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HMRC internal manual

Customs Special Procedures Manual

Specific rules and processes relating to Outward Processing: rate of yield - Added Value duty calculation where different temporary export goods are involved

The operator has the option to request partial relief from import duties to be granted by taking the cost of the processing operations as the basis of the value (hereafter: value added method of taxation). However the value added method of taxation may not be applied where, prior to their entry for the outward processing arrangements, temporary export goods which are not of Union origin had been released for free circulation at a zero duty rate. Therefore, several situations may occur:

The value added method is applied for in the case of temporary export goods subject to an ‘erga omnes’ zero duty rate. Therefore, the value added method of taxation may be applied only where the temporary export goods are of Union origin.

The value added method is applied for in the case of temporary export goods subject to a preferential zero duty rate; therefore, the value added method of taxation may be applied only where:

  • the temporary export goods are of Union origin, or

 

  • the temporary export goods had been released for free circulation at a duty rate higher than zero.

Where the value added method of taxation is requested covering several temporary export goods, and some of these are neither of Union origin nor had been released for free circulation at duty rate higher than zero, the value added method of taxation may nevertheless be applied by excluding these goods from the arrangements. For this purpose, the value of these temporary export goods could be added to the processing costs of the compensating products.

Example

The value added method is applied for a compensating product consisting of two different temporary export goods:

  • compensating product: motor vehicles, Code CN 87, duty 10%, processing costs: 15000
  • temporary export good 1: Ball or roller bearings, Code CN 8482, value: 1000
  • temporary goods 2: Gear boxes, Code CN 8708, value 1000, which prior to their entry into outward processing had been released for free circulation at a zero duty rate, and do not have Union origin.

In this case, value added method may be applied by taking as the basis of assessment the processing costs for the motor vehicles (15000) plus the value of the gear boxes (1000) for applying the Common customs tariff: 10% x (15000 + 100) = 1600. Therefore the import duties to be paid could be calculated as 1600.