Inward Processing
Inward Processing is a customs special procedure that lets a business import goods to be processed, repaired or manufactured, with duty and import taxes suspended or relieved, provided the resulting products are re-exported. It is designed to keep local manufacturers competitive by not burdening them with duty on materials that will leave the country again as finished goods.
Under the procedure, raw materials or components enter under customs control; the business processes them (assembly, manufacture, repair) and then exports the finished products, at which point the suspended duty is discharged. If any of the goods instead enter the domestic market, duty becomes payable on them. Its mirror image is outward processing — exporting goods temporarily for processing abroad and re-importing them with duty relief on the original value. Inward processing (and the related manufacturing bond / duty drawback mechanisms) is widely used in export-oriented manufacturing and free zones to avoid duty on inputs, and requires careful record-keeping to prove the goods were re-exported.
A manufacturer that imports parts only to re-export the finished product shouldn't be stuck paying import duty on those parts — inward processing relieves it, keeping export industry competitive. It is a cornerstone of export manufacturing and free zones, but hinges on proving re-export, so record-keeping is everything. Understanding it (and outward processing) unlocks real duty savings.
What is the benefit of inward processing?
Imported materials can be processed with duty suspended or relieved, provided the finished goods are re-exported — avoiding duty on inputs.
What is outward processing?
The reverse — exporting goods temporarily for processing abroad and re-importing them with duty relief on the original value.