In the global trading environment, businesses often seek to maximise cost-efficiency, particularly when importing and exporting goods. One way of achieving this is utilising customs regimes like Inward Processing (IP) and Outward Processing (OP). These regimes can reduce or eliminate duties and taxes, thus helping businesses stay competitive in international markets.

Find out the essentials of Inward and Outward Processing, their benefits, and how training in these areas can equip your team for smoother trade operations.

What is Inward Processing (IP)?
Inward Processing allows businesses to import raw materials or semi-finished goods from outside a customs area (e.g., the EU or UK) without paying customs duties or import VAT, as long as those goods are processed and subsequently re-exported.

Key Features:

• Duty Suspension: You don't pay customs duties or VAT on the goods imported for processing.
• Temporary Import: The goods must be re-exported within a specific timeframe, or duties will become payable.
• Economic Benefits: This regime is particularly valuable for businesses manufacturing products for export, as it helps reduce production costs.

Example:
A UK-based car manufacturer imports engine parts from the US, assembles the car in the UK, and exports it to Japan. Under Inward Processing, the manufacturer avoids paying UK import duties on the engine parts.

What is Outward Processing (OP)?
Outward Processing enables businesses to temporarily export goods for processing outside the customs area and then re-import the finished product or semi-finished product at a reduced duty rate. This is particularly useful for companies looking to outsource manufacturing processes to countries with lower production costs.

Key Features:

• Duty Relief: Upon re-importing the processed goods, customs duties are only paid on the added value (i.e., the cost of processing or the value added during the time the goods were outside the country).
• Time Limits: Like Inward Processing, the goods must return within a specified timeframe to qualify for the duty relief.
• Quality Control: Ensure that outsourcing part of your production process does not compromise the quality of your products.

Example:
A UK clothing brand exports fabric to India for stitching and finishing. When the finished garments are imported back into the UK, the company only pays duties on the added value created by the stitching and finishing processes.

Key Benefits of IP and OP

• Cost Savings: The most significant benefit of both Inward and Outward Processing regimes is the savings on import duties and VAT, allowing businesses to manage cash flow more effectively.
• Competitive Pricing: Lower production costs can help businesses offer more competitive pricing on their goods in international markets.
• Supply Chain Efficiency: These regimes enable smoother and more cost-effective cross-border supply chains, helping businesses expand their global reach.

How to Get Started with Inward and Outward Processing
To start benefiting from Inward and Outward Processing, companies should:

• Register with your local customs authority (e.g., HMRC in the UK or the European Commission’s Customs Office).
• Prepare an Application: This will involve detailing the goods, processes, and timeframes involved in your business operations.
• Implement a Monitoring System: Track goods under these regimes to ensure compliance with time limits and avoid unnecessary duty payments.

Why Training is Essential
While the benefits of Inward and Outward Processing are significant, navigating these customs regimes requires in-depth knowledge of compliance rules, documentation requirements, and deadlines. Non-compliance can lead to penalties, back-dated duty payments, and potential legal issues.

Training in these areas is a vital step in ensuring your team can handle the complexities of customs procedures and take full advantage of duty relief schemes.

Essex Chambers run regular virtual half day courses on this topic and our training covers:

• Documentation
• Customs Compliance
• Risk Management
• Duty Recovery

and is ideal for:

• Logistics and Supply Chain Managers
• Customs Compliance Officers
• Procurement and Purchasing Teams
• Export/Import Managers

Our next training date is -

Date:   Wednesday 20th November 2024 9.30am to 12.30pm 
Virtual:   Zoom Platform
Cost to attend:   Members £250.00 + VAT and Non-Members £330.00 + VAT