Meaning
Special procedures allow raw materials or semi finished goods to enter a territory for manufacturing or repair without being subject to import duties or value added tax. Using inward processing is common for battery manufacturers who import cells to build packs that will eventually be exported to customers in other regions.
Economic Benefit
Suspending the payment of duties at the time of import keeps the production costs lower and prevents the buildup of tax credits that take time to recover. This procedure makes the local manufacturing sector more competitive in the global market. The exporter only pays duties on the portion of the goods that remains in the domestic market for local sale.
Yield Rate
Importers must provide a detailed calculation showing how much of the raw material is used in the finished product and how much is lost as scrap. If one hundred cells are imported, the manufacturer must account for every one of them in the final export or the waste stream. This technical documentation is essential for closing the customs record and discharging the liability.
Time Limit
Goods cannot stay in this suspended state forever and must be either exported or moved to another customs procedure within a set timeframe. Typically, a manufacturer has six to twelve months to complete the processing and move the goods out of the territory. Extensions are possible but require a formal application and a valid commercial reason for the delay.
