Inward Processing Relief (IPR) is a duty-relief arrangement that allows for the import of goods into the EC so that they can be processed and re-exported with import duty suspended or relieved. There are currently two types of IPR, IPR Suspension and IPR Drawback. However, under the Modernised Customs Code, IPR Drawback will be phased out.

Example of IPR Suspension Process

Under IPR Suspension, import duty is suspended when the goods are imported and is only paid if the goods are declared to free circulation rather than re-exported outside of the EU.

Under IPR Drawback, import duty is paid when the goods are entered to IPR. The importer then claims the duty back when the goods are re-exported, transferred to an IPR suspension authorisation or disposed of in one of the allowed ways.

Example of IPR Drawback Process

What are the conditions for applying for IPR?

There are a number of conditions that must be fulfilled in order to apply for IPR:

• The person must be a ‘natural' or ‘legal' person established in the Community, except where imports are of a non-commercial nature under economic code 30(1).
• There must be an intention to re-export or export goods outside the EC.
• Goods entered to IPR must be identifiable in any products produced.
• Certain economic conditions must be satisfied.
• Goods under IPR must not be used within the Community for any purpose other than the processing operation applied.
• It must be possible for customs to supervise and monitor its use without having to introduce administrative arrangements disproportionate to the economic needs involved 

What is the process for applying for IPR

There are five types of IPR that you can apply for:

(1) Local (Ideal if frequently importing under IPR and the annual value of the goods to be entered is over EUR 500,000)
(2) Specific (There is a list of certain goods that require a specific authorisation)
(3) Single Community (This type of authorisation is required where IPR processing is carried out in more than one Member State of the EU)
(4) Integrated (Required where more than one customs procedure is in operation (i.e. IPR & PCC)
(5) Successive (Where the goods you intend to process have already undergone processing under IPR in the EC and the previous processor held an authorisation that was subject to an economic test, your application does not have to undergo a further economic test.)

The Throughput Period

On your application, you will have to specify the throughput period that you would like authorised. The throughout period is the amount of time that you will have to process the goods and either re-export them, declare them to free circulation or declare them to another customs procedure. In our recent experience, HMRC are extremely unwilling to grant a throughout period of more than six months, this is something you should be aware of when making the decision to apply for IPR.

Equivalence

In some cases, an importer can apply for equivalence to be used. So for example, if an importer dual-sources some goods (i.e. some from China and some from the UK) he can simply draw goods from his stock and export/re-export them and is able then to release an equal amount of stock to free circulation without payment of duty. For goods to be classed as ‘equivalent' they must:

• Have the same trade description and 8 digit CN code;
• Have the same commercial quality and technical characteristics - they must be made from the same materials, be in the same condition and be used to perform the same function and purpose in the processing operation and;
• Be used to produce the same main compensating product(s).

What must I do post-authorisation?

If HMRC agrees to authorise you for IPR, you MUST keep records of all goods that you have imported for processing under IPR. These documents must clearly show:

• The type of goods imported.
• The processes which are carried out.
• What the products are and;
• When the goods are exported or how you have disposed of them.

There must be a clear audit trail that HMRC can follow when they audit your business or you may be deemed to not be complying with your IPR authorisation terms and may risk losing the authorisation altogether.

How can International Trade Solutions help you?

International Trade Solutions has in-depth and expert experience of applying for authorisation of IPR, implementing and advising about the implementation of IPR systems as well as ongoing support for the continued compliance with all of the requirements of IPR.

For a free first consultation please contact us either by email at This e-mail address is being protected from spambots. You need JavaScript enabled to view it or alternatively give us a call on (01905 619229).