Economic customs procedure Inward Processing

A procedure for specific exemptions  

Inward Processing (IP) is an economic customs procedure that makes it possible to bring non-community goods into the Netherlands or another EU country with exemption from import duties, other import taxes and trade and agricultural policy measures, in order to then have them processed in the Netherlands or somewhere else in the EU (have them undergo a processing operation), and subsequently have the processed goods transported again (taken outside the EU).

Processing

Goods that are brought under the customs procedure IP can undergo the following processing operations:

• Working
• Processing
• Repairs
• Use/application

Working

Working of goods means the assembling, mounting and adapting of the import goods to other goods. The import goods are built together or mounted on or to other goods. Through this working, the value of the goods generally becomes greater in economic terms. The result is clearly visible.

Processing

When processing goods, the nature of the goods changes. It is thereby the most far-reaching form of processing. New goods arise. The import goods can indeed be found in the processed products (products after processing), but as such are not always equally clearly visible.

Repair

Repair concerns a treatment in which damaged or worn goods are restored to their old condition. It is noted that repair also includes the overhauling and adjusting of the goods.

Use/application

This processing concerns goods that, after being processed, can no longer 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. An authorisation is required. For the use of the procedure an authorisation is mandatory, which is only issued if the products are exported again after the processing by the person who carries out or has the processing carried out. The applicant must be established in the EU.

With the exception of the import goods used for use/application, it also applies that the import goods can be found in the processed product. In addition, for the issuing of the authorisation it is assessed whether the Economic Conditions are met.

Economic Conditions

It is examined whether the interests of community producers are not harmed: are there goods in the country of origin that can be processed by the processor. The temporary import of non-community goods to process here may then possibly not be permitted. The interests of the processor weigh equally to the interests of the European producer of the goods similar to the import goods in the Community. In a number of cases, incidentally, it is assumed that the economic conditions are automatically met. This concerns, among others, the following situations:

• Contract processing
• Treatments without commercial character
• Repair of goods
• Usual treatments

If the authorisation is normally applied for in advance and that authorisation applies for a certain period, then for a one-off shipment that you want to have processed, the authorisation can also be applied for on the declaration you make for the import goods.

Two possible systems

The IP procedure can be applied in two different ways. It is possible to place the goods under the suspension system (IP/S) and under the drawback system (IP/D).

Suspension system

Using the suspension system, the goods are imported without payment of import taxes, and without application of trade and agricultural policy measures. The goods undergo a processing operation and are subsequently re-exported. At the moment of import you do not pay. This means that Customs runs a certain risk. It is for this reason that, for this variant, a security must be provided to Customs. If the goods are ultimately not exported, then payment must be made after all (afterwards). Compensatory interest must then be paid for the period that the goods have been under the IP procedure.

The drawback system

If you use the drawback system, the non-community import goods are brought into free circulation. The import taxes are indeed paid and trade and agricultural policy measures must also be complied with. The goods brought into free circulation are subsequently processed. If the processed products are subsequently exported, then the taxes paid are refunded. For this, however, a refund request must be made. Providing a security is not necessary in this situation. You have, after all, paid and Customs therefore runs no (financial) risk.

Free choice of systems

You are in principle free in the choice of one of the two systems. There are, however, a number of points of attention. To be allowed to apply the suspension system, the real intention must exist to re-export the processed products. With the drawback system this condition is less compelling. There it is sufficient that it can be demonstrated that the possibility exists to export the goods. With the drawback system, export is therefore not mandatory.

No application of the drawback system

Below you will find an overview of situations in which the drawback system cannot be applied. In the case of goods that:

• Are subject to quantitative import restrictions
• May be eligible for reduced import duties within certain quotas or allocated ceilings
• Are subject to agricultural levies

Requirements for your records 

If you are going to use the IP procedure, requirements are set for your records. In broad terms it comes down to the fact that the records must show:

• Which goods are placed under the inward processing procedure
• Which processing operations these goods will undergo
• Which processed products arise
• Which destination these processed products have been given

Avoid unnecessary costs with Inward Processing

If you process goods in the community that originate from third countries and you subsequently export the processed goods again from the community, then you can choose to simply bring those goods into free circulation. The cost price of the processed products is then unnecessarily increased by the amount of the customs duty. You no longer get that customs duty back, not even if you export the processed goods. In these cases you can choose the customs procedure IP. When using this procedure you ultimately pay no customs duties for the import goods when the processed products are (re-)exported. The condition is, however, that you have an authorisation. After all, it concerns an economic customs procedure. Where appropriate, a one-off authorisation on declaration can also be issued, but normally a continuous authorisation is used.

With the inward processing procedure you get the most out of your international trade and save on costs. Let The Freight Hero guide you for a problem-free handling!