FREE ZONE and FREE PORT. — These are the names given to those privileged centers which enjoy customs exemption for all goods arriving there from abroad and which, after a more or less brief stay, depart for other foreign countries; such goods may also be subject to a certain selection or sorting, or even to more or less simple and rapid processing.
In ancient times, entire cities where fairs were held were considered free for the entire duration of the market; during that period, therefore, the obligations to pay duties to the municipality or feudal lord were abolished and the monopoly of the guilds was suspended. Later, in the maritime centers of the Levant, free quarters were established for citizens and goods arriving from the Italian seafaring cities; after the discovery of new lands and as a result of the voyages of explorers, these quarters greatly contributed to the multiplication of trade and to the general increase of wealth. But although free ports initially fulfilled this positive function of stimulating international trade, they nevertheless created serious disparities in treatment among the citizens of the same State, exempting those who resided within the privileged area from paying duties. Classic examples remain Gibraltar, Hong Kong, Aden, and Singapore. It was therefore decided to limit the characteristic privileges of free areas and free ports solely to the port zone: thus the entrepôt was created, within clearly defined limits and in which no one resides permanently. Thus, although the origins of free ports are, at least in conception, quite ancient, in their present form they arose during the 17th and 18th centuries. In the modern economic structure, free ports in fact serve to mitigate the excesses of industrial and agricultural protectionism and also to facilitate, or indeed promote, the industrial development of regions that governments have particular reason to favor.
The free port permits the creation of many industrial, commercial, banking, insurance, and other activities. Within its boundaries, large warehouses and establishments intended for special processing can be organized, according to the relations, needs, and interests of the clientele of foreign countries. A certainly fruitful characteristic of the free port is that it makes possible the so-called improvement trade, which consists in re-exporting goods after the introduction of selections and modifications, without being subject to customs formalities, controls, and interference; thus, commercially, the free port is in the same position as a foreign country. The goods arriving there are neither assessed nor inspected by customs upon entry, nor during their stay in the port; they can therefore be handled in such a way as to alter their character, nature, and quality for customs purposes as well, without customs being able to intervene in any way.
The State collects customs duties when the goods leave the free-port enclosure to enter its own territory; no customs duty, however, is paid on re-exported goods.
The history of free ports in Italy has been varied. In 1854, the Subalpine Parliament ordered the termination of the free zone and of every customs privilege in the city and district of Nizza. Article 93 of the Customs Regulations of 11 September 1862 provided that, from 1 January 1866, Ancona, Livorno, and Messina should cease to be free cities. The results achieved by Hamburg and Trieste nevertheless induced the Italian government to grant free-zone privileges to certain ports, and a decree of 1927 authorized the creation of free ports at Savona, Genova, Livorno, Napoli, Brindisi, Bari, Ancona, Venezia, Trieste, Fiume, Palermo, Messina, Catania, and Cagliari. Until 1927, and for several decades, there had been only free areas, that is, simple enclosures in which goods could be stored and were regarded as duty-free until they crossed the customs boundary, but in which the handling of goods was permitted only in the simplest manner. They arose along the quays of ports or in railway stations and differed little from general warehouses. In the latter, goods are inspected when they are deposited, and payment of the duty is merely deferred; it is due in relation to the goods placed in the warehouse and to their quantity and quality, unless the goods are re-exported.
In their present form, free ports and free areas attract foreign goods and, by subjecting them to possible handling for re-export or introduction into the territory of the State, fulfill a function of indisputable usefulness and promote the expansion of international economic exchange.