Duty Matters: Can HMRC Prevent Importers from Gaining Inward Processing on a Retrospective Basis?

Importers need to be fully authorised under inward processing procedure prior to the importation of goods, in order to benefit from a duty relief. However, can HMRC grant retrospective authorisation on goods imported to free circulation, when an importer realises that the goods should have been imported under inward processing procedure?

In its public notice HMRC requires the following:

“2.23  How do l apply for retrospection?

Applications should be made on form(s):

  • SP1 – end-use
  • SP3 – inward processing
  • SP4 – outward processing
  • SP5 – temporary admission

In addition, you must provide a covering letter stating the reasons why retrospection is required and provide a list of the imports you wish to be included in the retrospective period of authorisation.  You will also need to be able to produce records to support your application and show that the goods in question were or are eligible for the procedure.  If we grant retrospection, you will be required to arrange for the amendment of the import entries and arrange for an agent to key them to CHIEF.

4.11  Completion notes for form SP3 – Application for Inward Processing authorisation

These completion notes should be used to assist you in the completion of your SP3 application for an inward processing relief authorisation under the Union Customs Code (UCC).

If you don’t complete the SP3 application in accordance with these completion notes and it doesn’t contain sufficient information for us to make a decision, your application may not be accepted in accordance with UCC article 22(2).

Please also ensure that you complete the inward processing applicant questionnaire which is required to assess the applicant’s eligibility for an inward processing authorisation against the additional criteria introduced under UCC.  You can obtain the questionnaire from the appropriate address in paragraph 1.4 of Notice 3001.

Box 3 – type of authorisation applied for

Please indicate whether the application is for a new authorisation or the renewal of an existing authorisation.

If you are applying for a retrospective authorisation you will need (in the additional sheets attached to the application) to provide evidence of the exceptional circumstances which led to IP being used without a valid authorisation.

Changes – please explain the changes you are requesting.  This can include any change to the original application form, such as a request to add a commodity, discharge method, a change in record keeping/type of records kept.  A change also includes a written request to remove items from the authorisation that are no longer valid or required.”

Turning to the legal basis within the UCC, Article 211(2) covers retrospection and this indicates that it shall be granted if all the relevant conditions apply:

“2.  The customs authorities shall grant an authorisation with retroactive effect, where all of the following conditions are fulfilled:

  • there is a proven economic need;
  • the application is not related to attempted deception;
  • the applicant has proven on the basis of accounts or records that:
  1. all the requirements of the procedure are met;
    1. where appropriate, the goods can be identified for the period involved;
      1. such accounts or records allow the procedure to be controlled;
  • all the formalities necessary to regularise the situation of the goods can be carried out, including, where necessary, the invalidation of the customs declarations concerned;
  • no authorisation with retroactive effect has been granted to the applicant within three years of the date on which the application was accepted;
  • an examination of the economic conditions is not required, except where an application concerns renewal of an authorisation for the same kind of operation and goods;
  • the application does not concern the operation of storage facilities for the customs warehousing of goods;
  • where an application concerns renewal of an authorisation for the same kind of operation and goods, the application is submitted within three years of expiry of the original authorisation.

Customs authorities may grant an authorisation with retroactive effect also where the goods which were placed under a customs procedure are no longer available at the time when the application for such authorisation was accepted.”

Assuming that the above can be substantiated, it appears that HMRC would be compelled to grant retrospection.

Steve Cock – Director of Consultancy – KGH Customs Services

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