Freeports: will they help commodity companies?

The UK’s new free ports will present opportunities for commodity companies, for example in the Tees Valley chemical industry. However, there are important limitations to this.


Earlier in our series, we presented1 the new free ports, examined the operation of the customs regime2, assessed the recently published report of the International Trade Committee on UK Freeports3 and examined the impact of Freeports on the UK offshore wind industry. 4

In this article, we turn our attention to the commodities sector. We will explore the extent of the opportunities that the proposed UK Free Ports present for companies operating in the raw materials industry, using as an example the chemical companies located in Teesside and the surrounding area.

Location location location

The UK government defines free ports as “secure customs areas located in ports where business can be conducted within a country’s land borders, but where different customs rules apply.” 5 It has produced a useful map identifying the precise boundaries of each of the proposed UK free ports as well as the customs, tax and seed capital sites in each area. 6 The potential benefits of these areas for commodity companies will depend on their location, capacities and infrastructure in or near the ports concerned.

Notable locations in Freeport’s list of new areas from a product perspective include:

Humber and SolentThese include Immingham and Southampton, the main UK ports for liquid bulk cargo.

Some of the UK’s largest oil refineries, including the Humber, Lindsey and Fawley refineries, are included in the wider areas of Freeport.

Thames: this includes the Port of Tilbury, one of the UK’s largest terminals for the import and export of grain.

Liverpool City Area: The Port of Liverpool handles a diverse range of cargoes and is one of the best equipped and connected ports in the UK.8

Teesside: Teesport is a key port to access Tees Valley, home to the UK’s largest chemical complex and Europe’s second in terms of manufacturing capacity.9

A notable missing from the list is Milford Haven, the UK’s largest energy port, which serves a number of the region’s refineries as well as the South Hook LNG and Dragon LNG terminals.10

What is the main advantage for commodity companies?

The main benefit of the free ports offered for all businesses is the creation of a more favorable customs regime, as discussed in our previous article.11 Commodity businesses are no different and will benefit when products can be brought into a market. postage free for further processing, fabrication or assembly with lower service and paperwork costs.

Case study: chemical companies in Teesside

For example, the Teesside Freeport is likely to be of particular interest to companies operating in the chemical industry. Tees Valley produces around 30% of the UK’s chemical production and is home to some of the world’s largest chemical manufacturers. More than 1,400 Tees Valley companies are directly involved in the chemical and processing industry.12

Take the example of the fictitious company “Teesside Chemicals Ltd” (TCL). TCL is a petrochemical company that manufactures products such as ethylene, propylene and butadiene, the building blocks of many everyday materials and plastics. It has manufacturing, storage and logistics facilities spread across multiple locations within the proposed Freeport area. Its Teesport operations are responsible for importing and exporting all of its raw materials and products via jetties on the River Tees. TCL can now be able to import goods into the zone without being subject to import tariffs and procedures and use them to manufacture products that it can then re-export.

What are the limits ?

Our previous article on the new customs regime13 highlights some important practical limitations to the potential benefits of the proposed customs rules. Additionally, Brexit has had an impact on the benefits that Freeports can offer commodity companies in general and chemical companies in particular.

First, under the UK-EU Trade and Cooperation Agreement in December 2020, no tariffs or quotas will be applied to trade in goods (including chemicals) that comply with the rules of ‘appropriate origin. This somewhat mitigates the main potential benefit of favorable regimes in the proposed UK free ports, which will offer no comparative advantage in terms of tariffs and quotas for trade with the EU.

This is particularly relevant for the UK chemicals industry, as the majority of UK chemicals trade is with the EU. 57% of chemicals exports in 2019 went to EU Member States and 73% of chemicals imports came from the EU14.

One of the potential benefits of free ports is that of simplified customs procedures for importing goods into the UK. However, UK chemicals companies (among others) will have to offset any benefits from this simplification against the increased administrative burden resulting from new controls and procedures in place for post-Brexit trade with the EU.

In addition, chemical companies bringing goods into UK free ports will need to keep in mind their potential obligations under the new ‘UK REACH’ regime. This is a separate regulatory framework for the UK market, similar to the EU’s REACH15 regime. Under UK REACH, substances brought into the UK will generally need to have REACH registration in the UK. There is a “free zone” exemption. However, even though the customs zones of UK free ports constitute such free zones, a significant limitation is that as soon as the goods concerned undergo treatment or processing, this exemption disappears.

Since one of the main draws of Freeport UK customs sites is the ability to process goods while escaping customary customs obligations and administrative burdens, it should be borne in mind that UK REACH obligations may nevertheless arise.


UK free ports could offer welcome benefits to commodity and chemical companies, including those that trade, for example, Immingham, Southampton, Tilbury, Liverpool and Teesport. However, on closer inspection, the extent of these benefits may be more limited than it appears at first glance.

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