The outward processing procedure allows, under certain conditions, the temporary export of Community goods to third countries with the aim of processing and re-importing of the finished goods with partial or total relief from import duties.
Outward processing is a specific customs procedure under the provisions of which, and subject to certain conditions, the temporary export of Union goods outside the customs territory of the European Union (EU) is granted with partial or total relief from import duties. This procedure includes the temporary export of these goods which are subject to processing and the re-importation of the processed products resulting from these operations and their release for free circulation.
Processing operations which may be carried out under this procedure are:
- The processing of goods, including their assembling, joining and pairing to other goods,
- The alteration of goods
- The destruction of goods
- The repair of goods, including restoration and re-operation
- The use of certain goods which do not fall into the category of processed products but allow or facilitate the production of such products, even if they are wholly or partly exhausted in the process (production aids).
The benefits of outward processing
This procedure allows beneficiaries to benefit from the possibility of lower labour costs outside the EU and encourage the use of Union goods for the production of products.
In addition, under the ‘fixed exchange system’ procedure, a product may be returned to a third country for the purpose of repairing or replacing it with another imported commodity called the ‘substitute product’ with the exception of certain agricultural products.
Which products can be placed under the outward processing procedure?
All the products can be placed under this procedure with the exception of the following cases:
- The export of goods grants the right to return or to erase import duties or
- if prior to export the goods had been released to free circulation with exemption from customs duties or with a reduced duty rate on account of their end-use and for as long as the targets set for that end-use remain unfulfilled unless the goods in question have to undergo repairs or
- the export gives the right to grant export refunds or if they are subject to economic advantages other than those refunds under the common agricultural policy and due to their export.
How can the goods be placed under the outward processing procedure? It is necessary to acquire the relevant permit from the competent customs department based on the application form submitted by the person who will proceed with the processing work. The application can either be submitted A.via a specific written form or B.upon presentation of the export declaration during the temporary exportation of the goods to be placed under the procedure.
- When the specific form is used, it must be submitted to the customs office in whose territory the principal accountancy records of the applicant are kept and/ or at least part of the temporary export is carried out.
B. The permit is granted based on the export declaration, that is simplified procedure, on the following cases:
- when the outward processing procedure consists of repairs, including the fixed exchange system without prior importation, provided that the temporary export goods are subject to repairs, that is the procedure is not only used to improve their technical characteristics and that they do not belong to the agricultural products listed in Annex 71-02
- To set products to free circulation
– replacement goods based on the fixed exchange system and not included in the permit,
– when the processing operations are destined to non-commercial goods.
However, it is not used when the application includes more than one Member States or when it concerns equivalent goods or when an examination of the economic conditions is required.
What are the prerequisites for the outward processing procedure? The permit is granted only:
- To persons residing in the European Union
- To persons that submit all the necessary documents that guarantee the proper implementation and
- when it is considered possible to verify that the processed products result from the use of the temporary export goods,
- provided that the essential interests of the Union processors are not seriously affected,
- provided that the customs authorities are able to supervise and control the procedure without being obliged to implement an administrative mechanism which is disproportionate to the respective economic needs.
When and how is the outward processing procedure granted to more than one Member-States?
When Union goods are temporarily exported from a Member State and reimported in the form of processed products to another Member State, the application shall be made in writing to the customs office where the applicant’s accounting records are kept as well as where, at least, part of the temporary export takes place or at the customs office where the applicant’s accounting records are kept.
This licence is granted after the a priori agreement between the customs authorities and the concerned Member-States.
In the example above, when submitting the export declaration, the INF2 information sheet should be filled in. This information sheet is numbered and can be obtained from the customs office of export or exit. It is then submitted to the customs office responsible for the temporary export in order to certify the temporary export. This same document shall be presented at the customs office at the time of re-importation of the processed products in order to claim partial or total relief of import duties.
What are the prerequisites for the outward processing procedure?
The validity of the permit cannot exceed 5 years. This is the time limit within which the goods that were temporarily exported for processing operations must be re-imported into the EU as processed products. The expiry date of the procedure is based on the time required to transport the goods to and from the country where the processing operation shall be carried out and the time required to complete the processing operation. This time period can be extended if the beneficiary submits a substantiated request.
The beneficiary should keep records of the temporary export and re-importation of the processed goods in order to facilitate customs controls and the proper functioning of the procedure. These records include:
(a) the declaration’s data that assigned a new customs procedure to the goods when the outward processing procedure was cleared;
(b) the date and the number of protocols as well as any other document related to the outward processing procedure and its clearance;
(c) the nature of the processing or assembling work;
(d) the rate of return or, where appropriate, its calculation method;
(e) the commercial or technical descriptions in order to identify the goods.
When is the clearance of the outward processing procedure certified?
The clearance of the outward processing procedure means that the products that were temporarily exported are re-imported into the EU as processed goods. Then the owner of the permit submits a clearance declaration at the customs office and the goods are set in free circulation. In case of a single permit the declaration should be accompanied by the INF2 document, signed by the customs office of export. When the processed goods are set in free circulation, a partial or total exemption from the import duties is granted only when the goods are cleared in the name of:
- The licensee
B. Or any other person established in the EU if they have obtained the consent of the licensee and fulfil the conditions for granting the permit.
No total or partial exemption from the import duties shall be granted when one of the conditions or one of the obligations associated with the procedure is not fulfilled unless it is proved that the omissions did not have a real effect on the proper functioning of the procedure.
* The total or partial exemption from the import duties is the deduction of the amount of import duties that should be charged on the same date to the goods that were temporarily exported, if these goods were imported into the Community territory from the country where the last processing operation took place.
The amount to be deducted shall be calculated on the basis of the quantity and type of goods on the date of acceptance of the declaration for the outward processing procedure and on the basis of other duties data that apply on them on the date of acceptance of the declaration for free circulation of the processed products.