Suspension
Also known as: suspension of duties
Suspension is the deferral of import duty and VAT for as long as goods remain under customs supervision, for example on a T1 or in a customs warehouse. The charge follows only when they enter free circulation.
What does suspension of duties mean?
Suspension means you do not yet pay import duty and import VAT, because the goods remain under customs supervision. They have entered the customs territory of the EU, but they have not been released into free circulation. Until that moment there is no customs debt, only a possible debt if the procedure is not discharged. The two most used forms are transit under T1 and storage in a customs warehouse. On a T1 the goods travel. In the warehouse they sit. In both cases the status is the same: non-Union goods, duties not yet paid. In the jargon that status is called T1, separate from the T1 document they may travel on. Suspension is not an exemption. The duties remain due in principle. They are only deferred to a later moment: import into free circulation, or re-export where they leave the customs territory again without ever having been charged.
Which procedures suspend the charge?
The Union Customs Code has special procedures that suspend the charge. Transit (T1) moves non-Union goods under supervision. A customs warehouse stores them without a charge. Inward processing lets you work them and then re-export or clear them. Temporary admission is for goods that leave the EU again, such as tools or exhibition material. Each procedure has its own declaration, its own authorisation or guarantee, and its own way of discharging. You discharge a T1 with a follow-up declaration. You discharge a warehouse per exit, with an IMA into free circulation or with re-export. You discharge inward processing with export of the processed product or with clearance of what remains. Do not confuse suspension with preference. Preference lowers or removes the rate because origin allows it. Suspension says nothing about the rate. It only says you do not pay yet. When the goods later enter free circulation, the rate of that moment applies, including any preference if you can prove it.
How does suspension work in a customs warehouse?
If you place goods in a customs warehouse, you file an STO, a storage declaration. Technically that is the same declaration type as an IMA, with one data element different: you place instead of paying. The goods stay under suspension. No customs debt arises, as long as the stock records add up. The classic example is a consignment that partly stays in the EU and partly leaves again. One hundred chairs from the United States, fifty sold in the Netherlands, fifty re-exported to the United Kingdom. On those last fifty you never pay import duty, because they never reached free circulation. Without a warehouse you would have paid on all hundred and had to reclaim part of it. Customs requires every placement and every exit to be traceable to a declaration. A difference you cannot explain leads to a customs debt on the missing goods, as if the suspension had been broken. The records are therefore not a side issue. They are the condition on which the suspension may continue.
How does suspension work under a T1?
A T1 lets non-Union goods travel without the duties becoming due along the way. The container arrives in Rotterdam and may go to a warehouse in Germany, or from the terminal to a Dutch warehouse, as long as the document is live and the guarantee covers it. When the T1 is opened, suspension under the earlier procedure (often temporary storage) becomes suspension under transit. The T1 itself is finite. The office of departure sets a time limit. Within that limit the goods must be at the office of destination, followed by a follow-up declaration that discharges the T1. If that fails, the suspension is broken and the customs debt the guarantee was given for arises. Watch the distinction between document and status. The T1 document can close while the goods keep T1 status, namely after placement in the warehouse. Suspension then continues, but under a different procedure. Anyone who only looks at the document thinks the suspension is over. It is not.
When does suspension end?
Suspension ends when the goods receive a destination that fixes the charge or lets it fall away. The ordinary exit is the import declaration: IMA, duty and VAT are calculated, the goods enter free circulation and receive T2 status. From that moment you may do what you want with them. The other clean exit is re-export. The goods leave the customs territory without ever having been in free circulation. There is no charge. If they do not sit on the terminal but inland, you need a T1 next to the re-export declaration for the stretch to the port. That T1 suspends again, until the goods leave the territory. An unclean exit is breaking the procedure: goods that go missing, that leave the warehouse without a declaration, or a T1 that is not discharged. Then suspension ends with a customs debt, often with interest and a penalty. Customs calculates as if you should have cleared at the moment the procedure failed.
Which guarantee belongs with suspension?
Because the duties are only deferred, customs requires a guarantee that covers the possible debt. For T1 that is usually a comprehensive guarantee on the holder of the procedure. For a warehouse the guarantee hangs on the authorisation and the stock. The amount follows from the risk: rate, value and the number of shipments or the stock that sits under suspension at the same time. If the guarantee fills up, suspension stops for new shipments. DVA refuses a new T1, or customs blocks placement in the warehouse, until there is room. That is not a punitive measure. It is the logic of a ceiling. Anyone who uses suspension as a working-capital tool must watch the open items as tightly as the cash. An AEO authorisation can lower the guarantee, but that is an authorisation condition and not automatic. Without that reduction you calculate with the full risk. Do not inventory what the guarantee costs as a percentage. Calculate how many open T1s and how much warehouse stock fill your ceiling, and steer on that.