Outward processing

Outward processing grants partial or total relief from customs duties on re-importation of goods exported outside the customs territory of the Union for processing.
  • On re-importation, the finished product is subject to commercial policy measures (e.g. quantitative limits), except in the case of repairs or where the goods have retained the EU origin due to the rules of origin.
  • Outward processing is applicable to Union goods.

Authorisation for the use of outward processing

The application of outward processing requires a customs authorisation. There are three different types of authorisations:

  • single authorisation – covers different Member States in case outward processing and re-importation is applied in different Member States;
  • standard authorisation – an authorisation valid in one Member State;
  • the authorisation granted on the basis of a customs declaration – an authorisation granted for single corrective actions.

A person of the EU can apply for the authorisation if he or she is a processor or arranges processing and whose main accounting is located in Estonia.


Preconditions for applying for the authorisation:

  • the goods to be exported are identifiable in the ready-to-use product (excluding equivalent goods or standard exchange);
  • records of processing enables customs supervision;
  • no export refunds or other incentives specified in Article 259 (2) of UUC are applied to the goods to be exported.

Obligations of authorisation holder:

  • correct formalisation of export and import documents and proper completion of the customs declaration;
  • keeping proper records of goods;
  • correct calculation and payment of import duties;
  • notifying the customs authorities of changes in the relevant data.

For applying a single or standard authorisation, you need to file an electronic application in the CDS (see the instruction). The following supporting documents have to be submitted with the application for authorisation:

  • the form of outward processing records. The records have to contain the information specified in Article 178 of Delegated Regulation.
  • contract for services, if the processing is carried out under the contract for services.

The procedure of a single authorisation may take up to 90 days (Article 260 of Implementing Regulation). The procedure of a standard authorisation may take up to 30 days (Article 260 of Implementing Regulations). The period of procedure starts on a day when all necessary documents and information are submitted to the customs.

The customs may refuse to grant the authorisation by making a reasoned written decision. The applicant may file a challenge on the decision of refusing to issue an authorisation within the period of 30 days.

The authorisation for placing goods under the outward processing procedure on the basis of a customs declaration can be applied for in cases other than agricultural goods (Annex 71-02 of Delegated Regulation).

To get the authorisation, it is required to lodge an appropriate customs declaration (profile E1) at the customs office of the place of processing. Authorisation based on a customs declaration cannot be applied for in the case of simplified customs declaration (Article166 UCC) or any other simplification (Articles 179 and 182 UCC).

The release of goods for a customs procedure (the "released" status of the customs procedure is considered the granting of an authorisation (Article 262 of Implementing Regulation).

To refuse the authorisation, the customs has to make a reasoned written decision, on which the applicant may file a challenge within 30 days.

Procedure

Repair of goods free of charge under a guarantee contract, neither customs duty nor value added tax upon release for free circulation (Article 260(1) UCC).

Repair and processing of goods - the amount of import duty is generally calculated on the basis of the cost of the processing operation (Article 86(5) UCC), which includes loading, transport and insurance costs related to the import of the goods up to the border of the EU (Article 71(1) e) UCC).

The value added tax is paid based on the processing costs, which includes all loading, transport and insurance costs, both on the export of goods from the border of Estonia to the processing place and on the import of goods up to the border of Estonia.

Where a specific import duty is applied to processed products, the amount of customs duty is calculated pursuant to Article 75 of Delegated Regulation: [(the customs value of the processed product– the statistical value of the exported goods) x the amount of import duty applicable to the processed products] /the customs value of the processed products.

To apply the procedure, the documents named below shall be submitted to the customs office where the procedure is started (in the case of an authorisation given on the basis of a customs declaration, the documents must be submitted to the customs office of processing).

References to supporting documents are indicated in the customs declaration (box 44) and at the request of the customs, the following documents must be submitted:

  • a document certifying the value of goods (invoice or pro forma invoice);
  • authorisation for the use of outward processing procedure (in the case of a standard and single authorisations);
  • information sheet INF 2 in case the re-importation of ready-to-use product takes place in another Member State (Annex 13 Annex 71 of Delegated Regulation).

The customs may request the submission of other relevant documents.

When submitting a declaration, supporting documents are generally not submitted; they must be kept available to the customs and submitted at the request of the customs.

To terminate the procedure, the holder of the authorisation submits a customs declaration of the subsequent customs procedure or re-importation to the customs office of supervision.

Re-importation

In the case of re-importation, the customs declaration I profile H must be submitted.

Procedure code 61 is inserted in box 37A "Required procedure".
Procedure code 21 or 22 is inserted in box 37B "Previous procedure".
Box 40 A-D previous document Z- previous document and the number and date of the previous declaration.

The holder of the authorisation (in the case of a single authorisation, the person indicated in the authorisation) or the person who obtained the consent of the holder of the authorisation submits a customs re-importation declaration to the supervising customs office (Article 259 (1) UCC). The document certifying the value of the goods and all other documents necessary for the release of the goods for free circulation (import licence, if required, etc.) have to be indicated as supporting documents in the declaration (box 44) and presented at the request of the customs authorities.

Code 4004 and N 325 are inserted in box 44AA „Supporting document code“. A declarant calculates the taxes, which shall be manually inserted in box 47.

The calculation of taxes have to be shown on the sheet of calculation of taxes (box 44AA, code 4004), which can be attached to the declaration as a file or kept available to the customs authorities and presented at the request of the customs.


The goods remain in a third country

If the goods exported for outward processing are not re-imported, no customs clearance is required; this must be indicated in the records.

Use of information sheet INF 2 for outward processing procedure

The information sheet INF 2 (hereinafter INF 2) must be used if the export and import of goods under the outward processing procedure takes place in different Member States (Article 176 (1) Delegated Regulation).

INF 2 contains information concerning the goods to be exported in order to enable to verify the quantity of the goods and calculate the specific duty on the import of the goods.

The holder of the authorisation has to complete boxes 1 to 15 of the INF 2 and print the form in duplicate and submit them in paper form to the customs office that directs the goods to the outward processing procedure (Annex 13 to Commission Delegated Regulation (EU) 2016/341).

The customs office that directs the goods to the procedure enter the registration number in the upper right box of INF 2, complete and confirm box 16 (both copies), retain one copy and return the other to the person who presented it.

The carrier of the goods must present the INF 2 at the customs office of exit where the customs authorities certify (box 17) that the goods have left the customs territory of the Union and return the document to the person who presented it.

Upon the importation of goods, the importer of the processed product or replacement product has to present the INF 2 document to the customs office of discharge together with the re-importation customs declaration (6121, 6122).

INF 2 is the consent of the holder of the outward processing authorisation to transfer the right to a tax incentive (total or partial relief from import duties) to another person. The importer of the goods need not be the holder of the outward processing authorisation. Where goods placed under outward processing are reimported in installments, the customs authorities fill in box 20 of the paper document and return it to the importer.

Warranty repair of goods outside the customs territory of the Union

Warranty repairs are deemed to be repairs free of charge due to contractual or statutory warranty obligations or manufacturing defects.

If the defect was already taken into account before the goods were first released for free circulation, there is no warranty repair (e.g. goods that have been discounted due to defects).

The delivery of goods for guarantee repair purposes outside the customs territory of the Union is subject to outward processing since the use of the outward processing procedure allows the goods to be reimported free of duty (exemption from customs duty pursuant to Article 260(1) of UCC, exemption from value added tax pursuant to subsection 13(5) of the VAT Act).

For a single repair, a customs declaration for outward processing shall be lodged at the the customs office responsible for the place where the exporter is established.

References to supporting documents are indicated in the customs declaration (box 44) and submitted at the request of the customs:

  • document certifying the value of the goods (invoice of the goods or pro forma invoice);
  • information sheet INF 2 in case the re-importation takes place in another Member State (Annex 13 Annex 71 of Delegated Regulation).

The customs may request the submission of other relevant documents.

If warranty repairs are carried out on a continuous basis or if a simplified declaration is to be used, a standard outward processing authorisation is requested (see Application of the procedure).

Upon re-importation of goods, a customs import declaration shall be lodged at the customs office of discharge.

The warranty contract that certifies the free repairs of the goods due to contractual or statutory warranty obligations or manufacturing defects must be kept available to the customs authorities and submitted at the request of the customs.

If the goods have been conveyed to warranty repairs without an outward processing procedure (e.g. with a traveller, postal consignment, export customs procedure, etc.), the re-importation may still qualify for tax relief if the outward processing authorisation is applied for retrospectively (Article 211(2) UCC).

As a general rule, the standard outward processing authorisation is applied for retrospectively.

In the case of goods of a non-commercial nature (for personal consumption), a retrospective authorisation can be applied for on the basis of a customs declaration (Article 163 (1) f) of Delegated Regulation), see Customs clearance on the basis of the customs declaration.

If no prior electronic export declaration exists, the type of export, e.g. “package”, “courier”, “passenger”, is inserted in box 40 C “Reference”. The customs authorities may require the submission of supporting documents.

The retrospective authorisation is issued if the customs authorities are satisfied that the goods concerned are the same goods that had previously been sent to warranty repairs. On the customs import declaration (Declaration History – Officials’ notes), the customs officer indicates that this is a retrospective authorisation.

The authorisation is deemed to have been issued if the import customs declaration bears the indication “Released”. The customs declaration for outward processing is not drawn up retrospectively.

The head of the customs office notifies the applicant of the refusal to issue an authorisation. Where a retrospective authorisation for outward processing is not issued, the import duties applicable to the goods and other internal charges due in connection with the incurrence of the customs debt are payable when the goods are released for free circulation.

Outward processing with prior importation

Outward processing with prior importation (4800-2148)

Where Union goods are repaired outside the customs territory of the Union, a replacement product may be imported instead of the repaired goods. The replacement product must have the same eight-digit commodity code, commercial quality and technical characteristics as the defective Union product if the latter had been repaired. The replacement product may be imported prior to the exportation of the goods to be exported. Defective goods must be exported within two months of acceptance of the import declaration for the replacement product. (Article 261 UCC).

For example, a certain part of the device needs to be repaired. A replacement part is ordered from the third country, which is imported before the export of the part to be repaired. The import of the replacement part is declared under the customs procedure's code 4800. Based on the import declaration, the taxes are paid on repair costs or expected repair costs (in the case of an authorisation issued on the basis of a customs declaration, a guarantee is also collected to ensure that import charges are paid on the device). The part to be repaired is declared for outward processing procedure under code 2148 (in the case of an authorisation issued on the basis of a customs declaration, the guarantee is also released).

If the actual amount of repair costs becomes clear after the goods have been exported, the import declaration (code 4800) is corrected and the import duties overpaid or underpaid are claimed or paid.

Outward processing with prior importation may be carried out either under a prior authorisation (for goods of a commercial nature) or under an authorisation granted on the basis of a customs declaration (in the case of goods of a non-commercial nature).

A prior authorisation can be requested for in the e-MTA system LUBA.

The authorisation granted on the basis of a customs declaration is the release of the goods declared by the corresponding customs declaration.

Last updated: 23.07.2021

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