FREE ZONE AND FREE PORT. — These terms designate privileged centers that enjoy customs exemption for all goods arriving from abroad, which flow into them and, after a more or less brief stay, depart again for other foreign countries; they may also be subject to a certain selection or processing, whether simple or rapid.
In antiquity, entire cities where fairs were held were considered free for the duration of the market, during which time the obligation to pay duties to the municipality or feudal lord was suspended, and the monopoly of the guilds was likewise suspended. Later, in the maritime centers of the Levant, free districts were established for citizens and goods coming from Italian maritime cities; after the discovery of new lands and the voyages of explorers, these districts greatly contributed to the multiplication of trade and the general increase in wealth. Although free zones primarily served this positive function of promoting international trade, they created serious disparities in treatment among the citizens of the same state, exempting from duties those residing within the privileged perimeter. Classic examples remain Gibraltar, Hong Kong, Aden, and Singapore. It was therefore thought to limit the characteristic privileges of free zones and free ports solely to the port area: this gave rise to the entrepôt, within well-defined limits and where no one resides permanently. Thus, while the origins of free zones and free ports are, at least in their conception, quite ancient, in their present form they emerged during the 18th and 19th centuries. In the modern economic structure, free zones and free ports actually serve to mitigate the excesses of industrial and agricultural protectionism and to facilitate or even promote the industrial development of regions that governments have particular reason to favor.
The free port allows for the establishment of numerous industrial, commercial, banking, insurance, and other activities. Within its boundaries, large warehouses and establishments for specialized processing can be organized according to the relationships, needs, and interests of foreign clientele. A particularly fruitful characteristic of the free port is that it enables what is known as improvement trade, which consists in re-exporting goods after selection and modifications without undergoing customs formalities, inspections, or interference; thus, the free port is commercially in the same position as a foreign country. Goods entering it are neither inspected nor verified by customs upon arrival or during their stay in the port; they can therefore be manipulated to alter their character, nature, and quality for customs purposes without any customs intervention whatsoever.
The state collects customs duties only when goods leave the free port perimeter to enter its own territory; no duties are paid on re-exported goods.
The history of free zones and free ports in Italy has been varied. In 1854, the Subalpine Parliament ordered the cessation of the free zone and all customs privileges in the city and district of Nice. The customs regulation of September 11, 1862, in Article 93, stipulated that as of January 19, 1866, the free city status of Ancona, Livorno, and Messina would cease. However, the results achieved by Hamburg and Trieste led the Italian government to grant free zone privileges to certain ports, and a decree of 1927 authorized the establishment of free ports in Savona, Genoa, Livorno, Naples, Brindisi, Bari, Ancona, Venice, Trieste, Fiume, Palermo, Messina, Catania, and Cagliari. Until 1927 and for several decades, there had been only free points, i.e., simple enclosures where goods could be stored under exemption until they crossed the customs line, but no processing was permitted except in the simplest manner. These were located along port quays or railway stations and differed little from general warehouses. In the latter, goods are inspected upon entry, and duty payment is merely deferred and is due based on the goods stored and their quantity and quality, provided they are not re-exported.
In their current form, free ports and free points attract foreign goods, subjecting them to possible processing for re-export or introduction into the state territory, thus performing a function of undeniable utility and contributing to the expansion of international economic exchanges.