In a globalised economy, freeports are an important instrument for facilitating the trade in assets such as works of art, precious stones, antiques, vintage cars, wines and sensitive documents and for ensuring secure interim storage. Freeports are used in particular by museums, galleries and auction houses as well as private collectors, investors and foundations.
What are freeports?
Freeports are modern and large storage facilities within free zones (see §210b of the Union Customs Code, UCC), into which goods can be brought free of import duties, taxes and other trade policy measures.
In the Union, the Union Customs Code provides the legal framework within which the Member States can designate free zones (Article 243 UCC, §20 Customs Administration Act; ZollVG).
Well-known freeports are located in Luxembourg (Luxembourg High Security Hub; HSH), Geneva (Ports Francs et Entrepôts de Genève) and Singapore (Le Freeport). In Germany, freeports can be found in Bremerhaven and Cuxhaven. The geographical location of free ports is chosen specifically with logistical aspects in mind, as capital, economic and data flows should be efficient and free. A connection to airports is therefore common.
The storage and conservation of works of art in particular have gained massive importance in recent decades. Not only does art have a special significance for people due to its historical value, aesthetic expressiveness and possibly emotional impact.
Art is also a commodity and therefore an investment. High-priced modern and contemporary works of art can represent a stable investment even in times of economic crisis.
It is therefore important to deal appropriately with the responsibility that ownership of works of art entails and to protect the investment. Freeports offer a secure instrument for the long-term storage of assets such as high-priced paintings or photographs and for realising an increase in value.
Former Bank of America’s Private Wealth Manager Evan Beard comments: „For some collectors, art is treated like an asset in their portfolio. They are becoming more financially savvy, and the free ports have become a mainstay in all of this.“
Freeports have developed into centres of the international art trade. Stefan Horsthemke, Managing Director of Artbridge Kunstvermietung, agrees: „The freeports are hugely important for the art market."
Freeports are also used by luxury companies and leading manufacturers of luxury goods to trade goods. For example, if a luxury car part is manufactured in Germany and is to be shipped to Australia, it can be stored untaxed at all stages of its journey with the help of freeports.
Freeports thus serve as temporary storage facilities, allowing the luxury car part to be stored temporarily or long-term during its stopover anywhere in the world. Taxation only takes place on arrival at the final destination.
Freeports thus offer efficient trade in various luxury sectors for their customers such as museums, galleries, auction houses as well as private collectors, investors and foundations, reducing tariff and non-tariff barriers.
History
Freeports were established in the 19th century. They were originally places used for the temporary storage of trade goods such as grain and tea. The starting point was the idea that the double taxation of goods in transit should be removed as a barrier to trade.
Freeports therefore already represented an area for the free trade of goods at that time.
The roots of the concept of freeports even go back to the time of the English and Dutch colonial traders. The medieval Hanseatic League, an organisation of manufacturers and merchants in northern Europe, maintained tax-free trading sectors.
This historical perspective shows that the concept of creating a special free zone with freeports is not new and has been used in the past in different parts of the world as an instrument to drive and organise trade.
What exactly do free ports offer the art world?
Freeports offer a range of benefits and advantages to their clientele, which consists of museums, galleries, auction houses, private collectors, investors and foundations. They offer their clientele the opportunity to secure assets in an exceptional and individualised way.
Freeports play a particularly important role with regard to works of art and other sensitive assets that require special storage and conservation.
This is because they specialise in providing ideal, appropriate storage conditions. For most private collectors and investors, such storage is not possible elsewhere.
Within the various buildings of the freeports, an environment can be created for each object that is ideally suited to the respective requirements. Customised adjustments can be made with regard to special humidity, temperature and climate conditions, which are essential for the preservation and conservation of a Renaissance work of art, for example.
In addition, these conditions are meticulously monitored by highly qualified and specially trained staff. Works of art can also be examined by restorers on request or checked for authenticity in laboratories, for example with the help of pigment and X-ray analyses.
From a conservation point of view, storage in a freeport is therefore recommended. This is because they offer ideal storage conditions that guarantee the preservation of a work of art, for example, and rule out any depreciation in value due to storage.
Financial considerations also play a role. After all, it is not only the acquisition of high-priced works of art, for example, that represents an investment.
The conservation and storage of the acquired artworks is usually an even greater investment. Here too, the instrument of freeports is valuable. „We offer a high-quality solution for collectors who collect expensive objects where insurance does not allow the object to remain at home.“ Says David Arendt, project manager at HSH.
Freeports offer comprehensive security precautions for the stored assets. The buildings are high-security rooms, mostly made of fireproof concrete. The facilities are under round-the-clock video surveillance and are protected against burglary, theft and destruction.
This type of security is particularly advantageous with regard to high-quality works of art, which are always at risk of being stolen from private collections.
Such works of art can be temporarily stored securely with the help of freeports until they can be placed in a permanently secure location. This guarantees that the artworks can be made accessible to the public at a later date.
Attractive Tax Benefits
In addition, freeports offer attractive tax benefits for their customers such as museums, gallery owners, auction houses, private collectors, investors and foundations during the storage period. The assets can be imported and stored VAT-free (value added tax). VAT is only payable on final importation into the destination countries. Until then, funds saved can be invested elsewhere.
Only when a work of art, for example, is sold at a profit, stored under ideal conditions and increases in value after a few years, does it have to pay tax, which brings significant advantages. For example, if a private collector buys a work of art for 50 million dollars at a Christie's auction in New York City, he must expect to pay import sales tax totalling 4.4 million dollars. As the artwork is stored in a freeport, these taxes are not initially payable.
A further financial advantage lies in the granting of duty exemptions (see Article 158 UCC). Similar to tax concessions, customs duties are only levied on final import.
The background to this is to ensure an efficient international exchange of goods that is only minimally hindered by customs formalities. For the customers of freeports, the customs exemptions not only represent a financial relief, but also simplify customs clearance, which is usually lengthy and bureaucratic.
In the Revised Kyoto Convention (RKC) of 2003, the World Customs Organisation (WCO) established a framework for international trade. The main focus here was on harmonising regulations to simplify trade and making customs procedures more efficient and predictable.
Annex D of the Convention explicitly defines free ports. They are „a part of the territory of a Contracting Party in which the goods brought in are generally considered to be outside the customs territory for the purposes of import duties and taxes.“
Customers of freeports can therefore rely on the fact that they can benefit from customs exemptions in any freeport.
The removal of customs clearance barriers is particularly advantageous in the art world. For example, it gives collectors and private art investors more liquidity and the opportunity to build up capital while the art is in storage.
If desired, a work of art can also be temporarily exported without customs formalities and made available for exhibitions, for example. This offers a flexibility that is otherwise not possible.
Discretion and secrecy
Another aspect that characterises freeports is the extensive discretion and secrecy.
On the one hand, many freeports do not require the disclosure of ownership (Ultimate Beneficial Owner; UBO). Assets can also be imported in the name of another person.
On the other hand, it is not common practice to keep a record of the objects located in the freeports. In the freeport of Geneva, for example, there are no records or inventory lists of the stored objects. There are mere estimates that around 1.2 million works of art are stored in the freeport of Geneva.
This degree of discretion is particularly advantageous in the art trade if the public is not to be burdened with sensational transactions.
One example of the influence and trust that freeports enjoy among art collectors is the supposed storage of the Renaissance painting „Saviour of the World’“ („Salvator Mundi“). It is said to have been created in the workshop of Leonardo Da Vinci. The painting was sold for 450 million dollars at an auction organised by New York auction house Christie's in 2017. This makes it the most expensive work of art ever sold at an art auction.
It is assumed that it has been in Geneva's freeport since the auction. This will probably be the case until a suitable place is found. It is therefore not without reason that freeports are seen as hot spots on the art market
A look at the art world's hotspot-freeport in Luxembourg
An impressive freeport is located in Luxembourg. It consists of a 22,000 square metre, highly secure building located in a free zone. It is fire and earthquake-proof and is monitored at all times by security personnel and high-security cameras. Only licensed freeport operators are allowed to enter the building after a thorough security check.
Head of the Luxembourg Freeport, David Arendt, explains the advantages for works of art: „Local freight forwarders and service providers offer high-quality solutions in all areas of interest to art collectors: Transport and logistics, safekeeping and storage, insurance, art consultancy and appraisal, scientific analysis, restoration. More and more art is being bought or used as an investment. Contemporary art is becoming more voluminous. Objects of art are becoming more valuable. The need for storage arises for security and insurance reasons.“
Another special feature is that owners have the opportunity to present works to potential buyers or investors via video conference. Representative rooms have been set up for this purpose.
In addition, the lobby of the free harbour can be rented for exhibitions under strict conditions. The well-known street artist Alexandre Farto (Vhils) has created a larger-than-life portrait for the lobby.
This impressive lobby is intended to act as a link between the freeports and the outside world and offer the opportunity to show art by private invitation.
Résumé
Freeports thus offer customers a secure and exceptional opportunity to store their property. This is because they grant tariff and non-tariff trade facilitation, which makes them a valuable and practical instrument for the exclusive clientele and especially for the art market.
dtb lawyer and art law expert Leon van Lee comments. „Temporary storage in free ports is a key instrument in the international trade of assets. Freeports offer tax and customs benefits and investment opportunities. They are of particular practical interest to art collectors and investors, as the buildings offer highly secure and ideal storage conditions for works of art.“
Status 12.03.2025