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Duty exemptions

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The general rule is that duties are not refunded once they have been paid. However, under specific circumstances, duty exemptions are possible. Here, we describe four possibilities:

Customs warehouse

Companies that trade globally often open a warehouse in a European country from which they distribute goods. There are many EMEA (Europe, Middle-East, Africa) warehouses in countries like the Netherlands, Belgium, and Germany. The final destination of some of the goods that are brought to these warehouses will be an EU member state, but some will be re-exported from the EU. There are two reasons to store the goods in a bonded warehouse instead of in a regular warehouse:

  • There are import duties to be paid on the goods. If the goods were to be imported, import duties would have to be paid. Since duties are not refunded upon export, storing goods in a bonded warehouse obviates the need to pay import duties.
  • The payment of import duties needs to be postponed. If goods liable to import duties will be stored for a long time before they are used or resold, the payment of import duties can be postponed until the goods are actually needed.

Modern warehouses have no lock on the door; they are completely controlled administratively. So a permit for a bonded warehouse will only be granted if the goods administration is very high-level. This involves extra operational costs. In general, a monthly import declaration will be made for all the goods that were taken out of the bonded warehouse and thus brought into free circulation in one particular month. Another customs formality is that the goods have to be brought with an NCTS or transit document from the EU’s external border to the warehouse. Similarly, goods that are sold to a customer outside the EU have to be shipped from the bonded warehouse to the EU’s external border with a transit document.

Inward Processing Relief

Inward processing relief (IPR) can best be explained by means of an example. Suppose a manufacturer has to buy goods from outside the EU for the company’s production process, and the final goods will be exported to a customer located in a country outside the EU. As the manufacturer has to pay import duties on the imported goods, the production process in the EU becomes more expensive and thus less competitive. The EU, however, wants to facilitate this type of production and keep it competitive compared to other manufacturers outside the EU.

Manufacturers in the EU can, therefore, apply for IPR authorization, which gives them the option to declare the goods on import without paying import duties. However, the manufacturer has to prove that the manufactured goods that incorporate the imported goods will be exported.

An IPR authorization can be very interesting for manufacturers with global clients. However, it is a permit, which requires a careful administration. A permit can be obtained for a single shipment or for a continuous flow of goods. In practice, it is a rather tricky permit, because customs are very keen that all formalities are strictly fulfilled.

Outward Processing Relief

Outward processing relief (OPR) is the opposite of IPR. For example, textiles are exported to a country outside the EU where they are used to manufacture clothes. When those clothes are imported into the EU, import duties will be imposed. If it can be proved that the raw materials for those clothes have been exported from the EU, import duties need only be paid on the added value of the goods. A detailed authorization is also necessary for OPR.

If no import duties are levied on the goods to be imported, there is no point in applying for IPR or OPR. It would suffice to complete a regular import and export declaration on the basis of an invoice or pro forma invoice.

Treatment under Customs supervision

Production processes exist in which import duties are due on the imported raw materials but not on the end products. To make this kind of production processes economically feasible inside the EU, treatment under Customs supervision is possible. This allows the raw materials to be imported free of import duties, on the condition that these materials are used in a specified production process that results in goods for which no or reduced import duties are levied. For this, a customs permit is necessary, for which various administrative guarantees are required.

Temporary import

Goods can be temporarily imported for, for example, demonstration purposes. If such a product is liable to import duties, a temporary import permit can be obtained. The product can then enter the EU free of import duties, provided that it is not used for production purposes and that it leaves the EU again within a certain time. Such a permit can be granted for a period of up to three years.

The opposite of this is a temporary export permit, for which at re-importing no import duties are due, provided that it can be demonstrated that the goods were exported from the EU first.

History and future

Maco Customs Service was established in 1953.

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