Article 1.0.3. of the Customs Code defines the “inward processing” as “a special customs procedure consisting of bringing certain goods into the customs territory of the Republic of Azerbaijan without collecting customs duties and taxes for the purpose of export after processing operations”.
Article 197 of the Customs Code states that “foreign goods placed under the inward processing procedure are used in one or more processing operations in the customs territory without applying the followings: (a) import customs duties; (b) value added tax and excise duties stipulated in the legislation on the import of goods; and (c) trade policy measures.”
Under Article 198 of the Customs Code, the customs authority determines the period of completion of the special customs procedure for internal processing, which should not exceed 2 (two) years. However, based on the justified application of the person, the customs authorities may decide on the extension of the said period.
Along with the Customs Code, Rules “for placement of goods under a special customs procedure for inward processing”, approved by the decision No. 4 of the Cabinet of Ministers of the Republic of Azerbaijan, dated 14 January 2014 (hereinafter referred to as the “Rules”), is one of the main regulatory instrument in relation to the inward processing procedure.
In accordance with Article 5.1 of the Rules, permit to place the goods under inward processing procedure is granted to a person with the following conditions: (a) if the customs authority has a possibility to control the inward processing procedure; (b) unless the granting of the permit adversely affects the vital interests of local producers.
According to Article 5.2 of the Rules, permit to place the goods under inward processing procedure is granted to the following persons: (a) to the persons who provide a guarantee that the customs operations will be carried out in accordance with the requirements of the legislation and who provide a guarantee for the payment of the customs debt in cases where it has arisen or may arise; (b) persons who perform processing operations on goods placed under inward processing procedure.
As per Article 5.9 of the Rules, in case of changes in the information and documents submitted for obtaining the permit, the permit holder must immediately inform the customs authority as to such changes.
Article 6 of the Rules regulates the transfer of the rights and obligations to other persons which norms can be summarized as follows:
- The rights and obligations of the owner of the procedure in relation to goods placed under inward processing procedure may be transferred to other persons who comply with the conditions of the same procedure;
- For that purpose, the owner of the procedure must apply to the customs authority;
- The customs authority grants a permit if the person accepting the rights and obligations in relation to goods placed under inward processing procedure provides a guarantee that it will comply with the conditions set out for the relevant customs procedure;
- When the rights and obligations regarding the inward processing procedure are transferred to another person, the permit granted to the previous owner of the procedure is revoked;
- The transfer of rights and obligations related to the goods placed under the inward processing procedure to another person does not affect the flow of the period set out for that procedure.
With regard to the term of the inward processing procedure, Article 7 of the Rules speficies the followings:
- The period of completion of the inward processing procedure should not exceed 2 (two) years.
- When the goods are exported within the specified period, those goods are completely exempted from import customs duties and taxes.
- The customs authority may extend the period of completion of the inward processing procedure based on the justified application of the permit holder up to 1 (one) year.
- If the inward processing procedure is not completed within the specified period, the inward processing procedure is changed, the goods are placed under the customs procedure of release for free circulation (permanent import), and appropriate customs duties and taxes are applied to the goods.
About the author: Fuad Gashamov is a professional lawyer with over 12 years of experience in consulting industry. He mainly specializes in dispute resolution, real estate, contracts, regulatory, intellectual property and compliance. He is the founding partner at Legalize Law Firm. He is a member of the Bar Association since 2014. For more information about the author please see the following link: