Inward processing

Inward processing will enable to process non-Union goods duty-free. No commercial policy measures will be applied, except measures relating to import.
  • This processing can be applied, as a rule, to the goods for which the duty provided is greater than 0 per cent or if commercial policy measures are applied to the goods (for example, constraints in terms of quantity).
  • Inward processing shall not be applied, as a rule, for the purpose of suspending value added tax only, unless repair or destruction is in question. For the inward processing of goods duty-free, the KMD authorisation (an authorisation for payment of import VAT on the value added tax return)

Authorisation for inward processing and application

An authorisation from the customs authorities is needed for the use of inward processing. There are three different types of authorisations:

  • a single authorisation - an authorisation covering different Member States, if the successive processing operations are carried out in different Member States;
  • an ordinary authorisation - an authorisation valid in one Member State;
  • an authorisation granted on the basis of a customs declaration - an authorisation to be issued for individual (one-time) operations in the event of alteration, destruction, repair or handling (DA Annex 71-03).

A person from the Union can apply for the authorisation, who is a processor or organises processing and whose main accountancy is kept in Estonia.

The prerequisites for an application for an authorisation

  • Import goods are identifiable in the finished products
  • The place of processing and the processing records, as well as the summary of the procedure enable for the customs authorities to exercise supervision
  • The economic conditions for issuing an authorisation are fulfilled

Obligations of the holder of an authorisation

  • The correct preparation of import documents and correct completion of the customs declaration;
  • The correct keeping of records on goods;
  • The correct termination of a customs procedure, including the lodging of the customs declaration for the application of the subsequent customs treatment manner;
  • Timely presentation of the bill of discharge;
  • Notification of the customs authorities in the event of changes in the relevant data;
  • Provision of a guarantee and monitoring its sufficiency.

If the holder of an authorisation fails to discharge the obligations and conditions related to the use of a procedure (for example, keeping records, presentation of the report timely), a customs debt shall be incurred (UCC 79).

For obtaining a single or an ordinary authorisation, an application shall be submitted electronically in the system CDS (See the instruction).

It takes up to 90 days for processing a single authorisation (IA 260), an ordinary authorisation takes up to 30 days (DA 171). The period for processing starts from the day on which all the necessary documents and information have been submitted to the customs authorities.

The period of validity of the authorisation shall not exceed five years, in the event of the goods referred to in Annex 71-02 (agricultural products and fish) the period shall not exceed three years (DA 173).

With the application for a single and an ordinary authorisation,

  • The additional documents mentioned in section 2 of the Regulation No. 56 of the Minister of Finance shall be submitted;
  • The authorisation to use a comprehensive guarantee shall be applied as well.
  • In order to describe the process concerning the goods, the relevant points of the self-assessment questionnaire shall be answered.

The authorisation shall be issued after the provision of the guarantee.

On the refusal of issuing the authorisation, the customs authorities shall make a justified written decision. A challenge against the decision to refuse to issue the authorisation can be filed by the applicant within 30 days.

An authorisation on the basis of a customs declaration. as a rule, can be applied for repair, destruction or simple forms of handling (the list of operations in DA Annex 71-03). For obtaining an authorisation, a relevant customs declaration shall be filed with the tax and customs administration at the location of the processing (profile I1). On the basis of a customs declaration, an authorisation cannot be applied for, if a simplified customs declaration (UCC 166) or any other customs simplification (UCC 189, 182) is used for lodging a customs declaration.

The customs authorities shall examine the application and take a decision on determining the guarantee at the latest within 30 days (DA 171 (1)). The acceptance of the customs declaration is considered as the issue of the authorisation. The goods shall not be released until the guarantee is provided. The holder of the authorisation shall be deemed to be the person who provides a guarantee at the request of the customs authorities (the person indicated in box 48 in the customs declaration). On the refusal of the issue of an authorisation, the customs authorities shall take a justified written decision and the applicant of the authorisation may file a challenge within 30 days.

1. The economic condition code

The economic condition code is used for the identification of the justification for inward processing. When applying for an authorisation, it is needed to indicate the economic condition code in accordance with the appendix of the Annex 12 to TDA. The economic condition code is also used in the event that the economic reason need not be proved by documents.

The economic justification need to be proved only, if the import duties are desired to be paid on processed products (UCC 85) and agricultural goods are in question (Annex 71-02 to DA), or the anti-dumping, countervailing or additional duties are applied to the goods (DA 166 (1) b)).

However, the economic justification need not to be proved also for the abovementioned goods, if the request relates to:

  • The processing of goods of a non-commercial nature (for personal use)
  • If the goods to be processed have been obtained through processing on the basis of a previous authorisation which was granted after the examination of the economic conditions
  • Destruction
  • The total value of the agricultural goods to be processed (Annex 71-02 to DA) does not exceed 150,000 euros in a calendar year .

The proofs of the economic justification (comparisons of the prices, price offers from Union and non-Union producers) shall be submitted together with the request. The proofs must show why the goods produced in the Union cannot be used for production. For each commodity code, the economic condition code for justification shall be indicated. The request is not treated without the necessary proofs and shall be returned to the applicant.

2. The period of processing

The period of processing starts with the declaration of the goods for the inward processing and ends with the application of the following customs procedure (for example, release for free circulation) or with a re-export. The goods declared for re-export have to be taken out of the customs territory of the Union within the time-limit for processing (UCC 215 (1)).

The necessary period for processing in months shall be indicated in the application for an authorisation. In general, the period for processing does not exceed one year.

If it becomes evident after the issue of an authorisation that a bigger period for the processing is needed than it had been originally applied for, a written request (digitally signed e-mail) for the extension of the processing period shall be made to the supervising customs office.

3. Processed products

Processed products mean goods which have undergone processing operations. All processed products shall be indicated in the application for an authorisation, both the main processed products and the secondary processed products (by-products) which are not considered as production losses (IA 1(7) and (9)).

4. Rate of yield

The rate of yield is the quantity of the compensatory product which is produced from the quantity of the goods placed under inward processing. It can also include the products used up in the processing operation which are not directly contained in the end products.

The estimated rate of yield or the method for its determination must be indicated in the application for the authorisation. If the application involves several processing operations, a separate rate of yield shall be provided for each operation, taking into account:

  • The quantity that went for the production of the processed product
  • The quantity of the by-product
  • The production losses - evaporation, desiccation, waste to be destroyed, etc.
  • The quantity of the goods necessary for the production but which are not contained in the compensatory product (for example, polishing paste)

If the end product is the same as the imported goods, for example, in the event of repair, the rate of yield is 1:1.

If upon processing different goods are used to produce one end product, then the rate of yield shows how many units of the imported goods shall be needed for making one unit of the end product (e.g. for making one blouse, it is necessary to have three metres of fabrics, five metres of thread and six buttons).

If upon processing one type of imported goods are used for different end products, the rate of yield shows the quantities of different end products per quantity of the imported goods (e.g. the 1000kg wood shall give 14 tables, 10 chairs and 50kg wooden waste (by-product)).

If the rate of yield is unknown at the moment of application or the rate of yield is different for each batch, then it shall be indicated in the application that for determining the rate of yield, the production report shall be used and the rate of yield shall be submitted together with the declaration ending the procedure. If the rate of yield changes or is incorrect, the supervising customs office shall be notified of this.

Application of a procedure

For application of the procedure, the customs declaration is submitted to the customs office initiating the procedure indicated in the authorisation (in the event of the authorisation granted on the basis of a customs declaration, to the customs office which processed the goods).

The reference to the additional documents is indicated on the customs declaration (box 44) and shall be submitted at the request by the customs authorities:

  • The document certifying the value of the goods (commercial invoice or proforma invoice);
  • The authorisation for inward processing (in the event of an ordinary or a single authorisation);
  • Accompanying document.

The customs authorities may demand submission of other relevant documents.

Upon lodging a declaration, additional documents, as a rule, shall not be submitted but they shall be kept available to the customs authorities and submit at the request of the customs authorities.

In order to place goods under the inward processing procedure, the person concerned, i.e. the importer, must apply for an authorisation from customs authorities either in the CDS or on the basis of a customs declaration (Article 211(1) of the UCC). A declaration can be submitted by using the profile “H4” (inward processing) or the simplification “I1A” (with prior authorisation). The “I1A” profile can be used if you have applied for the inward processing authorisation (IPO authorisation) and the authorisation to use a simplified declaration (SDE authorisation) from customs authorities. As a general rule, the simplified declaration is followed by the submission of a supplementary declaration. When the value of a consignment does not exceed 1 000 euros or the quantity does not exceed 1 000 kg, the customer is not required to submit the supplementary declaration. In this case, indicate the additional information code 94300 on the simplified declaration.

As a general rule, customs declarations can be used to apply for an authorisation for repair, destruction or simple handling operations (DA Annex 71-03). The Tax and Customs Board advises those who regularly use an authorisation granted on the basis of a customs declaration for placing goods under the inward processing procedure to apply for an ordinary or single authorisation from the CDS in order to speed up the declaration process and reduce the administrative burden. The processing time for the application for authorisation is usually 30 days (Article 171(1) DA), with the exception of the processing time for the application for a single authorisation, which is 90 days.

The following pages are used for entering data in Impulss (the customs system for submitting import declarations): general, persons and goods. In the case of some data, it is allowed to choose whether to provide the data for the whole consignment or for individual goods items. If the data is provided for the whole consignment, the data will apply for the entire import declaration, but if the data is provided for a specific goods item, the data will apply only to the goods item. In Impulss, the authorisation number applied for in the CDS must be entered in the field of the authorisation reference number. In order to be placed under the inward processing procedure, the declaration for inward processing must be submitted.

  • Sign in to the e-service environment e-MTA: select CustomsCustoms declarations – Import declaration (Impulss).

  • Click on the "New declaration” button on the right.

  • For specific information on how to fill in the declaration for inward processing, please refer to the instructions on how to fill in customs declarations in Impulss “Submitting customs declarations in Impulss”.

Data element When the authorisation for inward processing is single, ordinary or granted on the basis of a customs declaration, use the ‘H4’ profile to submit the declaration.
Supporting documents and write-offs 1203002000-1203001000

Enter either the ‘N935 — Invoice on the basis of which the customs value is declared’ or ‘N325-Initial invoice’ as the type of document certifying the value of the goods.

  • If the re-export of a finished product takes place in another Member State, attach to the document certifying the value of the goods a supporting document of the type “C710 — Information sheet” and its reference number or “C700 — Information sheet INF4” and its reference number. 

Customs decisions
1212002000-121208000
  • In the case of a single or ordinary authorisation, enter in the CDS the reference number of the IPO authorisation granted to the economic operator and the start date of the authorisation.

  • If you are using a comprehensive guarantee, please indicate the reference number of the CGU authorisation.

Additional information
1202008000-120200900
Enter code 00100 where a simplified authorisation is used for placing goods under the inward processing procedure.
Application for simplified authorisation
Fill in if the application for authorisation is made on the basis of a customs declaration.
Country of the place of processing
4/9
Indicate Estonia as the place of processing.
City of the place of processing
4/9
Indicate the name of the city where the processing operations are carried out.
Address of the place of processing
4/9
Indicate the address of the place of processing or destruction where the processing or destruction takes place.
Postal code of the place of processing
4/9
Indicate the postal code of the place of processing or destruction where the processing or destruction takes place.
Customs office of discharge
4/11
Indicate the customs office at which the customs declaration discharging the inward processing procedure is submitted.
Period for discharge in months
4/17
Indicate the number of months during which the goods are under the inward processing procedure.
Rate of yield
5/5
Indicate the estimated rate of yield or the estimated average rate of yield, expressed as a percentage. If the destruction process of the goods does not result in waste of commercial value, enter the code 100.
Processed product commodity code
5/7

In the case of inward processing, indicate the commodity code of the processed product.

If the destruction process of the goods does not result in waste of commercial value, enter the code 00000000.
Description of processed product
5/7
In the case of inward processing, indicate the description of the processed product. In the case of destruction of the goods, enter the words “goods destroyed”.
Goods identification method
5/8
Choose an appropriate method of identification of the goods from the classification.
Goods identification description
5/8
Enter the description of the method of identification of the goods, the information for identifying the goods.
Economic condition
6/2

Choose an appropriate economic condition from the classification.

Description of economic condition
6/2
Provide further details to allow verification of compliance with the economic conditions. In the case of destruction of the goods, indicate the reason for placing the goods under the destruction operation.
Details of planned activities
7/5

Indicate the nature of the use or processing operation.

In the case of destruction of goods, indicate the method of destruction (e.g. crushing).
Additional information
8/5
If you consider it necessary, please indicate any additional information.
Procedure
110900100
Indicate the code 51 (inward processing).
Additional procedure
111000000
In the case of the main regime, enter code 000.

Discharge of a procedure

For the discharge of a procedure, the holder of the authorisation files a customs declaration to the supervising customs office for the following customs procedure or for the application of re-export.

An authorisation holder must present the customs declaration for a following procedure or re-exportation to the supervising customs office for the discharge of inward processing. More information about filling in an inward processing customs declaration in Complex can be found on the page with the instructions for completing a customs declaration in Complex.

Re-export of goods

When goods declared for re-exportation are transported to the customs office of exit (exit from the EU) without a transit procedure (under inward processing), the liability of the warehouse owner ends when the goods have definitively left the customs territory of the Union.

In the case of re-exportation, a customs declaration EX or EU must be submitted.

If a proof of preferential origin (EUR 1, EUR, EUR-MED) has been affixed to the goods to be re-exported after inward processing, the non-Union goods contained in the processed product will be subject to appropriate import duties (Article 78 of the UCC). Import duties are paid by means of a re-export declaration (customs procedure code 3151).

Field 37A Required procedure Indicate the code 31 (re-export).
Field 37B Previous procedure Indicate the code 51 (inward processing).
Field 44AA Supporting document code
  • Indicate one of the following codes for proof of preferential origin: N954, N864, U045 or U048. If codes are not indicated, it is not possible to pay the duties.

  • Indicate the document proving the manual calculation of duties, code 4004. The calculation of duties must be shown on the page of calculation of duties which can be attached to the declaration and must be presented at the request of customs authorities.

Field 47 Manually entered duty code Indicate the duties calculated by a declarant.
Transporting goods to another Member State

When goods are moved to another Member State, they must usually be moved under the transit procedure. The transit declaration or accompanying document must bear the mark ‘IP goods’. If goods are released for free circulation in another Member State, the INF 1 document (Annex 13 of the TDA) may be used. The use of INF 1 is mandatory (Article 176(1) of DA, Article 23 of TDA).

When goods move to another Member State within the framework of a single authorisation, the goods are under the responsibility of an authorisation holder. The movement of goods must be recorded in the records of inward processing.

An authorisation holder presents customs declaration for the following customs procedure or re-exportation to the supervising customs office for the discharge of the inward processing. For specific information on how to fill in the declaration for inward processing, please refer to the instructions on how to fill in customs declarations in Impulss “Submitting customs declarations in Impulss”.

Placing goods in a customs warehouse

Goods can be moved from the place of inward processing to a customs warehouse under a transit procedure or under the responsibility of a holder of the inward processing procedure or a warehousekeeper. 

When goods are placed in a customs warehouse, the additional information code “00700 — Discharge of inward processing” or “00800 — Discharge of inward processing (specific commercial policy measures)” must be entered in the customs warehousing declaration and the mark ‘IP goods’ must be entered in the description field.

In the case of re-exportation of goods from a customs warehouse, indicate the customs procedure code 3151; when goods are released from customs warehouse for free circulation, indicate the customs procedure code 4051.
Placing goods in a free zone

When goods are placed in a free zone, the goods can be moved to the free zone under a transit procedure or under the responsibility of an inward processor. The transit declaration or accompanying document must bear the mark ‘IP goods’. No customs declaration for placing in a free zone must be submitted, the goods must be entered in the stock records of the free zone with the mark ‘IP goods’. In the case of movement under the responsibility of an inward processor, the number of the entry in the stock records of a free zone must be entered in the records of inward processing.

If the place of processing is situated in a free zone and after the inward processing the goods are placed under the same free zone regime, complete the inward processing with an entry in the stock records of the free zone.

In the case of re-exportation of goods from a free zone, indicate the customs procedure code 3151; when goods are released from a free zone for free circulation, indicate the customs procedure code 4051.
Release of goods for free circulation The holder of the authorisation or the person to whom the authorisation holder’s rights have been transferred (Article 218 of UCC, Article 266 of IA) must submit an import customs declaration (customs procedure code 4051) and all the necessary documents for the release for free circulation of goods under inward processing.

According to the processed product or end product (UCC Article 85) According to taxation elements of import goods 
(UCC Art 86 (3))
Duty is paid according to the processed product. Duty is paid according to the taxation element of non-Union import goods.

Value added tax is paid according to the processed product.

The calculation of value added tax is performed as follows: (the value of the processed product + the amount of the duty + the amount of the excise duty rate) × 0,2

Value added tax is paid according to the taxation element of non-Union import goods.

The calculation of value added tax is performed as follows: (the taxation element of the import goods + the amount of the duty + the amount of the excise duty rate) × 0,2
The excise duty rate is paid according to the processed product. The excise duty rate is paid according to the processed product.
The taxation elements of the processed goods are the commodity code, the customs value, the quantity and the origin. Although the taxation is performed according to the taxation elements of import goods, the end product is declared for release for free circulation. 

The excise duty rate (including the anti-dumping duties, etc.) is not subject to the taxation elements of the import goods, or the taxes shall be calculated at the moment of the release for free circulation according to the valid excise duty rate.

Upon the release of the goods, which remained unprocessed, for free circulation, the import duties (customs duty, value added tax, excise duty) are paid on a customary basis or according to the taxation elements of the goods to be declared for release for free circulation.

Provision of the bill of discharge

The holder of the authorisation shall present the bill of discharge to the supervising customs office within 30 days after the expiry of the time-limit for discharge of the inward processing or at the time indicated in the authorisation (DA 175). The bill of discharge must contain the particulars provided for in Annex 71-06 to DA.

The bill of discharge is not presented in the event of the authorisation granted on the basis of the customs declaration, if one-time repairing is considered.

Destruction on inward processing

For destruction of the goods, the person performing or organising the destruction shall have to apply for an application for inward processing. The authorisation can be applied for a multiple or one-time procedure.

For one-time procedure, the authorisation can be applied together with the lodging of the customs declaration. In addition, a guarantee shall be provided. For discharge of the inward processing and release of a guarantee, a report on the destruction of the goods containing the information about the goods to be destroyed, the method of the destruction and about the waste and scrap.

Last updated: 14.04.2022

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