Outward Processing Relief (OPR): Everything You Need to Know

Lower production costs, specialist facilities, manufacturer knowledge – there are many reasons why you might want to process your goods abroad. But, did you know that you can reduce your duty when importing items that contain previously-free-circulating goods?

Find out how Outward Processing Relief (OPR) works, and how to start using it, in this article.

How Does Outward Processing Relief (OPR) Work?

Outward Processing Relief is not a suspension of tax like Inward Processing Relief (IPR), but it follows the same kind of principle.

Where with IPR you can reduce your duty spend on components that are imported, processed, and then exported as part of a completed product, OPR allows you to claim a reduction in duty on imported goods when it contains a previously exported component that was in free circulation.

For example, if you manufacture e-bike motors but the e-bike is assembled overseas, then you could apply for Outward Processing Relief when importing the completed e-bike.

The calculation for the duty relief under OPR is specifically based on two key elements: the value of the temporarily exported goods and the processing costs incurred abroad.

This means you only pay duty on the ‘added value’ that occurred outside the customs territory. The specific calculation methods are defined in Article 86(5) of the Union Customs Code (for using OPR in the EU), allowing businesses to significantly reduce their duty liability on re-importation.

Other uses of the OPR procedure which do not involve a change of commodity code include:

• Repair and restoration.
• Replacement with equivalent goods.

Note that you are still usually required to pay tax on charges accrued abroad, such as labour and packaging, and that your commodity may have specific requirements for processing. For example, there are strict paperwork and assessment requirements for claiming OPR on gold that has been processed into jewellery.

Prior Importation

There are circumstances where you can import the product under OPR before you send out the product, which is already in free circulation. For example, when you are replacing a machine with an equivalent from the manufacturer, before you export the defective one.

In these cases, you must have a guarantee for the duty on the imported product and special permission for prior importation. There are also time limits for re-exporting that must be adhered to in order to avoid paying the import duty.

Combining OPR with IPR

If you have a complex supply chain, you can use a combination of procedures to minimise costs throughout the process. For example, you can bring raw materials in on IPR, export parts for processing abroad, then bring the components in on IPR for assembly before an international sale.

Such operations require specialist knowledge and strict monitoring of all movements. This is where the help of the Customs Support Group’s industry-leading experts and CustomsTech solutions can make a considerable difference to both your efficiency and your bottom line.

What is the Process for Obtaining Permission to use OPR?

The rules for claiming Outward Processing Relief depend on your country, although the rules are similar throughout the EU and UK.

You must have permission to use OPR from your customs authority, which can be granted in a few ways:

• Full authorisation: This is required if you want to use OPR regularly, and must be applied for before you begin exporting your goods.
• Retrospective authorisation: For extraordinary circumstances when you have already exported the goods. This may not be granted if you have recently used this method.*
• Authorisation by declaration: Permission to use OPR for a single shipment. This can be capped at a maximum number of uses per year.

There are also special OPR authorisations for specific regions, such as for movements across Ireland, Northern Ireland, and the UK, where there is an overlap on UK/EU territory.

*Note that “recently” is subjective and varies across jurisdictions. For example, a retrospective authorisation for outward processing relief will not be granted in the UK if you have used this in the last three years.

Be Prepared for an Economic Conditions Assessment

When applying for OPR authorisation, customs authorities will often evaluate if the procedure satisfies certain ‘economic conditions’. This assessment is designed to ensure that using overseas processing does not adversely affect the essential interests of EU/UK processors.

The economic conditions examination is particularly important for sensitive goods and industries. For example, authorisation might be refused if the processing could be reasonably performed domestically but is outsourced purely for labour cost reasons. However, economic conditions are considered fulfilled when processing involves repairs, alterations, or when specific technical expertise is only available abroad.

For Outward Processing Relief applications within the EU, this assessment is based on Articles 166-169 of Commission Delegated Regulation (EU) 2015/2446 and is a critical factor in whether your OPR application will be approved.

Streamline Your Processes with the Customs Support Group

Trusted by manufacturers across Europe, CSG provides specialist support that simplifies complex operations and reduces risk. From industry-leading CustomsTech to specialist advice and a Europe-wide presence, we are here to help you be more efficient throughout your supply chain.

Regarding Outward Processing Relief, you can rely on us for:

• Goods Classification: The regulations surrounding some uses of OPR are based on your commodity code and country of origin. To avoid costly assumptions, we help you gain clarity on your classification and safeguard you with binding tariff information in many cases.
• Duty Management: Save money across your supply chain with comprehensive advice on duty rates, using procedures to avoid double taxation, and leading digital solutions which help you to keep track of your goods’ customs activities so that you don’t leave money on the table.
• Accreditation Support: Streamline your processes so you can apply for and maintain permits more easily. From data mapping to compliance processes, we help you fine-tune your operation so that you can unlock the efficiency of your customs function.

Contact us today to see how we can support your compliance, KPIs, and bottom line.