DEFINITION of Entrepôt

The term entrepôt historically referred to a seaport or warehouse where goods would be imported for storage or trade before re-export, with no additional processing taking place and with no customs duties imposed. Their use dates back to the days of long distance, wind-powered sea routes, where they enabled traders to utilize part of a route to sell their goods without having to bear the risks and costs associated with long distance travel over an entire route.

BREAKING DOWN Entrepôt

Historically, entrepôts were usually ports located at strategic points along the sea trade routes. Entrepôts flourished during the age of colonialism, when ships would travel long distances to bear goods such as commodities and spices from the colonies in the Americas and Asia back to Europe. The benefit of the entrepôt in the past was that it removed the need for ships to travel the whole distance of the shipping route. Ships would sell their goods into the entrepôt and the entrepôt would, in turn, sell them to another ship traveling a further leg of the route.

Using Trade Entrepôts Today

The use of trade entrepôts has become largely obsolete as transportation options and safety have improved, and as the establishment of customs areas in seaports and airports have negated the financial benefits of entrepôts (goods in customs areas are stored for re-export and because they do not technically enter the country in which they are located, no customs duties are charged). However, entrepôt trade has continued in some regions. In particular, Hong Kong and Singapore have remained centers of entrepôt trade through the twentieth century and beyond. Entrepôt trade still accounts for about a third of Singapore's exports. Hong Kong's position, geographically and as a free port, made it an entrepôt for trade with China especially in the first part of the twentieth century, until a United Nations trade embargo on China reduced that role from the early 1950s. However with the re-integration of China into the world economy in the past few decades, Hong Kong has resumed this role; in 2017, trade with mainland China accounted for almost 89% of Hong Kong's total re-export trade value.

The term can also be used in reference to a financial entrepôt, which is a financial center where most activity is foreign traders dealing with each other, so that money flows through the center, but not much is retained in the local market.