Everything You Need to Know About Outward Processing
Category: Customs Author: — Date: — Reading time: —
Outward processing allows companies to carry out part of their production outside the EU while benefiting from preferential customs tariffs.
What is outward processing?
Outward processing allows companies to temporarily export goods outside the European Union (EU) to have them processed before re-importing them, with partial or total exemption from import customs duties.
This regime is particularly advantageous for companies that wish to benefit from lower processing costs or access specific skills available abroad.
What are the benefits of outward processing?
- Reduced processing costs: Companies can benefit from lower processing costs in countries where labour and services are cheaper.
- Increased competitiveness: By reducing production costs, companies can increase their profit margins or reduce selling prices.
- Strategic flexibility: Companies can access technologies or specific skills available abroad, thereby optimising their production process.
Outward processing procedure
1. Application for authorisation
To benefit from the outward processing regime, the company must first obtain prior authorisation from the customs administration. This authorisation is essential to ensure that exported goods will be re-imported after processing. To initiate a procedure or learn more about the steps involved, you can contact OneChain.
2. Temporary export
Once authorisation is obtained, the goods can be temporarily exported for processing. During this phase, the goods must be tracked with precision to ensure their traceability and compliance with the conditions of the regime. Export customs formalities must be completed at the competent customs office.
3. Re-importation and declaration
Upon re-importation of the processed goods, the company must declare the goods and prove that the processing has been carried out in accordance with the conditions of the regime. Customs duties and taxes are then calculated based on the value added through processing abroad, allowing for partial or total exemption from the original customs duties.
Key stakeholders in outward processing
Customs authorities
Customs authorities play a crucial role in the outward processing procedure. Customs formalities must be scrupulously observed to benefit from preferential tariffs. The customs code governs the procedures for customs declarations, transit, and clearance of goods. The importer and exporter must work with the customs authorities to ensure that all imported and exported goods are properly declared.
Warehousing and transit
Goods may transit through bonded warehouses where they are stored without being immediately subject to duties and taxes.
Customs clearance takes place when the goods leave the warehouse for re-importation after processing. In some cases, processed goods may benefit from preferential taxation if they meet specific criteria established by international trade agreements.
Customs declarant and broker
Companies may engage customs declarants or licensed customs brokers to manage customs formalities. These professionals are experts in nomenclature and customs tariffs, ensuring compliance with regulations and cost optimisation.
Practical examples
Case 1: Automotive industry
An automotive company exports engine components to a third country where labour costs are lower. After assembly, the complete engines are re-imported into the EU, benefiting from exemption on customs duties on the components originally exported. The customs tariff applied is based solely on the value added.
Case 2: Fashion industry
A fashion brand sends fabrics to India for specific finishing processes that are not available in Europe. The finished garments are then re-imported into the EU with customs duties applied only to the value added by the Indian finishing. The goods, during their stay abroad, are considered under customs control.
In conclusion, outward processing is a strategic customs regime for companies operating internationally. It helps reduce costs, improve competitiveness, and access specific skills abroad.