Behind Closed Doors: A Look At Freeports

By Talia Berniker.

In September 2020, Arcis, the first freeport in New York City announced its closing after being open for just two years, and that clients had until October 31, 2020 to retrieve artworks stored at the Harlem storing facilities.^[1] While the reasons for the closing of this resource remain unclear, the closing of Arcis is indicative of the impact the COVID-19 pandemic has had on the art market. This inquiry will explore the history of freeports, their role in the art market, as well as what the opening and closing of Arcis might indicate about the future of the freeport as a staple of the global art market.

What Is A Freeport Anyway?

A freeport is a lot, usually a large warehouse located near an international hub, “within which goods may be landed, handled, manufactured or reconfigured, and reexported without the intervention of the customs authorities.”^[2] Only when the goods have left the facilities are they subject to taxation and other customs requirements. These lots exist formally outside of the territorial jurisdiction of any country, making them an important part of the global art market. While the term “freeport” is most often used in the art law lexicon, the terms “free trade zone” or “foreign trade zone” are synonymous.^[3] In the United States, Foreign Trade Zones, or FTZs, exist under the protections of Customs and Border Patrol.^[4] These zones take advantage of what is known as an “inverted tariff” to create conditions that are optimal for trading and storing artworks.^[5] Because there are no federal import duties on art within a freeport, freeports have emerged as a legal way for art dealers and collectors to avoid paying duties and taxes on artworks they might be storing or planning on selling.^[6]