What is inward processing?

International trade is a delicate balance between facilitating trade and safeguarding national economic interests. At the heart of this dynamic are customs procedures, known as economic regimes, which are instruments for regulating the flow of goods across borders. Having explored the intricacies of outward processing, we now turn our attention to inward processing. Like its passive counterpart, inward processing offers customs advantages for imported goods. However, whereas outward processing concentrates on export for processing prior to re-import, inward processing is aimed at the temporary importation of goods for processing, followed by re-export. In today's economy, where efficiency is key, the role of inward processing is paramount. Let's take a look at this concept, its benefits and its place in the EU Customs Code.

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Understanding inward processing

Inward processing is a customs strategy that many companies use to facilitate their international transactions. But behind this term lies a precise and advantageous mechanism.

The principle of inward processing is simple: it allows goods to be temporarily imported into a country without having to pay the customs duties and taxes normally applicable. These goods are not intended to remain as they are. They are imported to be processed, worked or repaired. Once this operation has been completed, the products are then re-exported.

The main aim of this system is clear: to avoid imposing customs duties on goods that will not ultimately be sold on the local market. By allowing duty-free imports, subject to re-export after processing, companies can optimize their costs and increase their competitiveness on the world market.

Inward processing therefore offers companies valuable flexibility. They can access the world's resources, process goods according to their needs, then re-export them, while avoiding otherwise high customs charges. This mechanism encourages industrial and commercial activity, while preserving the economic equilibrium of the host country.

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The many benefits of active enhancement

Inward processing is not just a simple customs procedure, but a development and optimization strategy for companies. By adopting this approach, companies can reap numerous benefits, from direct savings to long-term strategic opportunities.

Economic gains

• Cost minimization: One of the most immediate benefits of inward processing is cost reduction. By enabling companies to import goods without paying customs duties and taxes, this approach optimizes acquisition costs, thereby strengthening their price competitiveness.
• Margin optimization: Minimizing customs costs translates directly into improved profit margins. In a globalized market, this optimization can be the key to standing out from the competition.

Openness to the world's resources

• Diversity of materials and technologies: Active improvement gives companies access to specific materials, rare skills or innovative technologies. This openness to diversity strengthens their ability to offer unique products or services.
• Stimulating innovation: Access to a wide range of resources can catalyze innovation. By combining different skills and materials, companies can develop new products or processes, strengthening their market position.

Positioning yourself on the international scene

• Creating lasting partnerships: By entering the inward-processing regime, companies can establish strong links with foreign partners. These relationships can lead to fruitful collaborations, joint ventures or other forms of strategic association.
• Preparing for expansion: Inward processing can be seen as a first step towards international expansion. By familiarizing themselves with international practices and regulations, companies prepare to explore new markets and extend their reach worldwide.

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The Union Customs Code: implications and regulatory framework

The Union Customs Code (UCC) is, in a sense, the "instruction manual " for companies wishing to navigate the intricacies of European customs. For those opting for inward processing, it's an indispensable document. Let's take a closer look.

History and key developments

The CDU, or Union Customs Code, was implemented on May 1, 2016. It replaced the former Community Customs Code with the ambition of modernizing and digitizing customs processes, making them smoother and more accurate.

One of the major innovations of the CDU is the way it has simplified the inward processing regime. To protect and preserve the Union's own resources, the CDU introduced new rules on the taking of guarantees.

Here are some of the most notable simplifications:

• Elimination of the requirement to declare intention to re-export: This change has led to the disappearance of the "reimbursement" inward-processing procedure, and the cessation of the collection of compensatory interest. Prior to this simplification, companies had to explicitly declare their intention to re-export the goods. From now on, this declaration is no longer necessary, reducing the administrative burden for companies.
• Merging regimes: Before the introduction of the CDU, there were distinctions between inward processing and processing under customs control. Thanks to the CDU, these two regimes have been merged into a single inward processing regime. This unified regime can now be discharged either by re-export or by release for free circulation, without companies having to pay compensatory interest.

This modernization has significantly reduced administrative complexity and costs for businesses, while continuing to protect the Union's financial interests.

Conditions for obtaining the plan

One of the aims of the inward processing regime is to promote the creation or maintenance of processing activities within the European Union, without undermining the fundamental interests of producers within the Community. This means that the advantages offered by the arrangements must not unfairly disadvantage local producers.

When a company imports raw materials under duty-suspension inward-processing arrangements, it is imperative that such imports do not cause injury to Community producers of equivalent or similar goods. This is a crucial condition for ensuring a balance between promoting processing activities and protecting the interests of local producers.

Any company wishing to benefit from the inward processing regime must therefore provide economic justification for its use. This economic justification is essential, and each applicant is required to indicate, using a specific code, the economic reasons why it is seeking to benefit from the advantages of the inward processing regime.

Eligibility and justification

Access to inward processing is not automatic. Companies must meet specific criteria. In particular, they must demonstrate that the modifications or transformations carried out on the imported goods add substantial value to the final product. This requirement reflects the Union's desire to promote activities that make a real contribution to the European economy.

Procedure, validity and guarantees

To enter the inward processing regime, an official application must be submitted to the competent customs authorities. This application must be accompanied by documentary evidence of the company's eligibility. Once the application has been approved, authorization is generally granted for a specific period, after which it can be renewed. It should be noted that some companies may be required to provide financial guarantees, thus ensuring compliance with CDU obligations and protection of the Union's financial interests.

Details of how inward processing works

Placement under the

Once authorization has been obtained, it is crucial to place your goods under the inward processing procedure.

• Via the Déclaration d'Admission Unique (DAU): This is the traditional route, offering a detailed, step-by-step procedure. It is designed for companies wishing to have complete control over every movement of their goods, thus guaranteeing seamless traceability. This method is particularly relevant if you're just starting out, or if you prefer to have absolute control over your transactions.
• Opt for simplicity: For those looking for a smoother solution, the simplified procedure offers an agile approach. It's ideal for companies with frequent exchanges, or for those who want to optimize processing time after several passes through the system. This method dispenses with some of the SAD steps, but requires a good knowledge of the goods and the regime to avoid any inconvenience.

Rigorous management of material accounting

Stock accounting is not just a formality; it's the beating heart of the inward-processing process. Every movement, every transformation of your goods must be accurately recorded. Traceability is crucial, because when it comes to customs controls, it's these documents that prove your compliance.

Think of material accounting as your logbook. It captures the history of your goods, detailing their journey, changes and even the unexpected. And when customs wants to take a look, it's this well-documented history that guarantees a smooth audit.

Beyond the controls, this accounting also offers perspective. By keeping close track of your goods, you can identify where to make adjustments, how to optimize your workflows, and ensure that your business runs smoothly. Think of it as a compass that, while ensuring compliance, guides your business towards greater efficiency.

The rate-of-return principle

The rate of return is a kind of compass for companies. It indicates the quantity of goods to be imported to obtain a certain number of finished products. For example, how many imported raw materials are needed to produce 100 shoes or 50 handbags?

During the production process, by-products may be obtained or losses may occur. These factors must also be taken into account.

To ensure the accuracy of this rate, the customs laboratory checks it regularly. And, to make things simpler for certain goods, standard rates have already been defined, avoiding the need to recalculate each time.

INF newsletters

In international trade, it's not uncommon for goods to enter one customs office and leave another. This complexity can lead to misunderstandings and administrative errors. Fortunately, a system has been set up to facilitate this coordination: the INF information bulletin.

This bulletin, created on the European INF STP portal, plays an essential role. It provides a transparent and efficient link between the various customs offices, ensuring that all parties are kept informed of the situation and where the goods are going.

Payment terms and conditions

When you operate under this customs regime, there comes a time when you have to "close" or "clear" your operations. Here's how it works:

Product re-export: The most common option is to send products back abroad after processing.

Exceptions to re-exportation: There are certain situations where, even if you do not actually re-export the products, they are considered re-exported in the eyes of customs:

1. International organizations: If you supply products to entities such as the UN, it's as if you've reshipped them.
2. Military troops from another EU country: Deliveries to these forces are also treated as re-exports.
3. Civil aircraft: Whether direct delivery or work such as repair or modification, this is considered re-export.
4. Spacecraft: Delivering vehicles such as satellites or related equipment is also treated in the same way.

Selling on the local market: If you decide not to reship and to sell your products locally after processing, there will be a charge. These products will be subject to the usual customs duties and VAT.

Other clearance methods: Instead of re-exporting, you can choose other methods to close your operations. This could involve transferring your products to another customs regime, or simply keeping them in transit.

Calculating customs duties

When it comes to paying customs duties, it's crucial to understand how they are calculated to avoid any surprises. The basis of calculation can vary:

1. Initial goods: Sometimes, duties are determined on the basis of the value of the goods when you initially placed them under the customs procedure. This is the gross value of the imported product before any processing.
2. Processed products: In other cases, duties are calculated on the basis of the value of the goods after processing. This method takes into account all the value added by the transformation or improvement process.

The distinction between these two methods can lead to significant differences in the amount of duty payable. It is therefore essential to know which method is used, and to take it into account when budgeting for customs costs.

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Use of online services for authorization requests

Digitalization has greatly simplified customs procedures. In France, there are dedicated online platforms to facilitate the management of applications for customs authorizations.

SOPRANO SOPRANO is the official digital platform of French customs. It centralizes all requests for national customs and tax authorizations. If your company wishes to obtain authorization for a particular customs procedure at national level, you should go to SOPRANO, more precisely to the "Customs clearance" section, under the heading "Special procedure".

TP-CDS For companies with cross-border activities within the European Union, the TP-CDS platform is the ideal solution. This online service manages applications for customs authorizations involving several EU member states. If your company operates in several EU countries, it will be able to submit its permit applications via the European TP-CDS portal. However, access to this service requires specific authorization. Interested companies are advised to contact their local customs office for further information.

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Customs optimization: the key role of inward processing

Inward processing, an integral part of the EU Customs Code, offers a vital opportunity for companies seeking to optimize their international operations. By allowing goods to be temporarily imported for processing, prior to re-export, this mechanism promotes competitiveness while avoiding unnecessary customs costs. However, to take full advantage of this system, companies must ensure compliance, traceability and rigorous management, reflecting the balance between trade facilitation and protection of national economic interests.