The Benefits of Using the Inward Processing Relief

Did you know that paying import duties is not always required when you are importing goods for processing and reexport? The inward processing procedure can significantly reduce your duty liability, lowering production costs and improving your margins. It’s an effective way to stay competitive in international trade.

We outline what the inward processing procedure is suitable for, and the benefits, in this article.

Contents:

• What is the inward processing relief and what are the benefits?
• What are some IPR customs use cases?
• What are the requirements and restrictions of the IPR customs procedure?
• How Customs Support Group helps you to take advantage of special procedures

What Is the Inward Processing Relief and What Are the Benefits?

The inward processing relief is a special customs function which enables you to process, modify, destroy, or repair imported goods without the obligation to pay customs duties.

It’s a form of economic licence which allows you to gain a financial advantage when producing or handling raw products. You are paying less overall for those materials, so you can re-export to the international market with a more competitive price – or with a better profit margin – compared to those who’ve paid the full tax during import.

You can also use IPR to pause the duty if you are unsure where the goods will be sold to. If you sell domestically, then you submit another import clearance to pay the duty. If you sell internationally, you close the process with the export clearance accordingly.

The batch does not need to be sold in its entirety to domestic companies or internationally. You can submit two declarations later to advise customs where everything went.

IPR is just one of the solutions we use when providing duty management services. It depends on your product, origin, and onward destination whether it will be the best one for you.

What Are Some IPR Customs Use Cases?

With inward processing, customs duty is only removed for the goods which are consumed during the process or re-exported in the final product. Therefore, as the name suggests, the IPR customs procedure can only be used for goods which are processed in some way.

Some examples of when you can use the IPR customs procedure include:

• Confectionery and foodstuffs, such as importing hard fat for baked goods
• Refurbishing machines, where repairs or component updates are performed
• Manufacturing, where raw materials are processed into a product
• Assembly, where parts are combined to create the product

Using inward processing for these cases can reduce or eliminate the import duty bill. And, depending on your commodity, you might be able to avoid paying duty on wasted materials.

For example, if you know that 10 grams of every 100 will be lost in production, you’d normally have to pay the duty on that wastage. However, if you are using the inward processing procedure, you may be able to write that off and only pay for the material that was included in the final product being sold to a domestic buyer.

So, if you sold the product 50/50 between domestic and international buyers, you’d only pay the duty on the 45 grams included in the sale instead of the 50 grams required to make it.

Inward processing requires very good admin and expertise to make full use of it, like this. This is what Customs Support Group can help you do. Our specialists work with you to streamline your processes so that you can identify these types of opportunities and unlock the savings within your customs function. Contact us today to get started.

What are the Requirements and Restrictions of the IPR customs procedure?

Depending on the country, you may need an IPR customs permit before you can use the inward processing procedure. This is the case in the EU, and the UK has recently begun to allow a limited number of uses per year without a licence – currently 10 times per year.

Where no licence is required, permission must still be obtained each time you use the IPR customs procedure. To obtain a full permit in the UK or a license in the EU, you must be able to demonstrate strict record keeping and compliance with customs procedures.

It is essential to get your application completed to a high standard before submitting it, as it is a lot harder to get approval following several queries and amendments, compared to when your business looks like a good candidate from the outset.

At a minimum, it will take three months in the EU to obtain a licence, but the whole process can take nine months or even longer. Submitting a good application, having a history of compliance with other special procedures, or holding AEO certification can help to speed up this process. For more information on how to streamline your IPR customs licence, contact our specialists for assistance.

One of the major limitations when using the IPR customs procedure is the timeframe for closing it. The standard time limit is three months, but some industries are granted up to six months because their process is naturally longer. In some cases, you can get a special agreement with customs that allows for even more time, but this is an option in conjunction with using a bonded warehouse.

Note that closing the procedure involves reexport. It is not enough to have just processed the goods.

How Customs Support Group Helps You to Take Advantage of Special Procedures

Customs Support Group provides help with the IPR customs procedure throughout the UK and EU, helping you to get the most value from your IPR function as possible whilst remaining compliant.

You can rely on us for help with:

• Requesting the IPR customs licence
• Managing your administration and database
• Analysing your data

Contact one of our experts to see how you can unlock savings within your customs function.