What is passive perfecting?

In the previous article on material accounting, we mentioned, among its many advantages, the facilitation of customs optimization through inward and outward processing. These customs mechanisms offer interesting possibilities for companies, enabling them to optimize costs linked to customs duties. Today, let's take a closer look at the outward processing mechanism, to reveal its subtleties and explain how it can be an advantageous tool in the handling of your import-export operations.

More than just a concept, outward processing is a practical device that enables goods to be exported for processing and then re-imported, while benefiting from significant customs advantages. Explore outward processing with us, and discover its impact and uses in the context of customs procedures.

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Understanding outward processing: a strategic customs procedure

Outward processing facilitates international trade by alleviating customs constraints for companies involved in the import-export of goods. This approach enables them to navigate more easily through the complexities of customs regulations and duties, optimizing their operations across borders.

The objectives

This customs regime supports companies in their international trade by offering them financial advantages. The principle is as follows: a company exports its products to another country for modification or repair. When these products are then re-imported, the company can benefit from a reduction or even exemption from the taxes that would normally apply to these products, despite the improvements made abroad. The idea behind this scheme is to encourage companies to participate more fully in international trade, which can stimulate the economy both locally and globally.

Deciphering outward processing

To use this scheme, there are specific rules to follow. When products are returned to their country of origin after having been worked on in another country, they must always be quite similar to the products originally sent - even if they have been modified or repaired. Companies must obtain special authorization to use this scheme, and this is granted taking into account the company's needs and ensuring that the scheme does not unduly harm local producers. In general, this authorization is valid for up to 5 years, but this period may vary according to the needs of the company and the rules of the market.

Impact on the economy and businesses

Outward processing impacts both the country's economy as a whole and the companies participating in the scheme. On a macroeconomic level, it can boost the country's trade by encouraging more imports and exports, which is good for the economy. For individual companies, it means they can save money, as they pay less tax when re-importing products that have been sent abroad for modification or repair. This makes international transactions a little cheaper and more feasible for them.

The benefits

As a tool, it opens up a range of possibilities for companies operating on the international scene. The benefits can be seen not only in terms of reduced costs thanks to duty exemptions, but also in the operational flexibility offered to companies, which can call on specific skills or materials available abroad. This enables them to participate more actively and strategically in international trade, adapting their operations to the opportunities and constraints of the global market.

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How outward processing works

Passive enhancement is an optimization mechanism in business, but to take full advantage of it, it's crucial to understand how it works in detail.

Temporary export process

Temporary export, the initial stage of the scheme, is vital in establishing a solid foundation for all future transactions. This is where goods leave their country of origin with the intention of undergoing specific transformations before being re-imported. Rigorous documentation and strict compliance with customs regulations are cornerstones in ensuring flawless execution.

Example: Imagine a French company exporting engine parts to Malaysia. All documents, including invoices, packing lists and shipping documents, need to be carefully prepared and checked to avoid any customs inconvenience or unnecessary delays.

Placement and discharge

Regime and discharge are orchestrated via precise declarations at each stage of export and re-import, guaranteeing legal compliance of transactions. Use of the Single Administrative Document (SAD) optimizes customs procedures, securing the legal path for goods across borders.

Example: On the outbound journey, the French company declares the engine parts for export using the SAD, thus ensuring that all outbound goods are correctly catalogued and authorized for the journey.

Special case of authorizations with INF newsletters

INF information bulletins are essential when products enter and leave through different customs offices, ensuring consistent and reliable communication between customs offices and avoiding potential administrative headaches.

Example: If engine parts are exported via Marseille and reimported via Lyon, the INF bulletin ensures clear communication between the two customs offices, avoiding delays due to information gaps.

Clearance period

Clearance deadlines, while carefully set, also offer a degree of flexibility, allowing for extensions if circumstances warrant, thus avoiding potential penalties.

Example: If assembly in Malaysia is delayed due to a stock shortage or production problem, the French company must immediately apply for an extension of the clearance period to avoid losing the benefits of the scheme.

Rates of return and taxation

The yield rate is a ratio established between products exported for processing and those reimported after processing. It is a kind of check to ensure that reimported products match those sent, taking into account any modifications made abroad. It must generally be defined when the initial authorization is obtained, and is crucial for validating the match between products before and after processing.

As for taxation, it is specifically calculated on the value added to products during processing abroad, and not on the total value of reimported products. This means that only the costs of labor and materials added abroad are taxed.

Example: A French company has sent engine parts worth €1,000 to Malaysia for assembly. If the assembly adds a value of €200, on their return to France, taxation will apply only to this added value of €200, not to the total value of €1,200.

Each step, though complex, is imperative to effectively navigate through the outward processing regime, maximizing benefits while remaining firmly within legal and regulatory limits. If further clarification or elaboration is required, I'm here to help!

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Legal and administrative framework

Navigating the intricacies of outward processing does not happen on a whim, but is carefully framed by a set of legal standards and precise administrative procedures. This framework is in place to ensure that the regime is not only beneficial to business, but also operates within the bounds of legality and respect for international trade policies.

Authorization procedures and applications

Access to the outward processing regime is not automatic, and requiresan application and prior authorization, drawn up according to specific administrative procedures. The application process generally begins with the submission of documents justifying and detailing the need for the planned processing abroad. Eligibility criteria, meanwhile, often revolve around the impossibility of carrying out the transformation locally, either for technical reasons, or due to the absence of the necessary skills on national territory.

The validity of the authorization, once granted, is typically limited in time and must be renewed at intervals determined by local legislation. The aim is to ensure that the reasons justifying the use of outward processing remain relevant, and that companies do not use it to unduly evade customs duties.

Conditions and restrictions

Outward processing is conditioned by a set of criteria and is subject to restrictions to ensure that the scheme is used fairly and in line with its original intention, which is to enable companies to benefit from skills and resources not available locally.

One of the conditions of the scheme is the traceability and recognition of exported goods in reimported products. Thus, goods sent abroad for processing must be identifiable in the finished products when they are re-introduced into the country of origin. In addition, the authorities ensure that use of the scheme does not hinder the interests of domestic producers, by imposing restrictions on certain goods or processing in sectors where local industry is deemed sufficiently competent or in need of protection.

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Online tools and services for passive improvement

Navigating the intricacies of customs procedures and international trade can be complex. Fortunately, online tools and services, such as SOPRANO and TP-CDS, are available to simplify these procedures, enabling companies to manage their import-export activities efficiently within the framework of outward processing.

SOPRANO and TP-CDS

SOPRANO and TP-CDS stand out as key instruments for outward processing. SOPRANO acts as a hub for managing customs procedures, helping companies to navigate through regulations without getting lost in the legal complexities. TP-CDS, on the other hand, focuses more on the transactional aspects of trade, helping to track and manage goods between nations.

To get started with these platforms, creating an account, registering the company and configuring export/import activities are the first steps. The platforms, which are generally intuitive, guide users through the various transaction phases, from document filing to shipment management.

Other resources and supports

Other online resources, including forums, specialized websites, blogs and webinars, are available to support companies in their passive improvement initiatives. The selection of reliable and credible resources ensures the accuracy and relevance of the information and advice gathered.

Tips and recommendations for optimum use

Optimal use of these online tools requires familiarization and appropriate training of all stakeholders. Adopt secure management of login information and establish protocols for secure information sharing. Explore all functionalities and don't hesitate to contact customer support to maximize your use of these platforms.

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Beyond borders: The passive enhancement strategy

Outward processing is emerging as a strategic lever within international trade, enabling companies to maximize the value of their goods through cross-border processing, while preserving a fiscal balance thanks to taxation focused solely on the value added during the process. Its relevance in the global economic fabric lies in its ability to deftly combine tax management and optimized production, forming a compass guiding companies through the complexities of globalized trade. On the horizon, the ability to master and apply this regime remains essential for international trade players wishing to combine expansion, competitiveness and regulatory compliance in an increasingly interconnected and evolving market.

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