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Blogs | 24 September 2018

UCC Delegated Act Amendments Series #3: Inward Processing

This is the second article in our UCC Delegated Act Amendments blog series. In our first post, we clarified the new definitions for exporters and registered exporters as well as rules of origin. In this second blog, we will focus on the changes concerning the inward processing procedure.


Inward processing allows businesses in the EU to import raw materials or semi-manufactured goods from outside the EU to be used in processing operations, e.g., manufacturing and repair, without having to pay import duty or import-related taxes, like VAT, on the imported goods. If, after inward processing, the goods are re-exported, no customs debt is incurred. However, if at the end of the inward processing procedure the goods are released for free circulation, import duties must be paid. In this second case, the rate that has to be applied must be the rate valid on the date the customs debt is incurred. 

There are two ways to calculate customs debt in the case of inward processing. One way is to follow Art. 85(1) UCC, which states the import duty is calculated based on the nature, customs value, and quantity of the goods at the time of acceptance of the declaration for release for free circulation. However, this means that the value added to the goods while they were being processed inside the EU customs territory is included, therefore the import duty is higher.

The second way to calculate customs debt is for the customs manager to ask in their request for authorisation to use the inward processing procedure that the calculation of import duties be made on the processed products, in line with Art 86(3) UCC. In this case, the tariff classification, customs value, quantity, nature, and origin, including the exchange rate, are only those that applied on the date the customs declaration was accepted for the goods that were processed. However, if the three conditions below are met, the method foreseen in Art 86(3) always applies even if not requested by the customs manager:

  1. The processed products resulting from the inward processing procedure are imported directly or indirectly by the relevant holder of the authorisation and are released for free circulation within a period of one year after their re-export.
  2. At the time of the acceptance of the customs declaration for placing the goods under the inward processing procedure, the goods would have been subject to an agricultural or commercial policy measure, a provisional or definitive anti-dumping duty, a countervailing duty, a safeguard measure, or an additional duty resulting from a suspension of concessions had they been declared for release for free circulation.
  3. No examination of the economic conditions was required in accordance with Article 166.

This second condition, clarified under the UCC DA amendments, now specifies when it shall be considered that the import goods are subject to a commercial policy measure in the EU and aligned it with the wording used in other articles of the UCC DA. This condition is in place to prevent economic operators from using the inward processing procedure to circumvent EU trade measures meant to protect the interests of the EU against unfair trade practices. This is particularly relevant in the case of the recent measures adopted by the EU to react to the US restrictions on steel and aluminum. The EU suspended the import duty concessions agreed to under the GATT 1994 for certain products, which allows for additional customs duties to be levied on the import of these products originating in the US into the EU.

The amendments also fixed a repetition of the first condition for using Art 86(3) UCC, which was previously mentioned in both Articles 76(a) and 168(2) UCC DA. This overlap has been removed by deleting the redundant reference in Article 168(2).


Read the full text of Regulation (EU) 2018/1063


Stay tuned for further clarification on how the UCC Delegated Act has been amended by following us on LinkedIn, Twitter, and Facebook, or bookmarking the C4T Inspire blog.

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