Find out how to get duty relief when importing goods for processing and subsequent re-export.
You can use Inward Processing (IP) to get relief from Customs Duty and import VAT on goods that are imported from outside the EU to be processed, and then exported outside the EU, or released for free circulation in the EU.
Excise Duty is also suspended when goods are entered into IP.
If your business is based in an EU country you can use IP, subject to authorisation by HMRC. Non-EU bodies can only use IP for non-commercial imports.
You’ll have to pay duties once the goods have been processed if they’re released into free circulation. The duties you’ll pay can be based on the value of the goods at import, or the value of the final product – see Articles 85 and 86(3) of the Union Customs Code.
Conditions apply to using IP. You cannot issue any documents showing the status of the goods as T2 or free circulation, or any preference certificates unless specifically allowed under preference rules.
You also need to send a Bill of Discharge to your supervising office within 30 days of the end of your agreed processing period.
You need to be authorised to be eligible for duty relief under IP.
Use full authorisation if you’re a regular user of IP. You should apply at least one month before importing, using form SP3.
Authorisation by declaration
Authorisation by declaration is suited to traders importing goods occasionally to IP and carrying out all processing in the UK. You should only use this method if you intend to import 3 times or less in a calendar year.
Authorisation by declaration lets you enter goods into IP without making a prior application for authorisation. Use the relevant customs procedure codes on your customs declaration (form C88) and place indicators in box 44. You’ll also need to complete a Bill of Discharge for each entry.
Where a company or importer’s address is not in the UK, you should only use authorisation by declaration for non-commercial goods. For authorisation involving more than one member state, you should apply for full authorisation or multi state authorisation.
You cannot use an authorisation by declaration to import goods listed under chapter 93 and chapter 97 of the Trade Tariff, or over £500,000 in value.
Multi State Authorisations
Multi State Authorisations are authorisations that are valid in more than one member state. They can apply to:
- Temporary Admission
- Inward Processing
- Outward Processing
- customs warehousing
Economic Operators must use a European Union Gateway website to access the EU Central Service site to request an authorisation.
Email: firstname.lastname@example.org to get access to the website. Include your:
- contact email address
- Economic Operator Registration and Identification scheme (EORI) number
HMRC will email you within 5 days to confirm you’ve been set up to access the European Union Gateway website, and give you the link to access it.
A guarantee for potential debts has to be provided to secure the future payment of the Customs Duty should they become due, for example, for IP where the goods are released to free circulation and the debtor fails to pay.
You should make sure you’ve applied for a Customs Comprehensive Guarantee (CCG) on form CCG1. You can submit the CCG1 at the same time as your application for authorisation. A CCG can take up to 120 days to issue.
Your authorisation cannot be issued until the CCG1 form has been processed. If you intend to use an individual guarantee, you should explain the reasons in the additional information box and provide the details to the authorising office.
You can apply for retrospective authorisation on goods imported to free circulation, if you realise the goods should have been imported to IPR.
All requests are considered individually and may only be issued in certain circumstances. You need to be able to:
- produce records to support your application
- show the goods were, or are, eligible for relief
- provide a full explanation of why retrospective authorisation is necessary
Retrospective authorisation can only be issued for up to one year prior to the date of the application being received.
Retrospective authorisation can only be applied for once in a 3 year period.
You cannot retrospectively apply for authorisation by declaration.
Responsibility of authorisation holders
The authorisation holder is responsible for all duties on the goods, even if they do not own them. You need to make your own financial arrangements with other suppliers, customers and processors involved.
Conditions and requirements
You’ll need to consider a number of things when you apply for IP authorisation.
The throughput period is the time you’ll need to process the goods – from the date you import or receive them to the date that you dispose of them. This period should not exceed a year, although there are some exceptions.
If you’re using authorisation by declaration, the standard throughput period is 6 months. If you’ll need longer than this then you should write to the National Import Relief Unit (NIRU) when you make your import declaration.
Processed products are those that result from your processing operations. You have to identify the processed products you’ll end up with when you make your application for IP authorisation.
You need to distinguish between your main products and your secondary products. Anything that is produced as a necessary by-product of making your main products must be counted as a secondary product.
They should not be treated as production losses, waste or scrap – only goods resulting from destruction of IPR suspension goods under customs supervision are treated as waste.
Rate of yield
Rate of yield is a measure of how many IP imports you need to produce your processed products. You need to specify this in your application.
If your application covers more than one processing operation, you’ll have to give the rate of yield for each one separately.
The economic test
The economic test applies to specific goods. To get IP authorisation on these goods, you’ll need to provide evidence to show why you cannot use EU-produced goods instead.
The full list of goods is in Annex 71-02 of the Commission Delegated Regulation 2015/2446.
You must keep records of all goods you enter into IP for at least 4 years after their export or disposal. Your records must show:
- the nature and quantity of the goods
- when and where the goods entered into IP
- where the goods have been held
- when and where the goods were exported or disposed of
- what processing was carried out on the goods and where it took place
- how the IP goods can be identified in the processed products
- production data showing your rate of yield
Additional rules for specific goods
Most of the administration of using IP is dealt with when you complete the Single Administrative Document for import and export.
There are more factors for certain special cases, including:
- goods subject to preference import licensing – preference cannot be claimed when goods are entered into IP, only if they’re released to free circulation
- ozone-depleting goods – contact the Import and exports: general enquiries helpline, as some of these goods cannot be entered into IP
- firearms, ammunition and nuclear material – these can only be entered into IP after an import licence has been obtained from the Department for Business, Innovation and Skills
The equivalence procedure lets you use identical free circulation goods instead of IP goods for processing and re-export. This means you can hold both IP and free circulation goods in common stock without having to distinguish which specific goods have been entered into IP.
Equivalence cannot be used when goods are subject to Anti-Dumping Duty.
When using the equivalence procedure:
- you must supply evidence to show that free circulation and IP goods are exactly the same
- you need prior authorisation – so it cannot be used with authorisation by declaration
- if any of your imported goods are not later re-exported, it cannot be because your customers have differentiated between your IP and free circulation goods
- if you’ve applied for IP on the basis that the goods you need are unavailable in the EU, you cannot use equivalence on EU-produced goods
There are 2 changes on the equivalence procedures. These are:
- prior export equivalence – lets you export processed products made from the processing of equivalent free circulation goods before you import your IP goods
- prior import equivalence – lets you release import goods to free circulation without the need for duty to be paid, on the basis that equivalent goods will be exported later
How to move IP goods
You can move goods entered into IP between IP authorisation holders, as long as the authorisation holder receiving the goods has approval to do so.
Your records must identify the location of the goods at all times. If you transfer your rights and obligations (TORO), this does not discharge your liability. You must get approval from your HMRC authorising office before you use TORO.
Read Notice 3001 for more information on the movement of goods.
How to export and dispose of IP goods
Your liability for suspended duty on IP goods ends when the goods are exported or otherwise disposed of. Eligible disposals include:
- exporting directly outside the EU – this can be done using a full declaration with form C88, or using simplified declaration procedures
- exporting outside the EU through another member state – copy 3 of the C88 must be endorsed by UK customs and sent with the goods to be presented when they are being cleared for exit from the EU
- placing the goods to free circulation
- moving goods to another customs procedure
- moving goods to another IP authorisation holder
- destruction - under IP suspension, this may only be possible under customs’ supervision
Other forms of discharge include:
- export by sea outside of territorial waters
- sale to customers who take goods out of the country in their baggage
- supply to duty-free shops
You need to complete forms to formally discharge your liability for suspended duty.
Use form BOD1 for all other authorisations, and send it to your HMRC authorising office.
How to place goods to the EU market
If you receive goods from another member state, your supplier should provide you with a form INF 1 which shows how much duty has been suspended and needs to be paid.
Other IP procedures
In some circumstances, you’ll have to follow different IP procedures.
IP for goods in customs warehouses
When carrying out IP operations in these premises, the goods remain physically in the customs warehouse but your records must show they’re under IP procedures.
IP for aircraft construction and repair
Special simplified IP procedures are available to businesses involved in aircraft construction and repair, or in manufacturing civil aircraft parts, satellites and ground-station equipment.
IP and tax-free shopping
Like all member states, the UK operates a system whereby goods sold by retailers for personal export outside the EU can be zero-rated for VAT. This is called the VAT Retail Export Scheme (RES).
Retailers who use RES can also apply for duty relief under IP for goods that were imported from a non-EU source before being sold for personal export back outside the EU. You can apply using form SP3.
How to get help
Contact the Imports and exports: general enquiries helpline for general customs related queries.
Contact NIRU for help with authorisation by declaration.
Your HMRC authorising office (shown in your authorisation) can answer questions about your own IP authorisation.