What are Special Procedures?
To promote economic activity, many countries offer the possibility of suspending or drawing back customs duties by means of Special Procedures. These cost-saving customs and excise authorisations are universal, but they can have different names in different countries worldwide. The main universal Special Procedures are Customs or Bonded Warehousing, Inward Processing (IP), and Outward Processing (OP), Temporary Admission, and End Use.
A Customs or Bonded Warehouse (CW) is a building or other secured area in which dutiable goods may be stored, manipulated, or undergo manufacturing operations without payment of duty. It may be managed by the state or by a private enterprise. In the latter case, a customs bonded warehouse must be registered with the government.
Customs warehousing allows the owner to hold imported non-EU goods in the EU and choose when to pay the duties or whether to re-export the goods.
The amount of working or processing allowed on goods held in warehouses is essentially limited to keeping them preserved with a view toward subsequent distribution. However, it is possible to process goods under inward processing or processing under customs control on the premises of a customs warehouse.
Inward Processing (IP) means that non-EU goods are imported in order to be used in the customs territory of the EU in one or more processing operations, for instance, for the purposes of manufacturing or repair. When imported, such goods are not subject to:
- Import duty
- Other taxes related to their import, such as VAT and/or excises
- Commercial policy measures
The inward processing procedure is designed to give businesses the possibility to process goods imported from outside the customs territory of the EU even before they decide, according to logistical, commercial, or other conditions, whether to sell the finished products within or outside of the EU. The inward processing procedure can also be used for goods which just have to undergo standard forms of handling intended to preserve them, improve their appearance or marketable quality, or prepare them for distribution or resale.
After the processing operations, the processed products can be either re-exported or released for free circulation in the EU; the latter would imply the obligation to pay import duty and taxes as well as the application of commercial policy measures. In addition, it is possible to store processed products under customs warehousing or in a free zone.
An authorisation from the customs authorities is required for the use of the inward processing procedure. The customs authorities must specify the period within which the inward processing procedure is to be discharged. Such authorisation can also allow businesses to export EU products which have already been processed in return for the import of an equivalent quantity of non-EU raw materials.
If the processed products are released for free circulation, the concerned business can apply to pay duty at the rate and customs value applicable to the imported goods at the time of acceptance of their customs declaration. Otherwise, the duty and import VAT will be calculated according to the rate and customs value of the processed products at the time they are released for free circulation.
Outward Processing (OP) is the opposite of inward processing. It allows EU goods to be processed abroad and, when they come back into the EU to be put into free circulation, duty must be paid only on the value added abroad. Without such a system, duty would have to be paid on the goods produced in the EU as well as on the value added abroad.
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. This Special Procedure is often used for events like trade shows, art exhibits, or music festivals.
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. This Special Procedure only applies to certain tariff codes, such as goods in the aerospace, shipbuilding, and defence industries.
Why Use Special Procedures?
Special Procedures can help companies save customs duty costs on imported goods, resulting in a positive impact on their bottom line. These savings present significant value to the companies that use Special Procedures, however the legal administration and reporting of customs authorisations, excise tax warehouses, and VAT warehouses that needs to be provided to Customs Authorities can be a cumbersome task for customs managers. Special Procedures require sophisticated administration that in many cases cannot be dealt with by simple spreadsheet management. A software solution is typically needed to optimise the benefits offered by Special Procedures, but ERP or WMS source systems are often not designed to apply Special Procedures or provide the reporting required by Customs Authorities.
How CAS Simplifies Special Procedures
C4T’s Customs Accounting System (CAS) is a fully compliant customs management system that allows you to implement and manage Special Procedures and instantly produce the reports and declarations required by Customs Authorities at the touch of a button. In combination with our Declarations module or with broker management, we can guarantee full compliance and visibility.
“The changes in customs law due to Brexit stand to have a significant impact on Honda Motor Europe, however our partnership with Customs4trade has allowed us to prepare in advance. They helped make us ‘Brexit Ready’ by expanding the UK import/export customs logic in CAS, which will, together with their Special Procedures Module for Customs Warehousing, increase our cash flow optimisation for future EU imports into the UK.”
Shaun Hall, Customs and International Trade Manager at Honda Motor Europe
Read more on our Special Procedures module in CAS and find out how you can save on duty costs.