Free ports and art market logic
The development of the art market and the multiplication in the number of art fairs around the world has triggered an increasingly dense and rapid circulation of art works. But transport costs and international taxes of various kinds can act as a considerable brake on such movements. One answer to this problem is the free port.
The principal… and its advantages
Nowadays an essential element in the trade and storage of assets of all kinds, the free port is a port zone where goods may be unloaded, stored and shipped under customs authorities’ control, but without the payment of various duties and taxes. During its time in a port zone, an artwork may change hands several times, but only the final owner will pay the taxes owed in the work’s destination country.
Free ports are therefore mainly a financial tool needed to virtualize the art market and acts as an indisputable legal escrow for art market players as much as for tax authorities. The exponential development of free ports really shows that the art market in the 21st century is becoming global, efficient and liquid.
A free port’s primary appeal is therefore that it avoids numerous expenses, save those relating to the work’s definitive exit from the free zone. There are however several other advantages, including relatively cheap insurance and storage costs, optimal security, special showrooms for the presentation of artworks in the best conditions or for their valuation or restoration. Lastly, these zones are highly appreciated for their confidentiality and discretion. In fact, so much so, that they are increasingly used by collectors, gallery owners, art dealers and brokers, as well as by numerous museums.
Geneva, the world’s largest free port for art
Owned 86% by the Geneva canton, the Geneva free port has premises of 150,000 square meters and is the world’s largest free port for art, with 40% of its total space dedicated to artworks. It currently holds over a million paintings and art objects (1) and there are already plans to expand its bonded warehouses in the coming years. The services offered by the company are attracting more and more clients and the 40,000 square meters of land that remains unexploited could well be mobilized to accommodate this growing demand. However, since 2009, Swiss law requires complete inventories of transferred goods and ‘all merchandise entering or leaving the free port is subject to a customs declaration of ownership, provenance and value‘(2) .
The global development of free ports is mirroring that of the international art market and is also turning towards Asia. Yves Bouvier, art collector and CEO of Natural Le Coultre, world leader in art shipping, is acutely aware of this trend. Based in Geneva, the company has warehouses in Luxembourg and Monaco and is now investing in Asia, first in Singapore, and then in Beijing and Shanghai. Indeed, several factors make Asian storage particularly attractive including laxer legislation, notably in terms of control and transparency whereas European requirements limit the confidentiality surrounding these areas.
The new free ports
Two new free ports opened in 2014, one in Luxemburg (mainly for art, with a capacity of 21,000 square meters, and tax advantages extended to the euro area) and one in Beijing (120,000 square meters, equivalent to 60 soccer fields). The latter should substantially contribute to the development of the Chinese art market which still discourages importers with costs that are far too high. Between Beijing, Singapore (an ultra-modern warehouse of 30,000 square meters that opened in 2010) and projects in Hong Kong and Shanghai, Asia is rapidly developing its free port network. This development, which includes the storage of artworks as one of its primary objectives, should contribute to a progressive easing of the circulation art around the world.
(1) ‘Dans le secret des ports-francs‘ by Marie Maertens in Connaissance Des Arts, January 2013.
(2) Geneva Free port Press Dossier, 2014 edition
Annual Global Art Market Report 2014 by Artprice & Artron will be online March 3, 2014