What is a Free Port

A free port concept can define as an area that is free from the duty/taxes of the country under given conditions. Freeports are established to encourage trade and enable manufactures/ value-added service providers to engage in economic activities without paying taxes. The facility encourages traders in other countries to establish businesses in the defined area of other countries to gain competitive advantages. Also, it helps the country to earn foreign exchange by allowing traders of other countries to letting engage business activities in their country. The government of the country defines the freeports for the economic benefit of the country.

Even you heard the word freeport, you may wonder “What is a Free port?”. The Cambridge Dictionary defines the freeport as “an area near a port or airport to which goods from foreign countries can be brought without tax being paid if they are sent to another country when they leave this area”.

Freeport is a platform for cost-cutting and innovations. It delivers benefits to both the local and international business entities. Countries have their guidelines and policies for trading under the facility. Minimum investment, percentage of value addition on the FOB value of goods when exporting are some considerations in freeport activities.

The Free Port concept comes from centuries. Thus, the importance of the dutyfree area is becoming very popular around the world for logistics benefits.

Hope now you have a better understanding on “What is a Free Port”.

What is a Free Zone?

The free zones are the same as the freeports. When the tax exemption area is inside a port it defines as a free port. When the area is outside the port generally call as a free zone. Yet, both provide similar facilities.

Importance of Free Port

The importance and advantages of the freeport can identify with its contribution to the economy of a country, importers, exporters as well as to the intermediary parties including the ports and freight forwarders. Manufacturing, value additions, multicountry consolidations, are popular activities under the concept.

  • Engage in import and export business activities with tax and duty exemptions
  • Increase the foreign trade of a country
  • Gain from foreign exchange
  • Encourage local industries for export manufacturing/value addition
  • Create new business opportunities
  • Achieve total cost reduction

Free Port Synonyms

Foreign Trade Zone

Free Zone

Bonded Area

Free Economic Zone

Free Trade Zon

Export Processing Zone

Free Ports in the World

Freeports are available around the world to facilitate the logistics and supply chain of products. Private owned, publicly owned and private-public owned free economic zones are available. Some examples are as below.

Batam in Indonesia, Anzali in Iran, Port of Laem Chabang in Thailand, Singapore, Busan and Incheon in South Korea, Dubai airport free zone and Dubai Logistics city in UAE, Bremerhaven and Deggendorf in Germany, Shanghai and Shenzen in China, Colombo and Hambantota port.

Free Port Services in Sri Lanka

Sri Lanka has defined Colombo port and Hambantota International port as freeports despite the available economic zones in the country. under the hub regulations of the country.  Services in the facility in Sri Lanka are available as per the below hub regulations.

2. (I) Any new enterprise, which is established or incorporated in Sri Lanka and engaged in any one or more of the following business activities, where at least Sixty Five Percentage (65%) of its total investment has been from foreign sources including transfers from any approved Foreign Exchange Account operated in a Licensed Commercial Bank in Sri Lanka, and of which the total turnover is from export of goods and or services, shall be exempted from the application of provisions of the Customs Ordinance (Chapter 235), the Foreign Exchange Act, No. 12 of 2017, the Imports and Exports (Control) Act, No. I of 1969, and Acts referred to in Schedule referred to in the Principal Act as amended by the Finance Act, No. 12 of2013.

(a)         entrepot trade involving, an import, minor processing and re-export;

(b)         any manufacturing activity for export as defined in the Principal Act and established in a specified Bonded Area;

(c)          off-shore business where goods can be procured from one country or manufactured in one country and shipped to another country without bringing the same into Sri Lanka;

(d)         providing front end services to clients abroad;

(d)         operations of the headquarters of leading buyers for the management of the finance supply chain and billing operations;

(e)         logistic services such as a bonded warehouse or in the case of operation of multi-country consolidation in Sri Lanka;

Sri Lanka is 10 nautical miles away from east-west main shipping route and having competitive ports in the country, provides a huge potential for importers and exporters to engage in freeport trade


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