Inward processing is an EU special customs procedure that lets you import non-Union goods to process, work on or repair them in the EU without immediately paying import duties, import VAT or commercial policy measures. The resulting products are then re-exported, or released onto the EU market once duties and taxes are paid. The procedure requires an authorisation and ends with discharge.
The current mechanism
The European Commission defines inward processing as importing non-EU goods to be used in one or more processing operations, such as manufacturing or repair (European Commission). While under the procedure, import duty, import-related taxes such as VAT and excise, and commercial policy measures are suspended.
French Customs describes the purpose as processing goods in the EU with a view to re-export, while still allowing release onto the EU market (inward processing fact sheet).
The old distinction between “suspension” and “drawback” variants is outdated: French Customs explains that inward-processing drawback disappeared under the UCC in 2016. The UCC (Union Customs Code) also removed the requirement to state an intention to re-export and merged the former processing-under-customs-control procedure into inward processing.
Examples of operations
- A manufacturer imports components from Asia, assembles them in France and sells most of the output outside the EU.
- A workshop receives equipment from a non-EU customer, repairs it and sends it back.
- A producer imports a raw material, processes it and sells part of the output in Europe: that part is released for free circulation, with the corresponding duties and taxes.
These examples illustrate the principle; actual eligibility is set in the authorisation.
Economic conditions
The procedure aims to support the creation or maintenance of processing activity in the EU without harming EU producers of equivalent goods. Applicants must therefore justify the economic need for the operation (French Customs). In particular, sourcing raw materials under duty suspension must not harm European producers.
Authorisation and guarantee
Applications are filed with customs through the EU customs decisions portal (TP-CDS). For one-off cases, such as repairs or usual forms of handling, authorisation can be granted on the customs declaration itself, when economic conditions are met and equivalent compensation is not requested.
The authorisation has a validity period: the time during which goods can be placed under the procedure. According to French Customs, it cannot exceed five years, and three years for goods listed in Annex 71-02 of the Delegated Act.
French Customs states that, in general, the authorisation holder must lodge a guarantee with the relevant office to cover suspended duties and taxes (French Customs).
The authorisation also sets the rate of yield, which Article 255 of the Union Customs Code defines as the quantity of processed products (also called compensating products) obtained from a given quantity of goods placed under the procedure.
Discharge: how the procedure ends
Customs authorities specify the period within which the procedure must be discharged (European Commission). The products can then be:
- re-exported outside the EU;
- stored under customs warehousing or in a free zone (see customs warehousing);
- released for free circulation, which makes customs duties and VAT payable;
- moved under another procedure, for example T1 transit.
Logistics completion does not itself establish customs discharge.
Equivalence
Equivalent compensation allows Union goods to be used in place of imported goods. The European Commission describes, for example, exporting EU products that have already been processed in return for importing an equivalent quantity of non-EU raw materials. French Customs also lists prior export among other special arrangements chosen according to business needs.
Inward vs outward processing
| Inward processing | Outward processing | |
|---|---|---|
| Goods | Non-Union | Union |
| Where processing happens | In the EU | Outside the EU |
| Flow | Import, then re-export or free circulation | Temporary export, then re-import |
| Benefit | Suspension of duties, VAT and commercial policy measures | Total or partial relief from import duties on re-import |
| Authorisation | Yes | Yes |
For the opposite case, where Union goods leave to be processed outside the EU, see outward processing.
Prepare the project with the declarant
Describe incoming materials, processing operations, resulting products and intended destinations. Identify sites, lot references and necessary records. Address guarantees and economic conditions through the authorisation process.
Follow the operation through completion
Connect imports to processing and subsequent destinations. The shipment file brings documents together for coordination; customs records and placement or discharge decisions must be organized with those responsible for the procedure.
Frequently asked questions
What is inward processing?
It is a customs procedure that lets you import non-Union goods to process or repair them in the EU, with import duties, import VAT and commercial policy measures suspended. The products are then re-exported or released onto the EU market.
Do you need an authorisation for inward processing?
Yes. It is requested from customs through the TP-CDS portal. For one-off operations, such as a repair, it can be granted directly on the customs declaration if the conditions are met.
How is inward processing discharged?
By assigning the products an authorised destination within the set period: re-export, customs warehousing, free zone, release for free circulation or another procedure. On release for free circulation, duties and VAT become payable.
Does inward-processing drawback still exist?
No. According to French Customs, the drawback variant disappeared when the Union Customs Code started applying in 2016. Only the suspension mechanism remains.
What is the difference between inward and outward processing?
Inward processing covers non-Union goods processed in the EU. Outward processing covers Union goods temporarily exported for processing outside the EU and then re-imported.