The essentials of customs procedures in international trade

Customs procedures, central to the regulation of cross-border trade, determine the conditions of import, export, transit and storage of goods, and dictate the duties and taxes applicable. Playing a crucial role in international trade, they guide companies' economic strategies, significantly influencing costs and logistics processes. This article aims to shed light on the contours of these customs systems, highlighting their strategic importance to trade flows and their impact on the global economy, while serving as a resource for economic players to optimize their operations within this regulatory landscape.

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Principles and functions of special customs procedures

Special customs regimes are designed to give companies a strategic advantage in the global economy. Their main role is to alleviate the tax and customs charges normally payable on goods as they cross borders. This translates into a suspension or deferral of tax and customs obligations, a mechanism that enables companies to optimize their cash flow and reduce the initial costs associated with import-export.

One of the fundamental aims of these arrangements is to boost the competitiveness of European businesses. By allowing goods to move more freely and at lower cost, special customs procedures help to create an environment more conducive to business and innovation. They act as catalysts for companies seeking to expand beyond domestic markets, paving the way for efficient and economically viable international expansion.

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General operation

Special customs procedures are designed to offer significant operational flexibility to companies operating internationally. They are distinguished by three main functions that are strategic for managing and optimizing business activities:

1. Storage: This function enables companies to defer payment of import duties and taxes normally due. Goods can be stored in designated areas, such as bonded warehouses or free zones, without having to pay taxes immediately. This mechanism is crucial for cash flow management, and can significantly reduce logistics costs. In addition, special customs regimes allow the usual handling of stored goods. These can include operations such as repackaging, quality control, ironing and so on. These activities can be carried out either directly on the storage premises, or at another location within the European Union. This added flexibility enables companies to optimize their logistics and goods preparation processes prior to distribution or final export.‍
2. Specific use: Certain special customs regimes authorize the use of imported, and sometimes reimported, products for specific purposes, benefiting from advantageous customs conditions. For example, equipment intended for use in research and development may benefit from total or partial suspension of customs duties. This function encourages innovation and supports business competitiveness by reducing the tax burden associated with the use of specific imported goods. It is important to note that this facilitation also works in the other direction. Products that are exported for specific uses, such as goods sent abroad for research and development, can also benefit from advantageous customs conditions when re-imported. This mechanism is designed to support companies in their international innovation and development efforts, by minimizing the tax and customs constraints associated with the cross-border movement of goods for specific uses.‍
3. Processing: Special customs procedures allow goods to be modified, processed or repaired before being re-exported or re-imported, tax-free. This facility covers activities such as assembly and fabrication, which can take place outside the usual tax framework. The advantage is twofold: on the one hand, it stimulates the export of value-added products by enabling companies to make modifications or improvements to products before re-exporting them. On the other hand, it also applies to imported goods. Companies can import goods for processing or repair, and then re-export them or place them back on the local market, thereby benefiting from an exemption or reduction in the tax charges normally associated with such operations. This feature of customs regimes is particularly advantageous for companies engaged in complex production processes, or requiring specific expertise only available in certain countries. It allows greater flexibility in supply chain management and helps to optimize production processes, thus enhancing competitiveness on the international market.

Each of these functions brings significant added value to companies, enabling them to better plan their customs operations in line with their commercial and production strategies.

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The different types of special diet

This section summarizes the different types of special customs regimes. To find out more about each regime, a detailed article is available on the Nabu blog.

Temporary admission

This scheme allows the temporary use of non-EU goods on EU customs territory, with total or partial suspension of customs duties and taxes. Goods may be used for specific purposes such as trade fairs, exhibitions or tests, before being re-exported without substantial modification. The procedures governing temporary admission are strict, requiring precise documentation to guarantee the tracking and re-exportation of the goods.

Special destination

Special purpose regimes support specific sectors by offering tax advantages for the import of raw materials, components or products needed for production. Examples include agriculture and aeronautics. The eligibility criteria and implementation of these schemes are governed by European legislation, designed to encourage certain economic activities within the EU.

Customs warehouse

This customs procedure allows goods to be stored under suspension of customs duties and taxes. The mainpurpose is to defer payment of duties until the products are either introduced onto the European market, or exported from the EU. The conditions for using a bonded warehouse are strictly defined, and authorized operations include simple storage, as well as certain handling of goods.

Inward and outwardprocessing

Under inward processing, companies are authorized to temporarily import raw materials or components without payment of duties, for processing or working prior to re-export. The aim is to support EU producers by reducing input costs. Outward processing allows goods to be sent outside the EU for processing or repair, before being re-imported with duty relief. Procedures are designed to ensure that benefits are not misused, and the benefits of these schemes are particularly important for companies involved in international production chains.

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Administrative and regulatory procedures

Authorization procedure

Obtaining a special customs procedure is subject to a rigorous authorization procedure. Companies must prepare a detailed application, justifying the need to apply the specific customs regime for their activities, and including an exhaustive description of the goods concerned. Theassessment of these applications by the customs authorities is based on strict criteria, taking into account compliance with current regulations and security issues.

In most cases, companies are required to provide financial guarantees. The purpose of these guarantees is to cover any tax liabilities arising from the use of customs procedures.

In addition to this standard procedure, there are cases and conditions in which companies can submit simplified authorization applications. These simplified applications can be made directly on the customs declaration, offering a faster and less complex procedure for companies meeting certain criteria. This simplified application option is particularly useful for routine operations, or for companies with a good track record of compliance with customs regulations.

Authorization management and development

Permit management is adaptive, evolving with business needs. Authorizations may need to be adjusted following changes in business operations, requiring ongoing compliance with current regulations. Companies need to remain alert to changes in legislation, which may impact on the use of customs procedures and require internal processes to be updated.

Customs surveillance and control

Customs supervision is a cornerstone of these special regimes. Regular inspections ensure compliance with the obligations associated with the authorizations granted. In the event of non-compliance, companies are exposed to corrective measures, which may include sanctions or revocation of authorizations. Rigorous, compliant management is therefore essential if you are to operate serenely within this regulatory framework.

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Towards strategic control of customs procedures

Special customs regimes are essential strategic tools for economic operators wishing to optimize their commercial operations and benefit from a significant competitive advantage. Through the suspension or reduction (partial or total) of customs duties, they offer the flexibility needed to adapt the production, storage and distribution of goods to the requirements of the global market. With the constant evolution of regulations and the potential for innovation in customs procedures, companies need to remain vigilant and proactive to fully exploit these regimes and anticipate future changes. This implies assiduous regulatory monitoring and continuous adaptation to new legislative provisions, thus ensuring sustainable competitiveness on the international scene.