Freeport duty on processed goods sold in the UK
Duty can generally be based on the imported inputs when declared to the Freeport procedure or the processed goods when declared to free circulation. Tell HMRC your choice; request changes through your supervising office. Trade measures can require the input basis. Cambridge China Bridge can help assemble supplier information for your customs adviser.
Start with the goods and the procedure
This guide concerns Chinese inputs processed under the Freeport customs special procedure and then released for UK sale. Before release to free circulation, you must account for import duties. You also need authorisation before declaring goods to the Freeport procedure.
Ask the business processing your goods to confirm which authorisation covers them and share its conditions with your customs adviser. Put the proposed processing and UK sales route in writing before comparing costs.
Compare inputs with processed goods
HMRC permits calculation by reference to the goods as they stood when declared to the Freeport procedure, or the processed goods when declared to free circulation. For your order, these are the imported Chinese inputs and the resulting product. The choice concerns the goods at those declaration stages, rather than simply choosing a factory invoice or a UK selling price.
Ask your customs adviser to prepare comparable calculations showing the goods description, commodity code, customs value, quantity and applicable duty treatment for each basis. Use finding your commodity code and what goes into customs value for those separate checks.
Check restrictions before choosing
The choice is subject to restrictions. HMRC’s technical handbook says that in some circumstances, for example goods subject to trade measures, duty must be determined by reference to the goods when declared to the Freeport procedure.
Ask your adviser to check the Chinese inputs for relevant trade measures before recommending the processed-goods basis. Request a written explanation of whether that basis is available for your goods, alongside the cost comparison.
Confirm your choice with HMRC
You must tell HMRC which calculation basis you want to use. If your application is approved, HMRC sends a letter setting out the authorisation conditions. Treat the calculation choice as an authorisation matter and check the letter with your supervising office before instructing your customs agent.
To request a change, contact your supervising office and explain the reasons. HMRC will allow or refuse the request and tell you whether it affects your authorisation. Send the current basis, proposed basis, affected goods, comparison and reason for changing. Wait for the decision before using the proposed method.
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Keep the calculation traceable to the batch
For processing under the Freeport procedure, business records must provide a complete audit trail from entry into the procedure until the processed goods leave it or are allocated to storage under it. HMRC specifies quantity, rate of yield, customs value and commodity codes as part of that trail.
Ask for input invoices, material specifications, batch links and a reconciliation of inputs to output. Keep the calculation and HMRC’s decision alongside them. Cambridge China Bridge’s staff in China can help gather factory information for this pack. If you are comparing customs procedures, see inward processing for Chinese materials.
Frequently asked questions
Is Freeport duty based on components or finished goods?
Generally, either the inputs when declared to the Freeport procedure or the processed goods when declared to free circulation. Tell HMRC your choice and check whether restrictions require the input basis.
Can I change my Freeport duty calculation method?
Contact your supervising office and explain why. Obtain its decision before using the proposed method.
Can I always use the cheaper Freeport duty basis?
The choice is restricted in some circumstances. HMRC says goods subject to trade measures may require duty to be calculated by reference to the goods when declared to the Freeport procedure.
What should I send with a request to change duty basis?
Send your authorisation reference, current and proposed bases, affected goods, comparative calculations and reasons. Ask HMRC to confirm its decision and any effect on your authorisation.