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HMRC internal manual

Customs Special Procedures Manual

Criteria and conditions to be met by economic operators applying for a Special Procedure authorisation: other conditions - examination of the economic conditions (economic tests)

The purpose of Customs import duties is to protect EU industry. Using some special procedures allows customs duties to be either suspended or reduced so long as it does not damage the economic interests of EU producers of similar goods.

In most cases EU producers are not considered to be affected, however, certain goods may need to be referred for an ‘examination of the economic conditions’ (previously known as ‘economic tests’).

For further information on economic conditions, when an economic test will be required and the economic codes to be used please see Section 3 of Notice 3001: Special procedures for the Union Customs Code.

New UCC Committee for the examination of the economic conditions

Where an ‘economic test’ is required under the UCC these will no longer be carried out nationally (which was the role of DEFRA and BIS previously) within each Member State they should be referred to the new EU committee (via the policy team).

However, the authorising office may need to consult with DEFRA and/or BIS for an ‘opinion’ or ‘recommendation’ to be passed to the UK representative on the Committee. It is for the authorising office to decide whether details of case should be referred, initially, to DEFRA or BIS as appropriate for their review and opinion/recommendation before forwarding to the policy team. See SPE02140 for information on DEFRA and BIS contacts.

Process in committee

The UK, along with other Member States, will discuss all cases and a vote will be held to establish the view of the committee. The UK customs administration does not submit an opinion/case on behalf of a UK trader, the trader will need to prepare their own case. However, the UK Customs attendee at the committee hearing will need to be briefed on how the UK should vote on each case.

Goods requiring an examination of the economic conditions (economic test)

Full details of the circumstances when an examination of the economic conditions will be required can be found in Section 3.1 of Notice 3001: Special procedures for the Union Customs Code.

All referrals for economic test will be sent to the new EU Committee from 1 May 2016.

Requirement for an economic test

Some general reasons why an economic test will continue to be required for processing operations under the UCC include:

For Inward Processing:

  • where evidence exits that the essential interests of Union producers are likely to be adversely effected
  • where the goods intended to be placed under the IP procedure would be subject to a commercial or an agricultural policy measure or an Anti-Dumping Duty, Countervailing Duty, Safeguard Duty if they were declared for release for free circulation.

Evidence of damage to the interests of other EU producers

Cases may be referred to the Committee following evidence by EU producers by either EU Member State administration or at the initiative of the Commission. The burden of proof lies with the producers. See sections 3.2 and 3.3 of Notice 3001: Special procedures for the Union Customs Code.

Anti-Dumping Duty

It should be noted that the EU committee is unlikely to accept any cases on which Anti-Dumping Duty is due.

For Outward Processing:

  • the economic conditions for outward processing shall be examined only where evidence exists that the essential interests of Union producers of goods listed in Annex 71-02 are likely to be adversely effected and the goods are not intended to be repaired.

Authorising office role

The authorising office should advise policy team of the line to take on referral to the committee. It is the responsibility of the trader to produce a robust case for considerations. The authorising office may wish to refer cases (in the first instance) to DEFRA/BIS as appropriate for an ‘opinion’.

Restrictions on goods which require an economic test

Economic tests cannot be made/applied retrospectively (ie no retroactive authorisations are possible for these goods).

Economic conditions deemed to be fulfilled

Cases in which the economic conditions are deemed to be fulfilled for Inward Processing are listed in Section 3.4 of Notice 3001: Special procedures for the Union Customs Code.

Economic codes

Economic codes are used on the application form to identify when an economic test will be required.

Referring cases to DEFRA (Department for Food and Rural Affairs) and BIS (Business, Innovation and Skills)

UK cases to be referred to the EU economic test committee may, initially, be referred to DEFRA or BIS as appropriate for an opinion.

Please note, economic test reviews are now conducted on behalf of DEFRA by SERCO (or the MMO for fish products). Where applicable, SERCO will forward applications to the MMO.

If a case is to be referred, the authorising office must ensure that details of the goods to be entered to IP (or OPR) and the processing to be carried out are clear before confirming that the correct economic code has been quoted. In addition, evidence to support use of these economic codes must be provided by the trader.

To ensure that applications are not referred unnecessarily (or delayed because insufficient evidence has been provided) the details should be checked by the authorising office before the application is referred to the relevant department. To prevent any delay in processing the application for authorisation, the authorising office should continue to carry out the checks they are required to undertake on other aspects of the authorisation while SERCO/MMO/BIS carry out their review of the economic conditions.

SERCO/MMO/BIS will examine the information provided by the trader in support of their application for relief. They will only consider the economic aspects of these applications. If, in their view, the economic test is satisfied, they may ‘recommend’ approval but the case will then need to be referred to the EU Committee (via the policy team).

Documentary evidence to support cases

Applicants must supply documentary evidence to support the reasons they have given in the application for the need to use the goods which are subject to an economic test. They should be advised that failure to supply the necessary documentary evidence for the purposes of the economic test will result in authorisation being delayed or their application being rejected.

Applications which require an economic test should not be forwarded to the BIS/DEFRA unless adequate evidence is provided. If you have any doubt about the adequacy of the documentary economic evidence provided, you should consult BIS/DEFRA to establish what their requirements are and advise the applicant accordingly (or advise the applicant to seek further information directly from the BIS/DEFRA regarding their requirements).

It is not sufficient for traders to state that goods are not available in the Union or that they can be sourced more cheaply from outside the Union. Nor is it sufficient to say that their customer requires components to be sourced from particular third country suppliers. They must provide written evidence of this.