Outward processing explained: How to save on duties when exporting for processing.

What is outward processing?

Outward processing is a customs procedure that allows goods to temporarily leave the European Union (EU) for processing. When the processed goods re-enter the EU and are released into free circulation (meaning they can be sold or used without restrictions), duties are charged only on the added value created abroad.

This mechanism provides a partial – or in some cases, full – relief from import duties, helping businesses reduce costs and remain competitive in international trade.

How duties are calculated for repairs

When goods are exported for repair, customs duties are based on the repair costs. For repairs carried out under warranty, a full exemption may apply. For example, if a defective product is sent abroad for repair under warranty, no duties are charged when it is re-imported into the EU.

This ensures that businesses are not penalised for defects outside their control, while still maintaining compliance with EU customs rules.

How duties are calculated for other processing

For operations other than repairs, the partial exemption is calculated by subtracting the duties on the temporarily exported goods from those on the processed products when they return to the EU.

This approach can make it cost-effective to carry out processing abroad – particularly in countries with lower labour costs or specialist expertise. For businesses, this means greater flexibility in optimising their supply chains while still benefiting from reduced duties.

Outward processing and CBAM

The Carbon Border Adjustment Mechanism (CBAM) introduces new considerations for outward processing, especially for goods linked to carbon-intensive industries such as steel, aluminium, cement, fertilisers, and electricity.

If processed goods fall under CBAM when re-entering the EU, a carbon levy may apply based on emissions linked to the overseas processing. This levy is designed to prevent production from shifting to countries with looser carbon rules, protecting EU climate objectives.

Businesses must account for and report these emissions under CBAM regulations – making environmental compliance just as important as customs compliance.

Authorisation requirements

To use outward processing, businesses must obtain authorisation from customs authorities. Applications are submitted via the EU Trader Portal.

To qualify, businesses must:

• be established in the EU,
• maintain proper conduct throughout the operation, and
• comply with EU customs regulations.

Authorisation provides the legal framework to benefit from outward processing and ensures that businesses remain compliant.

Conclusion: Turning outward processing into opportunity

Outward processing can be a powerful tool for businesses looking to reduce costs and streamline international operations. By leveraging reduced duties and managing CBAM obligations carefully, companies can stay competitive while maintaining compliance.

If you’re considering outward processing for your business, our customs experts can guide you through the authorisation process, ensure compliance, and help you unlock cost savings.