Guidance

Processing under Customs Control

How to pay less duty using Processing under Customs Control (PCC) for your imported raw materials or exported manufactured goods

This guidance was withdrawn on

Processing under Customs Control is now obsolete. This is a result of Union Customs Code (UCC) legislation which started on 1 May 2016. Notice 3001: customs special procedures for the Union Customs Code explains about customs special procedures under UCC.

Introduction

By placing imported goods under Processing under Customs Control (PCC) arrangements for processing in the European Union (EU), you may be able to obtain relief from customs duty, agricultural levies, and other Common Agricultural Policy charges when you declare the processed goods to free circulation.

You may be able to pay a lower amount of customs duty when the goods are released to free circulation if the duty rate applicable to the processed products is less than the rate applicable to the imported goods.

To determine whether you can obtain a duty advantage from using PCC you will need to check the Tariff classification of your imported goods and processed products and compare the duty rate applicable to them. However in calculating the duty advantage you will need to take into account the customs duty on the processed products will be based on the customs value of those products, ie the value will include any processing costs incurred in the EU.

This guide helps you to find out whether the raw materials you import and goods you manufacture from them are eligible, and shows you how to use the procedure.

Use the interactive tool to understand what customs procedures and reliefs apply to you.

Processing under Customs Control

PCC allows you to import raw materials with customs duty, VAT, agricultural levies and other Common Agricultural Policy (CAP) charges suspended. The duty rate applies to the processed products when you put them into free circulation, rather than the imported goods.

How PCC works

Businesses established in the EU can use PCC but you must obtain authorisation from HM Revenue and Customs (HMRC) before you use the system.

The finished goods must be released into free circulation within a timescale agreed at the authorisation stage, which is called the throughput period. You must also specify the rate of yield - the quantities of finished product you expect to manufacture from a fixed quantity of imported components or raw materials. This ensures they are being correctly accounted for.

Authorisation to use PCC may require an economic test to ensure it would not adversely affect other producers of similar goods in the EU. If your goods require an economic test, authorisation will not be given until the test is completed.

Alternatives to PCC

If you are processing goods for re-export from the EC, inward processing relief must be used instead of PCC. See the guide to [Inward Processing].(/government/admin/detailed-guides/3945) You may also wish to consider customs warehousing if the handling is minor, see the guide to customs warehousing.

Get authorisation for PCC

There are 4 types of authorisation for PCC. The best authorisation for your business will depend on the type of goods you are importing, and how and where the goods will be moved during the process of converting them into finished products to enter free circulation.

Choose the right authorisation

Simplified authorisation may suit you if you make imports under PCC where the processing is carried out in the UK only and the process is covered by part A of annex 76 of Commission Regulation (EEC) 2454/93, better known as ‘Implementing Provisions of the Community Customs Code’.

For further information read part A of annex 76 in Notice 237. You no longer need to complete form C107 for your imports.  
If you are regularly carrying out processing solely in the UK, you should consider obtaining UK authorisation. Find information on UK authorisation in Notice 237.

You can use this simplified authorisation procedure for which the economic conditions are deemed to be satisfied, that is items covered by Part A of Annex 76. This may suit you if you only make occasional imports to PCC and your processing operations are carried out only in the UK. You will need to include codes in Box 44 of the Single Administrative Document (SAD) that will tell HMRC:

  • the place of processing (if different from your address)
  • the type of processing using one of the economic code statement identifiers ECO01 - 21, the type of  goods and their commodity code(s) for processed goods
  • the rate of yield and throughput period of the processing

Acceptance of your SAD by HMRC provides your authorisation.

Find out about completing the SAD in the guide on declarations and the Single Administrative Document.

Single Community Authorisation should be used if your processing is carried out in more than one EU member state. You should apply to the customs authorities in the country where your main accounts are held and where at least part of the processing operations will be carried out. Approval will also be sought from the customs authority in the relevant member state(s) named on your application where part of the processing takes place. This authorisation will allow you to move raw materials and partially processed goods freely between your operations within the EU. Find information on Single Community authorisation in Notice 237.

If you regularly use other customs procedures, such as Inward Processing (IP) or customs warehousing, you should apply for an integrated authorisation, which allows you to move your goods between these procedures as required. Find out about integrated authorisation in Notice 237.

Apply for authorisation

You should apply for authorisation at least a month before you want to use PCC using form C&E 1321. If you want to start processing before the result of your application is known, you may be required to provide security for the potential customs charges. If you are not authorised you will have to pay the duty and import VAT.

Authorisation is granted for a specified validity period, usually 3 years. Some goods subject to specific European Community (EC) laws may require shorter authorisation, particularly goods that require an economic test.

Importing PCC goods

You can enter raw materials into PCC in 3 ways. The method you use depends on which customs procedure the goods are coming from.

If you are entering materials into PCC at import, you must use the Single Administrative Document (SAD) form C88

You can also enter goods to PCC using Customs Freight Simplified Procedures (CFSP). However you may not use CFSP and simplified PCC together.

If you are entering materials from Inward Processing (IP), you must use the SAD and quote the relevant Customs Procedure Code (CPC). To find out more about how to use the SAD, see the guide on declarations and the Single Administrative Document.

Record-keeping requirements

Whenever you’re importing and using goods under PCC, you must keep detailed records. Usually the commercial documentation you use is sufficient, provided that it clearly shows:

  • the goods you are importing
  • the processes you are carrying out
  • what the products are
  • how the products and unprocessed goods are disposed of

If you transfer any of the materials during processing, you must keep the relevant paperwork. You must keep all paperwork for at least 4 years after the authorisation expires.

Read more about effective record-keeping for PCC in Notice 237.

If you’re unsure about the level of detail required and whether you need to adapt your paperwork to ensure it meets the requirements for eligibility for duty relief under PCC, check with HMRC’s National Advice Service.

Transfer PCC goods

Goods that have been imported under PCC can be transferred to other authorised businesses to carry out work on them on your behalf.

The types of permitted transfer are usually contained within your initial authorisation to use PCC. How you go about transferring the goods depends on the type of authorisation held by you and the person to whom you are transferring them.

If you wish to transfer PCC goods to businesses in the same specific authorisation as you - for example contractors you specified in your initial application for authorisation - you must clearly mark the goods as ‘PCC goods’ and keep accurate records of the goods’ location.

To transfer PCC goods between different UK authorisation holders, you should use commercial documents, or the SAD document, depending on the circumstances. Find out about transferring PCC goods between UK authorisation holders in Notice 237.

If you wish to transfer goods to authorisation holders elsewhere in the EU, you must use the SAD.

If you wish to transfer goods to another customs procedure and hold an integrated authorisation, you must keep detailed records. A formal entry on the SAD will only be required if the movement leads to duty becoming payable.

You can find detailed guidance on transfers of PCC goods in Notice 237.

Discharge PCC goods

In many cases, PCC is discharged when the processed goods are entered into free circulation and the relevant duty and import VAT paid on them.

However, there are other circumstances in which goods can leave PCC if your circumstances change. They can be:

  • put into other customs procedure, such as Inward Processing Relief or customs warehousing
  • re-exported
  • destroyed under customs supervision

Entering PCC goods into free circulation, moving PCC goods into other customs procedures, re-exporting them can all be handled by entering them onto a SAD document quoting the appropriate CPC used for PCC.

You must apply to HMRC for prior authorisation to re-export your goods. Moving PCC goods into other customs processes, such as customs warehousing, may also require prior authorisation, unless you already hold integrated authorisation.

Other options will often require specific authorisation from your local customs authority - check with HMRC Excise and Customs Helpline.

Exporting either finished goods or unprocessed raw materials requires permission from your local customs authority (HMRC in the UK).

Find detailed guidance on methods of discharging PCC goods in Notice 237.

Pay duty and VAT on PCC goods entering free circulation

The duty you must pay when your finished PCC products are released into free circulation is defined by the duty payable on the type of finished product you have manufactured.

For goods that attract a specific rate of duty, it must be paid at the rate on the day you release them into free circulation. The same is true for unprocessed goods. You can check the duty applied to your specific products by checking the Tariff.

If your products are liable to ad valorem duty, you need to determine their value to work out the correct rate of duty. There are 4 methods:

  • the customs value of the imported goods plus the cost incurred in processing them
  • the customs value of similar or identical goods imported at around the time you release the goods into free circulation
  • the selling price of the products, as long as the price is not led by any specific agreement with your customer
  • the selling price of the products elsewhere in the European Community

If you are calculating ad valorem duty using the customs value of the imported goods plus the cost incurred in processing them, you can calculate your ‘processing costs’ by adding together all your expenditure (including the value of Community goods used) to create the finished products. This includes overheads and the value of the raw materials. You must not include any profit you intend to make.

It’s a good idea to check which of the calculation methods is most suitable for your particular circumstances, because the amount of duty payable may vary according to the method you use. If you work out your duty liability using each method, you can then choose which is the most advantageous to use.

If you are not sure about duty calculations, you can check with the HMRC VAT Helpline.

Import VAT will be due on the products once they are entered into free circulation, calculated on the value of the processed products. If you are authorised for VAT and duty deferment, you can use it on PCC goods entering free circulation.

Find out more about paying duty and VAT on PCC goods entering free circulation in Notice 237.

PCC returns

You must submit regular returns when importing goods under PCC. The frequency of returns will be specified in your authorisation, but you will usually be required to make them monthly or quarterly.

The return must be submitted within 30 days of the disposal of the goods or the end of the throughput period. If no activity took place under PCC you must still submit a nil-return. If you fail to submit a return, you may be liable to pay duty and VAT on the goods you have entered into PCC. It is your responsibility to submit the returns - you will not receive reminders.

Forms

For the UK, European Community, or integrated authorisation holders, you can use form C&E 1325.

You can also use company-headed paper containing the required information. If you choose to do this you must supply details of:

  • tariff commodity code and description
  • quantity
  • customs value
  • actual rate of yield
  • import entry number(s)
  • date(s) of entry

For the goods you have entered into PCC you must also supply details of:

  • tariff commodity code and description
  • quantity
  • customs value
  • processing costs 
  • free circulation entry numbers and dates
  • the customs procedure the goods have been entered into (if appropriate)
  • free circulation entry numbers and dates

The finished products entered into free circulation during the period covered by the end of the return.

Using form C&E 1325 will ensure you’re not missing any of the essential information on your return.

If you’re using the simplified authorisation procedure, at the end of the throughput period allowed for processing and identified on your import entry you must complete form C99 and send it to the HMRC National Import Relief Unit.

Get help and advice about PCC

The key source of help and advice on managing PCC is HMRC. Find detailed guidance in Notice 237 on PCC.

If you have more detailed queries, you can call the HMRC Excise and Customs Helpline.

If you are using a simplified PCC authorisation you can also contact the NIRU Helpline on Tel 028 6634 4557.

Problems

For appeals against any decision by HMRC you should contact:

Customs and International Reviews & Appeals Team
HM Revenue & Customs
7th Floor South
Portcullis House
27 Victoria Avenue
Southend-on-Sea
Essex SS2 6AL

If you have a complaint that cannot be resolved directly with HMRC, you can refer it to the Adjudicator’s Office. The Adjudicator must provide a fair and unbiased service and examine every party’s point of view before coming to a conclusion. For more details, call the Adjudicator’s Office Enquiry Line on 0300 057 1111.

Further information

HMRC Tariff Classification Email Advice Service

Provision of non-legally binding tariff classification commodity codes advice is available by emailing classification.enquiries@hmrc.gsi.gov.uk and including the information detailed in Customs Information Paper 27 (2015) with your enquiry.

NIRU Helpline

028 6634 4557

HMRC Customs and International Reviews and Appeals Team

01702 361 830

Published 6 August 2012
Last updated 13 June 2013 + show all updates
  1. Fixing references to specialist guides
  2. First published.