Sending items you have repaired to another country requires careful analysis of the option available to avoid duty payment and VAT, argues Arne Mielken of Customs Manager Ltd.
A repair shop in the UK approached us saying that after Brexit, they were hit with high duty and VAT payment when after they exported their repaired items and had then imported back to the EU. Was there something they did not do, right? Was there a way to avoid duty payments legally? And if so, how? What would the company need to do to manage this?
Overall, there are at least three ways you can re-imported items that were exported as faulty items out of the EU, imported into GB for repair and then returned to the EU. They are:
1. Clearance for free circulation as returned goods (Returned Goods Relief)
2. Release for free circulation
3. Outward and Inward processing
Each of these methods has its advantages and disadvantages. The EU-importer is free to choose which procedure to choose, provided that the relevant conditions are met.
1. Clearance for free circulation as returned goods (Returned Goods Relief)
Businesses can get this relief if you’re re-importing goods into the EU that have previously been exported. This is known as Returned Goods Relief in the UK and Returned Good procedure in the EU.
Three basic conditions need to be met for Returned Goods Relief to apply:
The goods come back from abroad in their unchanged condition: they have not been processed any further, only used.
The goods must return to the EU within three years, with exceptions to the deadline being possible.
The export at that time must be documented, which is why the exporter at the time and the importer of the repair shipment are usually identical (mandatory if no import VAT is to be incurred).
Get a detailed analysis here: https://www.customsmanager.org/post/customs-rules-for-importing-exporting-goods-for-repair
2 Release for free circulation
Advantages:
The goods are in free circulation, they are not subject to any customs supervision, that is, they can be handled as desired and they do not have to be re-exported within a certain period.
Easy electronic customs declarations (import, re-export)
No extra paperwork to prove that the goods were for repair.
The goods may have been processed or changed abroad.
Disadvantage:
Customs duties and import VAT are charges, however, a low duty rate may be “cheaper” than the admin costs associated with the additional paperwork. If simple working took place, the preferential origin cannot be used for returning EU goods as the rules of origin were not under the trade agreements were not met (exception: shipments from Switzerland or Canada to EU, where is this provided for).
Import sales tax is due, which can usually be claimed as input tax. Exception: Where goods are no longer exported but disposed of because, for example, repairs and return transport are not worthwhile.
3. Outward and Inward Processing
Advantages: The import duty and the import VAT may be suspended upon using this procedure.
Disadvantages: These are formal customs procedures and the goods remain under the customs supervision, there is a re-export period to respect and there is a need for additional procedure and paperwork. Financial security or guarantee may be required (The UK currently rarely requires a guarantee, in the EU it’s not required where the value of such guarantee is less than €1000). Contrary to the UK, in the EU, the guarantee can be provided in cash. For these processes, the administrative burden in the company is the highest. Where these processes occur regularly, approval by the main EU customs office must be sought and electronic information sheets (INF) used to exchange the necessary data via the EU Customs Trader Portal (EUCTP).
Customs value for repair shipments
The actual customs value of the defective imported goods back to the country where the repair will take place may be unknown and so it may be challenging to determine the right customs value. What’s more, if the repair is carried out under warranty, there is no sales price and no transaction value. As a company, it makes sense to use objective criteria to determine this customs value following the rules. Suggestions to consider are:
original purchase price
depreciation
usual wear and tear
known damage levels from the past.
In the case of individual repair shipments, the customs value is determined during active repairs as part of customs clearance with the customs office. In the case of ongoing repairs, a prior agreement with the main customs office can be useful, regardless of the procedure chosen.
More information
How we can help
Customs Manager Ltd is a specialist customs training and advisory company. We help SMEs, as well as large and complex multinational businesses, determine the correct customs value, processes and procedures to ensure they can clear customs borders quickly, reaching their customers faster. We cut red tape, paperwork and help design compliant processes and procedures, allowing our clients to reach their customer faster. If you have a particular concern regarding repairs or customs procedures in general, please get in touch at info@customsmanager.org
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