Inward processing
The inward processing procedure allows you to refine goods under customs supervision. Refinement is a broad term that includes processing, repairing, or modifying products. You place the goods under the inward processing procedure and refine them without paying import duties. In this case, the import duties are suspended. When you re-export the goods, you discharge the inward processing procedure and do not have to pay import duties. However, if the goods remain in the EU, you must still pay import duties.
Another use of the customs procedure inward processing is for goods where the final product, the so-called refined product, has a lower import duty than the product placed under the procedure. This is the case, for example, with electronics. The duty on electronic components is often higher than 0%, while the duty on the final product – the electronical product itself – is often 0%. The inward processing procedure can be applied so that import duties are paid on the final product, as soon as the final products are placed in the free circulation within the EU. This application results in a saving on import duties.
No double duties or a lower tariff
When goods are sent to the EU and then placed under inward processing, no import duties have to be paid on the goods. In the country of dispatch, the goods can be placed under the customs procedure outward processing, so that in the country of destination only import duties have to be paid on the added value.
By placing the goods under the inward processing procedure, you either pay no double import duties or only the import duties on the final product. The savings on import duties mean that many companies choose to apply the inward processing procedure.
Conditions
The procedure looks relatively simple, but the opposite is true. From the moment the goods are brought into the EU, until the goods are re-exported, Customs must be able to track the goods. This means that your administration must keep accurate records of which customs declaration the goods were placed under the procedure with, where the goods are located, what processing they have undergone, with which customs declaration the goods were re-exported or placed in free circulation, and which duty bases apply. The duty bases are the commodity code, value, and origin. Depending on your authorisation, the duty bases of the goods placed under the procedure, or the refined products may apply.
You need an inward processing authorisation to be able to apply this procedure. For one-time use of the inward processing procedure, you can apply for a authorisation on declaration. For repeated use of the procedure, you apply for a continuous authorisation. The continuous authorisation can be applied for via the EU Trader Portal.
You must submit a periodic settlement statement. In this settlement statement, you record the flow of goods. You state which goods have been placed under the procedure and also include the duty bases. You also report the re-export and any placement in the free circulation of the goods.
Inward processing authorisation: goods, quantities and values
An inward processing authorisation is generally granted for a period of three years. The authorisation specifies the commodity codes (TARIC code, CN code, GS code, or GS heading), quantities and values. You only have a authorisation for these specific goods, quantities and values. This means that if you want to place more than these quantities or values, or other goods, under the procedure, you must request an extension of the authorisation in advance.
Equivalent Goods
Under certain conditions, it is possible to use EU goods (goods already in the free circulation of the EU) instead of non-EU goods for the inward processing procedure. When goods are classified under the same 8-digit CN code, have the same commercial quality, have the same technical characteristics as the non-EU goods and this is included in your authorisation, you can use EU goods instead of non-EU goods. The application of equivalent goods means that your production process does not have to come to a standstill when non-EU goods are temporarily unavailable.
If you have permission for this (in your authorisation), you could even refine EU goods, export them, and only then place non-EU goods under the procedure of inward processing. Applying the inward processing procedure with equivalent goods and prior export requires careful attention. It is essential that you properly set up your processes and administration.
Triangular trading
In addition to the options described above, you can apply triangular trade. This means that you place goods from a non-EU country under the procedure in one Member State, refine the goods in the EU, and re-export the goods from another Member State.
Equivalent goods, possibly with prior export, can also be used here. Customs must be able to track the flow of goods in all cases. To track the flow of goods, so-called information sheets are required. In the EU Customs Trader Portal, you can create an INF if your authorisation includes permission for triangular trade (and possibly equivalent goods and/or prior export).
Monitoring
Obtaining an inward processing authorisation is a first step, but the real work begins after that. The flow of goods, the goods, quantities, and values in the authorisation and the correct application of the procedure must be monitored.
If you set up the process correctly and completely from the start, the inward processing procedure can offer many benefits. Complete administrative recording is essential.