Using a Freeport customs site
Information about permitted activities, customs declarations, processing goods, record keeping, excise goods and supply of goods on a Freeport customs site.
顿耻迟颈别蝉,听颈尘辫辞谤迟听VAT听and听any听applicable听trade measures (such as anti-dumping or safeguarding duties) are听suspended听while听imported goods are听stored or processed in a customs site under the Freeports customs procedure.
The suspension of听import听duties听does not听apply听to听imported听goods听brought into a customs site听for use or consumption in the site.听For example:听
- capital goods听
- goods听辞谤听materials to be used听in construction within the site听
- goods used to manufacture听equipment to be used in the processing of goods听within the site听
Where听imported听goods听undergo a period of storage听in听the听customs site听prior to being used听or consumed听within the site,听they can be stored under听the procedure with听duties听and import VAT suspended.听When听the storage period ends,听and听before听use or consumption of the goods,听a听declaration听from the Freeport customs procedure听to free circulation must be made, and the customs charges paid.
Businesses who are authorised for the customs warehouse (CW) procedure can听store听imported听goods,听with听import duties听suspended,听in a customs site. They can do this if they are not authorised for the Freeport customs procedure.
They can process goods in a customs site if authorised for the inward processing听(IP)听procedure. For IP, the customs site must be listed as a processing location in听the business鈥檚听IP听authorisation letter, as well as the nature of the processing to be carried out there.听The business will听be required听to听comply with听both the general Freeport听customs site听rules听as well as听the specific rules relating to their听CW听辞谤听IP听补耻迟丑辞谤颈蝉补迟颈辞苍.听
Businesses entering goods to a customs site in sealed or locked transport units, such as a shipping container,听are required to听open them so that the contents can be checked by the CSO. The CSO may also request听goods to be removed for听further inspection.
Some goods are听not听permitted听to be听declared听to, or听brought into,听a customs site. Details of these goods听are set out in a Public Notice made under regulation 18C.2 of the Customs (Special Procedures and Outward Processing) (EU Exit) Regulations听2018.听HMRC may also prohibit or restrict any activity by an authorised business, where it is considered听appropriate to听do so for customs control purposes.听
Domestic goods, meaning听goods produced in the UK or otherwise in free circulation in the UK, can be听used in a听free zone.听For example,听goods听used听in support of the workforce or administration of the business. Domestic goods in a free zone are not听held under the requirements of the free zone customs procedure, and听accordingly听authorisation is not听required听for听domestic goods in a free zone.听
However, commercial records for听free zone听businesses听using domestic goods in a free zone听will need to be sufficient to identify that they are domestic goods,听when听they were听brought into the听free zone听and听what they were used for.听The business will also need to inform the CSO听when听domestic goods听are brought into a free zone, and what they are, although the information does not听have to be to the same level of detail as听is听required for free zone procedure goods.
When goods are declared to the freeport customs procedure they must be presented and cleared in accordance with the port customs model, before the goods can be released for movement to the free zone. Port customs models used can be such as, temporary storage or pre-lodgement of the declaration. Accordingly, presentation and clearance of the goods cannot take place in a free zone.
Goods听can听be听moved听from a port听internal temporary storage听facility听to an external听temporary听storage facility听and then听declared by conduct to an adjacent free听zone.听Where听the听goods are declared to the freeport customs procedure,听at the point听they听are听released听from the port听for movement听to the free zone, they听are under the听freeport听customs procedure. They must be moved directly to the听intended听free zone.
In some circumstances, it may be difficult or impracticable to present the goods for pre-clearance examination in the usual manner, for example large components for assembly into offshore wind turbines, In these circumstances the free zone business should contact their authorisation supervising office for further guidance.
Simplified Customs Declaration Process (SCDP) apply to declarations to or from the freeport customs procedure. SCDP was formerly known as Customs Freight Simplified Procedures (CFSP). The processes are set out in the Simplified Customs Declaration Process handbook. Generally, SCDP can be used to declare goods to the freeport customs procedure, except where the goods have previously been declared to a customs procedure in the UK. A supplementary declaration is not required. The EIDR form of SCDP cannot be used to make an SCDP declaration for controlled goods.
An export declaration is not required for goods under the Freeport procedure. An export safety and security declaration is required where the goods have been held in the free zone for more than 14 days prior to re-export. This can be done electronically by form C21e on the Customs Declaration System (CDS) using PC/APC 0014/19Z.
An onward export notification is required where the goods are re-exported within 14 days of acceptance of the original declaration to the freeport procedure. PC/APCs 0014/19Z and 17X is used on form C21e on CDS for this.
In either case, an additional information statement is required in DE 2/2 to declare the number of days the goods have been held in the free zone prior to re-export. The code 鈥楩ZPER鈥� should be used followed by the number of days. Evidence that the goods are to be removed for export must be provided to the customs site operator.
Read more on making customs declarations for controlled and non-controlled goods at Declaring goods and paying tax when using a UK freeport customs site.
Regulation 27F of CIDEER sets out the circumstances that a declaration by conduct for a free zone procedure may be made and defines what the required conduct is for the declaration. You can read more information on Regulation 27F of CIDEER in the Free zone legislation section of this handbook.
Where a free zone business uses a customs intermediary who is not authorised for the free zone procedure, to make customs declarations on their behalf, the intermediary must act in direct capacity of the business.
The throughput period covers the agreed period of time in which the imported goods are to be processed. The length of the throughput period will vary depending on the nature of the processing, but it should reflect the actual time it usually takes to complete the processing of the imported components into the intended product.
Unless there are any aggregation arrangements, the throughput period starts on the day the goods are allocated to processing in the freeport business records. This can happen at the time the goods are imported and declared to the procedure, or at a later point if the imported goods are to be stored prior to being processed.
Throughput periods can be managed by aggregating goods allocated to processing on a monthly or quarterly basis. For example, for monthly aggregation, all goods allocated to processing throughout the month of January are treated as allocated on the 31 January. Their throughput period starts on the 1 February. For quarterly aggregation, all goods allocated to processing throughout the quarter from 1 January to 31 March are treated as allocated on the 31 March. Their throughput period starts on the 1 April. Aggregation arrangements must be agreed with HMRC first.
Within thirty days of the end of the throughput period, the processed goods are required to be discharged from the procedure by making a declaration to another customs procedure (or to free circulation). Alternatively, if the business wishes to store the processed product under duty suspension, they can be allocated in the records to storage under the Freeport customs procedure. The authorised business should contact their supervising office if it becomes necessary to change the throughput period.
A Bill of Discharge is not required to be submitted to HMRC for goods processed under the Freeport customs procedure. However, the business records must contain a complete audit trail of the processing activities. This should start from when the goods to be processed enter the procedure, to when the processed goods either exit the procedure or are allocated to storage under the procedure. This includes quantity, rate of yield, customs value, and commodity codes.
Identical or very similar free circulation goods can be used in a free zone activity, in place of the duty-suspended imported goods. This is known as equivalence. The basic principles of equivalence apply to processing under the freeport customs procedure in a similar way as to the inward processing customs procedure.
There is no requirement to keep equivalent free circulation goods physically segregated from their duty-suspended counterparts in a free zone. However, the authorised business must maintain a record of which are free circulation equivalent goods and which are duty suspended goods. The use of equivalence in a free zone is subject to HMRC approval and can be applied for either as part of the free zone business authorisation application, or any time after the authorisation is granted under the notification of changes procedures set out in the authorisation letter.
Read more about processing or storing similar goods to replace UK Freeport customs special procedure goods.
At present an economic test is not required to process goods under the Freeport customs procedure. An economic test in this context means a test to determine whether the processing of imported goods under duty-suspension would be disadvantageous to UK domestic producers of the same type of goods. It requires the importer to demonstrate why they cannot use domestic goods.
The import duty liability in respect of goods either processed or subjected to usual forms of handling in a free zone may be determined by reference to the goods as they stood at the time the declaration to the free zone procedure was made. This is instead of by reference to the processed goods at the time the declaration from the free zone procedure to free circulation is made, should the declarant elect to do so.
In some circumstances however, for example for goods subject to trade measures, the import duty liability must always be determined by reference to the goods as they stood at the time the declaration to the free zone procedure was made.
Records must be kept for a minimum of 5 years after discharge of the goods from the procedure. They should contain details of all goods brought into, stored or processed in, and removed from the free zone, such as (but not limited to):鈥��
- the听authorisation number听of the free zone business听responsible for the goods听
- the听customs听declarations used to place the goods under the procedure and to discharge the procedure听
- information that clearly听identifies听any documents, other than the customs declarations, connected to the placing goods under the procedure and their discharge听
- details of marks,听identifying听numbers and kind of packages, the quantity and commercial or technical description of the goods and (where relevant) details of any containers used鈥�
- the location of the goods and details of any movements that have taken place鈥�
- the customs status of goods, including whether they are UK or non-UK 驳辞辞诲蝉鈥�
- details of any听usual forms of handling that have taken place听on stored goods, including any听resulting听changes in tariff classification听and valuation听
- details of any processing听that has taken place,听including听the relevant throughput periods听and allocation dates, the rate of yield,听and听any use of equivalence听
- where accounting segregation is used, information about type of goods, customs status and, where听appropriate, origin of the goods听
- where听appropriate, details of any transfer of rights and obligations that听have taken place听
- movements of goods to,听and receipts of goods听from,听other free zones听
- a record of听any lost or damaged goods听
- any听additional听information HMRC may ask you to keep
Excise goods are controlled goods for the purposes of the freeport customs procedure. A full declaration is required 鈥� a C21i declaration or declaration by conduct cannot be used. SCDP can be used if so authorised.
An authorised Freeport excise business is one that is both authorised for the freeport customs procedure and approved to operate a free zone excise warehouse. A free zone excise warehouse is a secure area within a free zone, or freeport customs site, for the receipt, storage or processing of excise goods declared to the freeport customs procedure. It allows for imported excise goods to be stored or processed under excise duty suspension as well as the suspension of customs duties. Excise goods declared to the freeport customs procedure must be deposited in a free zone excise warehouse operated by an authorised Freeport excise business.
Excise goods that have been processed in a free zone excise warehouse must be stored within the free zone excise warehouse and not any other area of the free zone. This is only where the intention is for the processed excise product to be stored before being discharged from the freeport customs procedure.
Imported excise goods to be stored in a free zone excise warehouse should be declared to freeport excise warehousing on Customs Declaration System (CDS) and transported directly to the free zone excise warehouse. Businesses must follow the guidance for importing controlled goods into the freeport procedure. Read more at Declaring goods and paying tax when using a UK Freeport customs site.
The use of the Excise Movement and Control System (EMCS) will not be required while goods are subject to the freeport customs procedure. This is when the goods are moving:
- from a place of import to a free zone excise warehouse
- from a free zone excise warehouse to a place of export
- within or between freeport excise warehouses
When the goods are released from the free zone excise warehouse and entered to home consumption, UK import duty, excise duty and import VAT must be paid as a standard warehouse removal. If the goods are to be removed from the free zone excise warehouse as free circulation goods, but excise duty is to remain suspended, you must follow the procedures set out in section 8 of excise notice 197 using the Registered Consignor procedures.
Supplies of free zone procedure goods between free zone businesses are zero-rated for VAT purposes, provided the supply would normally be taxable (but not zero-rated) for VAT purposes and the supplier is authorised to make the supply.
Supplies of services听between free zone businesses听that are听carried out in a free听zone or听in relation to free zone procedure goods听are likewise zero-rated听where the supply would otherwise be taxable (but not zero-rated).听听
The business receiving the supply of services must inform the supplier that is is eligible for such zero-rating before the VAT invoice for the services is issued.
The reference 鈥榝ree zone鈥櫶齣s required to听be听stated听on a VAT invoice that relates wholly or partly to any such听supply of goods or services.听
Under section 57A of the VAT Act 1994,听the business is required to make听an onward supply of those goods outside听the free zone听within听three months where:
- a free zone business removes its goods from the free zone听by making a declaration to free circulation
- those听goods听were supplied听to the business听at听锄别谤辞-谤补迟别 VAT in the free zone
- services in relation to those goods were听carried out in the free zone and听supplied to it听at the VAT听锄别谤辞-谤补迟别
If it听does not听do this听it听may听have to听account for output tax听on the value of those goods听as if an onward supply had been made. This is known as the听free zone听VAT exit charge, and is an anti-avoidance听measure听intended听to prevent businesses that听are not听able to听fully reclaim VAT on their purchases from gaining an unintended VAT advantage by relocating to a free zone.
Retail sales are not听permitted听in a free zone, other than sales to:听
- individuals travelling outside the UK听
- members of international organisations听
- members of鈥�NATO鈥痜orces听
- individuals covered by diplomatic and consular arrangements听
- remote and online customers, where goods are picked and dispatched to order