Passive improvement


Outward processing is a customs regime that allows merchandise to be temporarily exported with suspension of payment of customs duties and taxes. This, to be subjected to some transformation, elaboration or repair for its subsequent re-importation.

This customs regime is the opposite version of the inward processing regime. Therefore, this process also includes the maintenance of goods susceptible to deterioration.

For example, the company Lavadora SA has a machine in poor condition. It needs to be repaired, but the technical service is abroad. For this he makes use of this regimen. Since you do not want to export the merchandise to sell it, but to repair it, you can save yourself the payment of taxes that could be incurred by exporting to another country and re-importing the repaired merchandise.

Characteristics of the outward processing regime

Like the inward processing regime, it has the following characteristics:

  • The companies are obliged to carry out the improvement operations in the destination country.
  • Customs authorities should be able to supervise the refinement process.
  • The exported goods must be identified in the reimported compensating products.
  • The improvement process should not be to the detriment of domestic economic interests.

Benefits of outward processing

This regime allows the use of technology and foreign labor in the production process of the local industry. This constitutes an advantage in reducing costs when foreign labor is cheaper, for example. In addition, there is no need to transfer the machinery or technological equipment to the national territory.This can represent a significant cost difference when locally available technology is less efficient. Also, given the exemption in the payment of taxes at the time of re-importation, companies deduct this expense from the cost structure.

In addition, sometimes there are barriers for the protection of intellectual property, this regime is an alternative to such restrictions.

Types of outward processing

In the case of export taxes, this regime can be of two types:

  • Suspension: In this case, the payment of taxes is completely suspended. After the re-importation of the perfected goods, taxation is exempted.
  • Refund: This consists of the payment of duties and taxes when exporting the merchandise. Later, when the company carries out the export, the paid taxes are reimbursed.

However, export taxes are rare because they discourage local production. In this sense, they can be found in protected articles considered of national interest, for example.

Likewise, regardless of the type of regime, companies can avail themselves of the following modalities:

  • Total re-import: This modality applies to companies that carry out the re-import of total production.
  • Partial re-importation: In this case, the companies allocate part of the production for export and another for re-importation. Therefore, the part of the production that is sold in the foreign market is subject to customs taxation.

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