Inward processing refers to the customs procedure that allows for non-national goods to be imported into a country tariff-free for manufacturing, processing or repair, and then re-exported outside that country afterwards.
Key Features:
- Foreign goods are imported on a temporary basis without payment of applicable import duties and taxes.
- The goods undergo manufacturing, processing or repairs by the inward processing holder within strict timeframes.
- Finalized goods are then re-exported outside the country with duties/taxes paid only on the value added from local labor.
Eligibility:
Inward processing authorization requires a financial guarantee and adherence to import/export timelines.
Example:
A Turkish manufacturer imported specialized machines from Germany tariff-free under inward processing rules to produce parts for the automotive industry for export.
Significance:
The inward processing scheme promotes export-oriented FDI by lowering costs for foreign companies to utilize local production capabilities.