Free ports and Entrepots

Essay by TharinduUniversity, Bachelor'sA, October 2014

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B.A. Tharindu Wishwajith Perera


BSc. In Logistics Management

Department of Management and Finance

Faculty of Management, Social Sciences, and Humanities

General Sir John Kotelawala Defense University


Mobile: 0778146133

Free Ports and Entrepots and their way forward in Sri Lanka

With the contemporary shift in the economic activities, we can witness a boom in the import and the export trades. Here, the transshipment cargo have played a prominent role in the economic boom. Due to this transshipment, a new concept has upheld in the international trading business which is known as the 'Entrepot Trade" (Azam 2010).

An entrepot is a trading place where merchandise can be imported and exported without paying duties. With the reluctance of ships to travel the entire length of a long trading route, they sell their goods to the entrepot instead. The entrepot then sells at a higher price to ships travelling the other segment of the route after doing some value additions.

According to Azam (2010), Entrepot trading is a new method of foreign exchange earnings.

Free ports take the same scenario. But, it is basically situated inside the port while entrepots are situated outside the port premises. And, these open areas for traders tend to be called customs areas, customs zones, or international zones. Storing goods under free port status allows temporary postponement of VAT and custom duties until such time as the goods reach their final destination. Goods may be in transit for an unlimited period of time.

Provision of front end services to clients abroad, operations of the headquarters of leading buyers, logistics services were also covered by the free zone rule relaxation. (Lankabusinessonline 2013). Here, the profits are earned by a two-way payment mechanism by the procedure of import and re-exporting. Here, there is an enormous...