Inward Processing

Inward processing allows imported raw materials or semi-manufactured goods to be processed within the EU for subsequent re-export without being subjected to any of the following: - import duty - other charges - commercial policy measures (apart from those that prohibit entry or exit of goods).

Following processing, the goods are typically exported again. However, it is also possible for goods to be used under this procedure and then released for free circulation within the EU, in which case the duties to be paid are based on the value of the goods at import, or the value of the final product.

As for other special procedures, an authorization is required to apply the inward processing relief procedure (IPR). However, in exceptional cases, Customs can approve the IPR procedure without authorization. In such cases, the procedure is indicated and applied directly on the customs declaration drafted upon import. The entire procedure requires a clear documentary trail which will be audited by Customs.

Example

Let’s look at the example of titanium and carbon fibers being imported into UK from India for the manufacturing of bicycles, which are subsequently exported in US. Under standard procedures, the imported materials would be subject to import duties.

However, this can be avoided provided the titanium and carbon fibers are imported under Inward Processing Relief (IPR). In this case, they will not be subject to duties or any other trade measures, provided they are re-exported again as part of the complete bicycles.

So instead of moving this part of the commercial activity - usually using cheaper labour - outside the European Union, the manufacturing of the bikes can still be undertaken within the EU without any negative duty impact.

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