EU special customs procedures: warehousing, processing, end-use

When a special procedure is worth considering

Transit, the movement of goods under customs supervision between two points, is outside the scope of this article.

Common rules

The European Commission's information sheet on special procedures sets out several horizontal rules:

• Authorisation. Every procedure except the free zone requires customs authorisation. Under certain conditions customs can grant it with retroactive effect of up to one year.
• Economic conditions. Where an authorisation could adversely affect the interests of Union producers, the economic conditions are examined at EU level with a Commission expert group. This mainly concerns processing procedures.
• Guarantee. Except in free zones, goods under a special procedure must be covered by a guarantee for the customs debt.
• Movement. Goods under a procedure can be moved without further formalities such as transit.
• Equivalent goods. Customs can allow Union goods to be used instead of the non-Union goods under the procedure (and the reverse under outward processing).
• Discharge. The procedure must be closed by export, release for free circulation or placement under another procedure. For end-use and inward processing this requires a formal discharge.

Customs warehousing

A customs warehouse is a customs-approved place where non-Union goods wait for their next destination. Duty and/or import VAT are deferred until the goods leave the procedure or are placed under another one. There is no time limit on storage, unless the nature of the goods creates a threat to health or the environment if stored for long.

The Code provides for four types: public customs warehouses type I, II and III, and private warehouses. Smaller importers usually use a public warehouse run by a logistics operator; a private warehouse makes sense with steady, large volumes.

Typical uses:

• buying a whole harvest or production batch and selling it in tranches,
• goods whose final market (EU or export) is not yet known,
• waiting for a rate change, a quota or a proof of origin.

A free zone works similarly, but it is an enclosed area and goods in it need no authorisation or placement under a procedure. When goods leave, export or import formalities apply.

Temporary admission

Temporary admission lets you use non-Union goods in the EU for a limited period, with a view to re-export. The goods may not be processed. The maximum period is 24 months.

Relief can be total or partial. With partial relief you pay, for each month or fraction of a month, 3% of the import duty that would have been due on release for free circulation; the amount is paid when the procedure is discharged. Under temporary admission VAT, excise and commercial policy measures do not apply either.

Typical uses are machines at trade fairs, professional equipment, commercial samples, reusable packaging and test equipment. An ATA carnet, issued by chambers of commerce, can also be used for temporary admission; ICC runs the carnet system and its digital version, eATA.

End-use

End-use means releasing goods for free circulation with a duty exemption or reduced rate on condition that they are used in a specific way within a specific period. The Commission gives the example of processing fish into food preparations. If the conditions are not met, the normal duty becomes payable. For goods suitable for repeated use, customs supervision lasts no more than two years after first use.

TARIC shows whether a conditional rate exists for a given commodity code. Classification is covered in HS and CN codes and tariff classification.

Inward processing

Inward processing lets you process non-Union goods in the EU with duties and taxes suspended. The processed products can be:

• re-exported, avoiding duty,
• released for free circulation, which the Commission describes as paying a lower duty,
• and waste from processing can likewise be released for free circulation at a lower duty.

The goods keep their non-Union status throughout. Customs sets the discharge deadline in the authorisation. The procedure makes sense for packing and assembly, upgrading raw materials, or repairing equipment for non-EU customers.

Outward processing

Outward processing works the other way round. Union goods leave the EU for processing, and on return duty is paid only on the added value, meaning the processing cost, not the value of the whole product. No duty is due where goods are repaired free of charge under warranty or defective goods are replaced. The Code also provides for a standard exchange system and prior import of a replacement product.

How to get started

1. Map the flow of goods: from where, to where, what happens to them and for how long.
2. Check classification and rates; the saving must exceed the cost of the authorisation, guarantee and record-keeping.
3. Ask your customs broker or warehouse operator what records the procedure requires.
4. Apply to customs for the authorisation and agree the form of guarantee.
5. Set up the accounting: every item under the procedure must be traceable to its discharge.

Special procedures are a customs matter; the sales contract has to reflect them, for example through the right Incoterms rule and proof of origin. Regular clearance is covered in EU customs clearance step by step. Hiram does not handle customs clearance, but it helps you find suppliers and buyers and compare quotes by total landed cost; see the market.

Sources

• European Commission: Special Procedures (other than transit), UCC Quick Info (PDF) (opens in a new tab)
• European Commission: Customs transit, ATA and temporary admission (opens in a new tab)
• ICC: ATA Carnet (opens in a new tab)
• Regulation (EU) No 952/2013 laying down the Union Customs Code, EUR-Lex (opens in a new tab)