Definition and Legal Basis of the Free Warehouse
Das Free Warehouse is a central term in customs law and refers to storage facilities where goods can be temporarily stored under customs supervision without customs duties or import charges being incurred upon entry. Free warehouses facilitate cross-border movement of goods and are primarily used in international trade and logistics. Storing goods in a free warehouse allows goods from non-EU countries to be held before being cleared for free circulation, at which point customs duties are levied.
Legal Basis
European Law
The essential regulations concerning free warehouses can be found at the European level, particularly in the Union Customs Code (UCC) [Regulation (EU) Nr. 952/2013] sowie in den ergänzenden Durchführungsverordnungen und Delegierten Verordnungen. Im europäischen Kontext werden Freilager, zusammen mit Zolllagern, als besondere Verfahren der Lagerung klassifiziert, bei denen Waren unter zollamtlicher Überwachung stehen.
National Law (Germany)
Complementary regulations can be found in German customs law in the Customs Administration Act (ZollVG) as well as in the Customs Regulation (ZollV) These provisions specify the general rules of the Union Customs Code and govern the organizational and practical implementation of free warehouses within the federal territory.
Distinction from Other Customs Warehouses
While free warehouses and customs warehouses are often used synonymously, a distinction is necessary: customs warehouses are mostly specially managed storage facilities, while free warehouses allow for a more open storage—often outdoors or on designated areas. The main differences are in access restrictions, the type of storage, and the degree of customs supervision.
Function and Purpose of the Free Warehouse
Storage of Non-Union Goods
Free warehouses are mainly intended for so-called non-Union goods (formerly: non-community goods), i.e., goods imported from a third country. Storage takes place under customs supervision, with import duties and any applicable trade policy measures suspended.
Timeframe for Storage
The maximum storage period for goods in a free warehouse is regulated by the Union Customs Code. In principle, unlimited storage is permitted as long as the goods are neither altered nor consumed. In individual cases, customs authorities may require removal within a specific deadline.
Practical Suitability and Economic Relevance
Free warehouses offer businesses the flexibility to store goods temporarily, to wait and see whether resale, further processing, or re-export is worthwhile, without having to pay import duties upon entry. This promotes international trade flows and offers liquidity benefits.
Customs Treatment of Goods in the Free Warehouse
Storage Procedure
The placement of goods into a free warehouse is subject to a customs declaration, which must include essential information regarding the type, quantity, origin, and value of the goods. Once the declaration has been accepted by the customs authority, the goods are subject to the special procedure of free warehouse.
Supervision and Duties of the Warehouse Keeper
The warehouse keeper is required to organize the free warehouse in such a way that customs inspections can take place at any time. Essential duties include proper record-keeping, ensuring the integrity of the goods, and cooperating during customs audits.
Handling of Movements and Alterations
Goods in a free warehouse may generally not be subjected to active processing or treatment unless explicitly permitted by customs regulations (e.g., usual treatments to preserve goods). Every movement, alteration, or removal of goods from the free warehouse must be reported to the customs authority.
Termination of the Free Warehouse Procedure
The procedure regularly ends by transfer of the goods into free circulation, transit, export, or transfer into another customs procedure. Upon termination, customs duties and import charges may become due, unless the goods are re-exported.
Tax Aspects of the Free Warehouse
VAT Treatment
Special VAT rules apply for the period during which goods are stored in a free warehouse. Generally, VAT liability arises only upon removal and release of the goods into free circulation. Until the free warehouse procedure ends, there is no taxable domestic transaction.
Other Tax Implications
In addition to VAT, depending on the type of goods, excise duties (e.g., tobacco duty, energy tax) may become due when goods leave the free warehouse. The tax liability is generally linked to the release of the goods for free circulation.
Types and Organization of Free Warehouses
Public and Private Free Warehouses
A distinction is made between public free warehouses, which are made available by their operators to anyone for a fee, and so-called private free warehouses, which are operated by individual companies or corporate groups for their own use.
Approval and Supervision Procedures
The establishment of a free warehouse requires prior customs authorization. The responsible customs authorities assess the reliability of the warehouse keeper, the suitability of the storage areas with respect to security and organization, and the technical facilities available for monitoring the goods.
Distinction from Other Customs Procedures
Difference from Open and Closed Customs Warehouses
Unlike free warehouses, closed customs warehouses may be subject to closer supervision with stricter access rules. Permissible movements of goods and the warehouse keeper’s obligations regarding documentation and reporting can also differ.
Comparison to the Customs Procedure of Active and Passive Processing
While the free warehouse is intended strictly for passive storage, procedures such as active or passive processing allow (sometimes temporary) processing of goods under suspension of customs duties. In the free warehouse, processing is generally not permitted.
Significance in International Agreements and World Trade
Free warehouses play a role in numerous international trade agreements, such as within the framework of free zones or special economic zones, and contribute to the facilitation and acceleration of goods movements. They are particularly common in sea and air freight transport.
Summary: Free warehouses are a central element of European and national customs law and enable duty- and tax-free temporary storage of goods under customs supervision. They create flexibility for business and logistics but are subject to extensive legal and organizational requirements, especially regarding authorization, administration, supervision, and the collection of duties and taxes upon termination of the procedure. Legally compliant establishment and operation of a free warehouse require detailed knowledge of the relevant customs and tax regulations.
Frequently Asked Questions
What legal requirements apply to the establishment of a free warehouse?
The establishment of a free warehouse in Germany requires official authorization under the provisions of customs law, in particular according to Art. 237 et seq. of the Union Customs Code (UCC) and additionally under national law (§§ 4, 11 Customs Administration Act). Applicants must demonstrate their reliability, adequate record-keeping and organizational structures, and financial capacity. The customs authorities also check the suitability of the storage location in terms of access control, security, and segregation of goods. The customs administration may impose conditions and requirements for approval, such as minimum standards for supervision and documentation. Violations of conditions may result in withdrawal or revocation of approval and can lead to fines or criminal consequences.
How are goods in a free warehouse supervised by customs?
Goods in a free warehouse are under customs supervision by the competent authorities for the entire storage period. This means that all movements of goods, entries and removals, changes to the goods (e.g., processing, if permitted), stocktakes, and inventories must be accurately documented and made available to customs upon request at any time. Supervision includes regular and unannounced inspections, visual checks, reconciliation of stocks with records, and verification of compliance with all customs and foreign trade requirements. Breaches of record-keeping obligations or manipulations can be prosecuted as administrative offenses or customs violations.
What obligations does the holder of the approval have during the use of a free warehouse?
The approval holder is required to fulfill all due diligence obligations to preserve and secure goods stored in the free warehouse. These include, among others, keeping a complete free warehouse book or an equivalent electronic system that allows a traceable overview of goods entries and exits, stock levels, and current statuses at any time. Furthermore, the holder must ensure customs officers have access at all times, comply with all conditions of approval, and promptly report all notifiable events (e.g., unauthorized loss of goods, damage, or theft). The holder must also monitor the due dates for duties owed to customs and, if necessary, provide guarantees for potential tax debts.
What tax aspects must be considered in relation to the free warehouse?
Goods stored in a free warehouse are, from a customs perspective, in a non-taxable area, meaning that no import duties such as customs, import VAT, or specific excise duties apply until they are released into the economic circulation (e.g., by release for free circulation). However, if the goods are removed from the free warehouse and released into commercial circulation, the warehouse keeper or other authorized person is obliged to submit the relevant tax returns and pay the corresponding duties. From a criminal tax law perspective, unauthorized removal or failure to declare may result in severe penalties. Additionally, from a VAT perspective, supply of goods within the free warehouse can be considered an exempt export supply if the legal evidentiary requirements are met.
What notification and reporting obligations do free warehouse operators have?
Free warehouse operators are required to notify customs immediately of any changes affecting the conditions of approval (e.g., change of management, changes to warehouse design, structural alterations to the premises). Significant irregularities—such as loss, damage, or theft of goods or discrepancies detected during stock controls—must also be reported without delay. Furthermore, all movements of goods resulting from storage, removal, and internal transfers must be recorded in a timely and proper manner. Failure to comply can result in withdrawal of approval and further legal action.
How long may goods remain legally in a free warehouse?
Customs law generally does not provide for a maximum storage period for goods in a free warehouse, as long as the requirements for the free warehouse procedure continue to be met. Nevertheless, the competent authority may impose specific deadlines in individual cases, for example for safety reasons or pursuant to other public law requirements (e.g., food safety, hazardous goods regulations). If storage exceeds the permitted scope or customs regulations are not observed, the procedure may be terminated and any outstanding customs duties and taxes subsequently levied.
Under what conditions can approval for a free warehouse be revoked?
The approval to operate a free warehouse may be revoked by the competent customs authority if key obligations are breached. This includes in particular gross or repeated violations of notification and record-keeping duties, lack of cooperation with inspections, unreliable management, or subsequent failure to meet approval requirements (e.g., insolvency, loss of financial capacity). Additionally, in the event of serious violations of customs or tax law, especially smuggling or tax evasion, an immediate operating ban may be imposed. Before revocation, the warehouse keeper usually has the opportunity to comment unless an imminent danger requires immediate action.
