Repair abroad and duty on the full value
A company has a piece of equipment that has broken down. The manufacturer is outside the Union. The equipment is sent out for repair and comes back two months later.
Technically that is an export and an import. If the import is declared as an ordinary one, duty is calculated on the value of the goods. For equipment worth 80,000 EUR, at a 3 % rate that is 2,400 EUR.
But the equipment was not bought. It was repaired, and the repair cost 6,000 EUR.
What the outward processing procedure provides for
The outward processing procedure of the Union Customs Code is meant for exactly this case: Union goods are taken out temporarily to be processed or repaired and are returned with total or partial relief from import duty.
The practical consequence: duty is calculated on the value of the processing, not on the full value of the goods. In the same example that would be 3 % of 6,000 EUR, that is 180 EUR instead of 2,400 EUR.
The Code also provides for cases where the repair is carried out free of charge — under a warranty, for instance, or because of a manufacturing defect — and then the relief may be total. The specific conditions depend on the circumstances and have to be checked case by case.
Why the procedure goes unused
For two reasons, and both are procedural rather than a matter of knowledge.
First: the procedure requires an authorisation, which has to be obtained from customs. The authorisation is not complicated, but obtaining it takes time, and the equipment broke down today and has to be repaired as soon as possible. The decision is taken in a hurry: we send it out the ordinary way, we will bring it back the ordinary way, we will pay the duty.
Second: the sending out and the return are different events in different months, and by the time it comes back nobody remembers that it is the same equipment. The same problem as with returned goods.
When it is worth sorting out
Not in every case. For a one-off repair, obtaining the authorisation may take longer than the benefit itself.
It is worth it when the repairs recur. A company that sends out ten machines a year for repair has a steady flow — and an authorisation obtained once works for all of them.
This can be calculated directly: take the re-imports after repair over the past twelve months, add up the duty paid and the amount that would have been paid on the value of the repair. The difference is the annual benefit, and it will recur.
As for the past
The same limit applies here as to every missed relief: the procedure required an authorisation that did not exist at the time of the import. Whether repayment of duty can be claimed for re-imports carried out without an authorisation, where the conditions of the authorisation were in substance met, is a legal question — and in this case a harder one than with returned goods, because here there was not only no application but also no authorisation.
In practice that means almost the whole value of this topic lies ahead.
One thing worth checking in any case
If your company sends goods out for repair, check how the return is declared today. A frequent case: it is declared on the basis of the repair invoice, but the customs value is given as that of the whole item, because that is “safer”.
That is not safety, it is an overpayment. And it happens even where the authorisation is in place.