Reaction magazine

EU tariff suspensions and quotas: a hidden opportunity 

With customs duties adding up to 6.5 percent on chemical substances imported into the EU, many chemical companies – both inside and outside of the EU – may find that they can potentially achieve significant savings though an EU customs duty suspension or quota.

An introduction to tariff suspensions and quotas

In the EU – much like most other jurisdictions – customs duties are generally imposed in order to protect domestic production. But, if specific requirements are met, companies operating in the EU may benefit from a suspension of duties granted by the European Commission.

In simple terms, ‘tariff suspensions’ allow unlimited quantities of raw materials, components or semi-finished products to be imported into the EU without paying duties while ‘tariff quotas’ provide for limited quantities to be imported without paying duties.

How the concept works

The potential for tariff suspensions or quotas offers an important opportunity for the EU and non-EU chemical industry.

However, there are a number of limitations and requirements that must be met before a tariff suspension or quota will be provided. For example, applicants must demonstrate that the imported materials cannot be sourced or supplied in sufficient quantity from Member States. The measures can also not be used to simply import goods for resale nor for goods for which anti-dumping or countervailing duties may be applicable.

Navigating the application process

Requests for tariff suspensions or quotas are generally submitted by the importer or processing/manufacturing company to the designated government agency of the country in which they are either established or importing the eligible goods. Applications approved by the government agency are then forwarded to the members of the Economic Tariff Questions Working Group (ETQG).

Measures are proposed by the ETQG only after they carry out an examination of the economic reasons upon which the request is based. This will require applicants to provide detailed documentation such as technical data sheets, sales literature, statistics and samples.

Confidentially requests will be honored, but applications will not be reviewed if any piece of information essential for scrutiny or discussion cannot be supplied for whatever reason (even if to protect ‘company confidential information’, manufacturing processes, chemical formulae or compositions).

Taking advantage of the measure

While the criteria for tariff suspensions and quota are rather stringent and the application process is somewhat burdensome, tariff suspensions and quotas can be quite beneficial to the chemical industry.

For example, in 2012, an EU importer obtained a tariff quota for the duty-free importation of 400,000 Kg of D-Xylose (a sugar substitute) which would normally be subject to a duty rate of 6.5 percent. Assuming an average market price of approximately USD6 per kilogram, the measure provided an approximate duty savings of USD1.5 million.

Clearly, both EU and non-EU chemical companies may want to explore the potential for using tariff suspensions or quotas as a viable way to minimize their EU duty burden and generate cost savings for themselves and their customers.

By Bart-Jan Kalshoven

Bart-Jan Kalshoven is a Director with KPMG Meijburg & Co in the Netherlands and is a member of KPMG’s European Trade & Customs Group.

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