Outward processing duty calculation for textiles
Information on outward processing duty calculation for textiles.
Outward processing is often used for textiles which say, carry a 13% duty rate.
As an example, fabric, lining, buttons, zips, and interfacing are sent to a third country for manufacturing into suits.
The business has been granted an authorisation based on the descriptions and quantities of the goods exported, the descriptions and quantities of the processed goods imported, and the rate of yield.
The following example calculation demonstrates the duty saving:
9 metres fabric)
5 metres lining)
60 buttons)
3 zip)
1 metre interfacing)
Total value goods exported = £130
The non-UK manufacturer’s invoice for processing costs of £500 covers labour and overhead costs but also additional materials used such as thread and waistband.
There is also £70 in freight and insurance charges.
The total added costs at re-import are £500 + £70 = £570.
Customs value of suits = £570 + £130 = £700
If duty were paid on full value, it would be £700 @ 13% = £84