What are Special Procedures?

Duty can be suspended or ‘drawn back’ in many countries (including UK and the EU) by means of Special Procedures. Whilst these cost-saving customs and excise procedures are universal in process they can be styled differently in different countries. We will focus on the most popular and most generally implemented Special Procedures:

·      Inward Processing (IP),

·      Outward Processing (OP),

·      Customs or Bonded Warehousing,

·      Temporary Admission

·      End Use.

Why Use Special Procedures? 

Special Procedures help companies save customs duty costs on imported goods, resulting in reduced manufacturing costs. Under the new EU / UK Trade and Co-operation Agreement (TCA) new benefit levers have become evident. These levers present significant value to the companies that use Special Procedures. However, the administration and reporting to national customs can be a daunting task for finance, logistics and customs managers.

Spreadsheet management of Special Procedures is rarely successful and a proprietary software solution is typically needed to optimise the benefits. Since ERP and WMS systems are not designed for this type of reporting the barrier of accessing suitable systems may stop implementation.

Inward Processing (IP):

Under inward processing non-EU or non-UK raw materials are imported and used in the receiving country (EU / UK) in one or more processing operations (manufacturing or repair). When imported, such goods are not subject to:

  • Import duty

  • Other indirect taxes e.g. VAT and/or excise

  • Commercial policy measures

After the processing operations, the processed products can be either re-exported (duty free) or released for free circulation in the country of processing; the latter requires the processor to pay import duty and local indirect taxes and to observe any applicable commercial policy measures. Alternatively, processed products can be moved under customs warehousing or into a free zone.

Authorisation from the national customs authority is required for the use of the inward processing procedure. The customs authorities will specify the materials, quantity and value together with the period within which processing is to be completed.

Beneficially, the processor can, on releasing the processed products for free circulation, apply to pay duty at the rate and customs value applicable to the imported raw materials consumed in processing. Otherwise, the duty and import VAT will be calculated according to the rate and customs value of the processed products – which is generally higher.

Outward Processing (OP): 

As the opposite of inward processing OP allows EU / UK raw materials to be processed abroad and, when they are re-imported as finished goods into the EU / UK, duty is only paid on the value added abroad.

Customs or Bonded Warehousing (CW):

A CW is an approved establishment (building or other secured area) in which dutiable goods may be stored and manipulated or undergo manufacturing operations without payment of duty. Generally, the processing allowed, on goods held under duty bond, is limited to ‘breaking bulk’ or ‘order picking’ prior to subsequent distribution.

Customs warehousing allows the owner, or their clients, to hold imported non-EU goods in the EU or non-UK goods in the UK and delay release of goods into free circulation and pay the national duties (a potentially significant cash flow opportunity) or whether to re-export the goods duty free.

Other Special Procedures:

Temporary Admission allows goods to be brought into a country temporarily, typically for less than 24 months, with total or partial relief from import duty..  

End Use relief reduces or eliminates customs duty on certain imported goods which meet defined criteria and are put to a specific use within a set period of time. End Use only applies to certain tariff codes, such as imported fish together with goods in the aerospace, shipbuilding, and defence industries.