Euro area annual inflation is expected to be 7.5% in April 2022 according to Eurostat, the statistical office of the European Union.

For companies this could be a disaster. Difficult to increase the prices of their products at the same level of the inflation, so a lot of companies try to cut their costs.

How to reduce customs costs? Here are only a few possibilities to take into consideration. Some of these require customs authorizations.

• Origin of goods: the EU signed a lot of Free Trade Agreements (FTA). Trade agreements make it cheaper for you to import and export your goods. 

One important provision that you will find in the FTAs is the cumulation rule. Cumulation is a system that allows contracting parties to use originating products from each other and it can operate between more than two countries. Therefore, it is important to analyze all the flow of your goods.

If you understand origin cumulation, you can make the difference with your competitors and you can reduce costs.

• Customs warehouse: customs warehousing allows your company to hold non-Union goods in the EU and choose when to pay duties or re-export the goods without paying the customs duties. 

The storage may be for unlimited periods, unless the nature of the goods means that they could pose a threat to health or to the environment if stored for a long term.

• Inward processing: Inward processing allows your company to import non-Union goods in order to be used in the EU in one or more processing operation, without being subject to import duty, VAT, excises and commercial policy measures.

However, you can always decide to release for free circulation (import into the EU) the raw material previously imported or the finished product.

Example: An EU company imports raw materials for a value of 1M € per year. The average customs duty to its raw materials is 4%. The company re-exports the finished products which include the raw materials of a value of 700 000 € in a year. The company saves customs duties for more or less 28 000 €/year. If all the raw materials are processed and re-exported, then the company saves customs duties for more or less 40 000 €/year. There is also the possibility to re-export the raw materials or to release them for free circulation in the EU.

• Outward processing: Outward processing allows companies to temporarily export Union goods from the EU, in order to undergo processing operations. The processed products resulting from these goods can be re-imported and released for free circulation with total or partial relief from import duty. 

In most of the cases, when goods have been exported to be repaired free of charge or because of a contractual obligation or material defect, the company will not pay customs duties when the goods will be re-imported into the EU.

In the other cases, the import duties on the re-imported products are calculated only on the basis of the value resulting from the processing operation undertaken outside the EU.

Example: Company A bought a machine from China. This machine was released for free circulation in the EU and customs duty paid. The machine is broken and needs to be sent back to China for repair as mentioned in the contract between the parties. Company A can use outward processing to avoid paying customs duties when the repaired product will be re-imported from China. In some cases, the machine can even be replaced.

Example: Company A exports from the EU to China raw materials to build a machine. When the machine is imported from China in the EU, outward processing allows Company A to pay the customs duties only on the processing operation undertaken in China and not on the full value of the machine.

Other ways to reduce companies’ costs: correct tariff classification of your products, correct customs value of your products, etc.

Customs Easy can support your Company in the analysis of your trade flows to optimize your customs costs.