What is IPR or Inward Processing Relief ?
IPR (Inward Processing Relief) is a customs regime that can allow companies avoid the payment of import duty (and appropriate VAT) on imported materials when finished goods containing the imported material are subsequently exported outside the EU.
What is PCC or Processing under Customs Control ?
PCC (Processing under Customs Control) is a customs regime that can allow companies avoid the payment of import duty on imported materials when the finished goods containing the imported material are subsequently sold within the EU. In order to qualify to use PCC, the rate of duty on your finished product must be lower than that applicable to the imported materials. PCC is particularly beneficial when the rate of duty on your finished product is zero.
Do you need to have access to our Bill of Materials on SAP?
Not really. Your Bill of Materials contains planned/theoretical material and quantities whereas DutyTracker automatically picks up actual material and quantities (along with any batch/lot numbers) from the SAP production order.
So the duty avoidance calculations are based on what actually happened during production rather than what is specified in the Bill of Materials. This information also facilitates subsequent “where material is now” visibility of what material and quantities were used.
Must the finished goods leave the EU in order to qualify?
Yes – under IPR this is the case. However, it may not be widely known that under PCC the qualifying products do NOT have to leave the EU. The key consideration is the appropriate “point of discharge” in the manufacturing assembly or process where the finished product (or more often than not the partly finished product) is put into free circulation in EU. So where PCC applies, manufacturing companies can import material from outside the EU – for assembly/process and subsequent sale within the EU – and avoid paying the import duties.
Is it only the payment of duty that is avoided?
Not necessarily. If you are also paying VAT on the duty then avoiding the payment of duty will also avoid the payment of VAT on that same duty. So, for example, if the CIF value of your purchased materials is £1,000 and the prevailing duty rate is 20% then the savings would be: Duty of 200 + Vat of 17.5% of 200 = €235 in total.
If we implemented DutyTracker today what about all the duty we failed to claim in the past?
DutyTracker has the capability to allow you consider historical inventory movements as candidates for duty avoidance on a retrospective basis. This can be an attractive source for additional savings. Minola’s consultants can help to guide you through this process in dialogue with your local Customs staff.
My agent looks after customs matters so I have no issues – is that correct?
While your agent no doubt acts in your best interest it is you the importer or exporter who is legally responsible for the accuracy on any declaration made to customs. It is ultimately the responsibility of the importer or exporter to ensure that the tariff classification, value, origin and custom procedures are correctly declared to customs on every single entry.
How long does it typically take to implement?
To implement DutyTracker in one site where SAP is already implemented would typically take approximately 25 man-days of work over an elapsed 3 month calendar period. This does assume that the site in question is “ready” for either IPR and/or PCC i.e. that the qualifying products have been identified, the most duty-efficient customs tariff classifications are in place, appropriate authorisations have been received from Customs etc. If these are not in place then Minola can assist in this preparation but is not included in the above figures.
What are the benefits and the value proposition for me?
1) Savings in material purchase costs
DutyTracker can result in tangible savings in material purchase costs by avoiding the need to pay duty. As duty rates can be up to 22% of the CIF (Cost, Insurance & Freight) value of purchased materials these savings could be substantial. Where VAT is levied on duty, the avoidance of duty payment will also avoid the payment of this VAT. With DutyTracker there is the opportunity to examine historical movements (prior to implementation of DutyTracker) retrospectively so even more savings may be identified.
2) Compliance with Customs regulations
Implementing DutyTracker will avoid un-necessary penalties for non-compliance.
3) DutyTracker is Consistent with SAP
- With DutyTracker all relevant SAP transactions are captured.
- The system uses actual material and quantities from production orders.
- There is minimum education required as screens and reporting are SAP consistent.
- DutyTracker is based on same underlying technology as SAP.
What is the Value Proposition associated with DutyTracker?
Based on the benefits outlined above it is reasonable to assume a payback period (on the associated DutyTracker costs) of 6-12 months.
Do you buy any raw materials products indirectly via EU suppliers which, you know, have originated outside EU?
You may be suffering a hidden cost built in to the price if your suppliers are delivering these to you duty paid, from outside the EU. A thorough check would be advisable to determine if you could avail of Customs duty relief schemes to extract that hidden cost and realise the savings to your bottom line.
Do you import any pharmaceuticals or related raw materials from outside the EU?
If yes, check your Chemical Abstract Services (CAS) registered numbers of the material (supplier can usually advise this number ) and match it against the “INN”1 listing to determine whether your imports may be eligible for a duty-free rate. You may need to check with the Customs authorities to be certain that you qualify for the zero percent import duty rate.
Do you currently use the Customs duty relief scheme to avoid paying duty on your raw materials?
If yes, have you checked your CAS ( Chemical Abstract Service ) numbers of the raw materials to see if they are on the “INN”1 list and qualify for duty-free treatment. If they are, you could dismantle these schemes and eliminate the compliance costs – freeing up resources while continuing to benefit from duty savings.
Do you have another question?
If you have any other questions about Minola and DutyTracker or the services we provide then please get in touch and we’ll be happy to assist.