What duty is due if software developed in the EU is exported to a third country and embedded in another product there e.g. a car, when that product is then imported into the EU?
Normally, a product imported from third countries, irrespective of the origin of the components of such products, is charged with a duty as per EU Combined Nomenclature, unless such a product has been fully liberalized under a free trade agreement of the EU with the exporting country. However, the importer can avail himself of available customs procedures in the EU to avoid paying a duty on a component which is produced in the EU but processed in a third country.
The available procedure for the situation at hand is outward processing. This means that the company which has developed or purchased the software in the EU (owner of the software) needs to get an authorisation for outward processing before the software is installed in a car or part thereof. The company needs to address the competent customs authority located in the place where the software owner’s records and documentation enabling the customs authority to take a decision (main accounts for customs purposes) are kept (in one of the 27 Member States).
The details to be filled in the authorisation include the indication of the value of software (commercial value) which will then be deducted from the value of the imported car/car part upon importation. The value of the software will be its costs of production or its purchasing price. The duty will be charged on the difference in that value (the added value). Customs authorities will specify the period within which the outward processing procedure will be discharged, i.e. the time by which the importation of the final product should take place.
The EU importer has to make reference to the relevant authorisation for outward processing in the customs declaration for release for free circulation.