The Italian Customs and Monopolies Agency has provided clarifications on customs procedures and operational requirements for introducing yachts from outside the european union which need maintenance and refitting work into EU customs territory
by Federico Santini*
With its memorandum number 20 of May 27th, 2022 the Italian Customs and Monopolies Agency has provided clarification on the customs procedures and operational requirements for introducing yachts from outside the European Union which need maintenance and refitting work into EU customs territory. This was in response to requests from the Italian shipbuilding industry for operational simplification and a reduction in administrative charges. First and foremost, the memo makes clear that the 18-months’ maximum that non-EU yachts may stay while covered by the temporary admission regime must be considered globally if the yacht is bound by the holder of the procedure to another special regime (such as inward processing) and then placed again under the temporary admission regime; however, when the yacht is bound to the temporary admission regime by the holder and subsequently the inward processing regime intervenes at the request of the shipyard, for refitting work, before a return to the temporary admission regime, only the two periods in which the owner subjects the yacht to the temporary admission regime will be considered when assessing the maximum period of discharge.
The maximum period of 18 months during which non-EU yachts are covered by the temporary admission regime must be considered globally if the yacht is bound by the holder of the temporary admission regime to another special regime and then once more placed under the temporary admission regime.
The memo then provides information on temporary admission and explains that, under the temporary admission regime, it is possible to carry out maintenance work on the boat, including bottoms and decks (treatments, painting, polishing, wrapping and carpentry), maintenance, repair and possible replacement of systems and equipment, propulsion systems and equipment in the engine rooms, as well as maintenance and repair of interiors, provided that this work does not modify the structure or involve improvements in performance or cause a considerable increase in the value of the yacht.
Undertaking this kind of work under the temporary admission regime, and therefore with VAT exemption in accordance with article 9, paragraph 1, number 9 of Presidential Decree 633/1972 (Italian VAT law), does not entail the obligation to provide a guarantee for customs purposes, provided that the following procedure is observed: 1) the owner of a yacht (or their representative) who requests the maintenance work must show when the yacht entered EU waters by submitting attachment 71-01 of EU Regulation 2446/2015 (the so-called “oral declaration of temporary admission”) to the customs office presiding over the location where the maintenance is to be carried out; in relation to this, the memo specifies that, where the need for maintenance arises after entry into EU waters without the presentation of the form mentioned above, i.e. by merely crossing the EU border, the oral declaration can be submitted later, although always prior to the maintenance work; in such cases the declaration will show a date of entry into EU territory that is prior to that of presentation to the customs office, and that date will need to be supported by appropriate documentation;
2) when a yacht needs to be moved to a shipyard for the maintenance work, its owner must also transfer the rights and obligations deriving from the temporary admission regime to the shipyard in charge of the work, by presenting the T.O.R.O. (transfer of rights and obligations), also signed by the shipyard, to the customs office which is to authorise the T.O.R.O; the form should indicate the period in which the shipyard will have the yacht for the work to be done; 3) the shipyard must note in its accounting records the information relating to the work, the start and end date, any parts and pieces replaced, and must assume direct liability in relation to customs duties, if any.
MAINTENANCE WORK ON THE HULL MAY BE CARRIED OUT UNDER THE TEMPORARY ADMISSION REGIME PROVIDED THAT IT DOES NOT MODIFY THE STRUCTURE OR INVOLVE IMPROVEMENTS IN PERFORMANCE OR CAUSE A CONSIDERABLE INCREASE IN THE VALUE OF THE YACHT.
The memo also provides indications on the issue of inward processing and explains that, when what is to be done on non-EU flagged yachts involves structural work (refitting) and therefore activities which substantially increase the value of the yacht, inward processing must be used (the simple temporary admission procedure is not allowed) and that requires customs authorisation and also the provision by the shipyard of a guarantee covering any customs duties payable.
The memo includes some examples of work falling under the inward processing regime: reconstruction of a yacht interior, changes in the room layout, extending or modifying the hull, lengthening of the bottom or decks, replacing the main engines, replacing or installing systems with more efficient and innovative equipment. To do this kind of work the yard has to ask for authorisation, through the Trade Portal, from the relevant customs office, which will issue a decision using the CDMS (Customs Decision Management System). The bond to be provided by the yard can be specific to a given operation, or global, if it covers several operations. Reductions on, or exemptions to, the amount to be guaranteed (which is at least equal to the amount of the duty) cannot be applied to an individual bond. However, the shipyard can apply for a partial or total exemption for bonds covering more than one operation.
WHEN THE NEED FOR MAINTENANCE ARISES AFTER ENTRY INTO EU WATERS WITHOUT THE FORM MENTIONED ABOVE BEING SUBMITTED,
THE ORAL DECLARATION CAN BE PRESENTED AT A LATER DATE, PROVIDED IT IS PRIOR TO THE MAINTENANCE WORK BEING CARRIED OUT.
For the exemption to be granted, the customs authority is required to consider the financial solvency, reliability and financial capacity of the yard, as well as the risk of incurring customs debt relating to Italian duties and charges. Upon completion of the assessment, and if the office deems the yard reliable, it may grant a reduction of up to 50%, or 30% of the reference amount of the guarantee relating to VAT. If the yard has AEO authorisation for customs simplifications in accordance with Article 38.2 letter a) of the Union Customs Code (AEOC or AEOF), then the customs office can consider granting exemptions of up to 100%. The value of the yacht subject to inward processing must be proven by a sworn appraisal if there are no documents (such as deed of sale or purchase invoice) to prove it.
(Work on yachts flagged outside the EU – Barchemagazine.com – August 2022)