Freeport

A freeport is a secured warehouse under a suspensive tax regime: goods kept there, mainly artworks and valuables, incur neither customs duties nor taxes as long as they do not leave. The French term, port franc, translates directly as free port. The mechanics are simple. Goods enter under suspension, they can be sold, appraised or photographed on site, and import VAT only falls due when they leave the freeport for the customs territory. In April 2016, after the Panama Papers, the Geneva prosecutor had a Modigliani, "Seated Man (Leaning on a Cane)", seized at the Geneva Freeport, claimed by the heir of a dealer whose stock was looted during the war. Geneva, Luxembourg and Singapore host the best known. In a wider sense the word also covers a port free trade zone where goods are processed outside customs; in the art market and among insurers, it means the warehouse. It is often confused with a bonded warehouse, a neighboring and looser regime, where suspension is meant for transit rather than storage measured in decades. Designed to facilitate trade, freeports have become long-term storage venues where a large share of the world's art sits, often out of sight of the public and the authorities. For insurance they pose two distinct problems. The first is an accumulation risk characteristic of the specie class: a single loss, fire or water damage, can hit hundreds of works at once, belonging to different policyholders, covered by separate policies but exposed to the same event. Underwriters therefore ask for the exact address and vault, and add up their exposure site by site. The second is compliance: the secrecy of these sites worries regulators on money laundering and tax evasion, and raises the due diligence burden on insurers and brokers alike.