The Economic Customs Procedures for inward processing
Inward processing is an economic customs procedure, which makes it possible to import non-Community goods with exemption from import duties, other import taxes and trade and agricultural policy measures in the Netherlands or another EU country, so that they can be processed in the Netherlands or somewhere else in the EU (undergo a processing operation), and thereafter can be exported outside the EU again without paying duties and taxes.
Goods brought under the inward processing procedure may undergo the following processing operations:
The editing of goods means mounting, assembling or modification of the import goods to other goods. As a result of this operation, the value of the goods generally increases in economic terms. The result is good visible.
When processing goods, the nature of the goods changes. This makes it the most far-reaching form of finishing. New goods are created. Although the import goods can be found in the processed products (products after processing), they are not always clearly visible as such.
The restoration is a treatment in which damaged or worn goods are returned to their former state. It should be noted that recovery also includes the revision and adjustment of the goods.
This processing is about goods which, after having been processed, are no longer to be found in the product. For example, a catalyst in a chemical process. This is used to enable or facilitate a production process. However, this does not apply to fuels and lubricants. A permit is required for the use of the inward processing procedure, which is only handed if the products are re-exported after processing by the person who carries out the processing. The applicant must be established in the EU.
With the exception of the import goods that are used for application, the import goods can be found in the final product. In addition, for the issuing of the permit, compliance with the Economic Conditions is checked.
In the context of the economic conditions, it is examined whether the interests of the Community producers are not adversely affected: are there goods in the country of origin that can be upgraded by the inward processor? Temporary admission of non-Community goods for processing can then possibly not be allowed. The interests of the processor will be weighed against those of the European producer of goods similar to import goods in the Community. In a number of cases, however, it is assumed that the economic conditions are automatically met. This concerns, among other things, the following situations:
• Outward processing
• treatments without a commercial character
• repairing goods
• usual treatments
Normally, the license is applied for in advance and this permit applies for a specific period. For a one-off shipment that you would like to process, the permit can also be applied for on the declaration you make for the import goods.
The inward processing can be applied in two different ways. It is possible to place the goods under the system of suspension and under the system of reimbursement.
System of suspension
Using the system of suspension, the goods are imported without payment of import taxes, and without the application of trade and agricultural policy measures. The goods undergo a processing operation and are then re-exported. You do not pay at the time of import. This means that Customs is at some risk. It is for this reason that for this variant certainty must be lodged with Customs. If the goods are not ultimately exported, then (afterwards) the duties and taxes must still be paid. In this case compensatory interest must be paid for the period that the goods were under the processing arrangement.
The reimbursement system
If you use the reimbursement system, the non-Community import goods are released for free circulation. Import taxes are paid and also trade and agricultural policy measures must be complied with. The goods released for free circulation are then upgraded. If the concerning products are exported subsequently, the taxes paid are returned. For this, a request for reimbursement must be made. It is not necessary to provide security in this situation. After all, you have paid and Customs has no (financial) risk.
You are basically free in the choice of one of the two systems. There are, however, a number of points for attention. In order to apply the suspension system, there have to be a real intention to re-export the concerning products. With the reimbursement system, this condition is less compelling. It is sufficient that it can be demonstrated that there is the possibility to export the goods. Export is therefore not required in the reimbursement system.
No refund system
You cannot apply the refund system if the goods:
- are subject to quantitative import restrictions
- may benefit from reduced import duties within certain quotas or divided ceilings
- are subject to agricultural tariffs
If you want to use inward processing, requirements will be imposed on your administration. In general terms, it means that the administration must show:
• which goods are placed under inward processing arrangements • what operations these goods will undergo • which end products arise • what the destination is of these products
If you are processing goods originating from outside the EU and subsequently exporting the finished goods from the Community, you can choose to simply return the goods to free circulation. The cost price of the concerning products is then unnecessarily increased by the level of the customs duty. You will not get back the duties or taxes, even if you export the finished goods. In these cases its better to choose for the customs procedure for inward processing. When using this you do not pay customs duties for the import goods provided that the compensating products are (re)exported. A condition is that you have a permit. After all, this is an economic customs procedure. Where appropriate, a one-off license can also be issued on a declaration, but normally a continuous license is used.