I.   Text and Commentary

     -    Introduction     5
     -    Definitions      5
     -    Principles (provisions 1-4)     6
     -    Scope (provisions 5-9)     8
     -    Declaration for processing of goods for home use (provision 10)   9
     -    Security (provisions 11-16)     9
     -    Termination of processing of goods for home use (provisions 17-21)  10
     -    Discharge of security (provision 22)    11
     -    Information concerning processing of goods for home use (provision 23) 12

II.  Entry into force

     -    Contracting Parties having accepted the Annex     13

III. Reservations

     -    Contracting Parties having entered reservations   15
     -    Reservations entered (in alphabetical order of Contracting Parties)

IV.  Alphabetical Index


I.-TEXT AND COMMENTARY *


* Annex F.2. was adopted by the Permanent Technical Committee at its
107th/ 108th Sessions in May 1980 . The Annex has been incorporated in
the Kyoto Convention by decision of the Council, taken on 18 June 1980
at its 55th/56th Sessions held in Brussels. It entered into force on 8
January 1987.


Introduction

In general the duties and taxes chargeable on goods imported for home
use are well adapted to the tariff policy of the county concerned.
However, in certain cases, the level of the import duties and taxes
chargeable on imported goods is such that any intended manufacture,
processing or further working of the goods after clearance for home
use would render the overall commercial operation unprofitable with a
resultant loss to the country because of the transfer of such economic
activities to another country.

On the other hand, these economic activities can be encouraged by
permitting certain goods to be processed under Customs control prior
to being taken into home use.

The purpose of the Customs procedure of processing of goods for home
use is to provide for the possibility, where it is in the national
economic interest, of processing certain imported goods under Customs
control to such an extent that the amount of the import duties and
taxes applicable to the products thus obtained is lower than that
which would be applicable to the imported goods.


Definitions

For the purposes of this Annex:

(a)  the term " processing of goods for home use " means the Customs
procedure under which imported goods may be manufactured, processed or
worked (1), before clearance for home use and under Customs control,
to such an extent that the amount of the import duties and taxes
applicable to the products thus obtained is lower than that which
would be applicable to the imported goods (2);

(b)  the term " clearance for home use " means the Customs procedure
which provides that imported goods may remain permanently in the
Customs territory. This procedure implies the payment of any import
duties and taxes chargeable and the accomplishment of all the
necessary Customs formalities;

(c)  the term " import duties and taxes " means Customs duties and all
other duties, taxes, fees or other charges which are collected on or
in connection with the importation of goods, but not including fees
and charges which are limited in amount to the approximate cost of
services rendered;

(d)  the term " Goods declaration " means a statement made in the form
prescribed by the Customs, by which the persons interested indicate
the Customs procedure to be applied to the goods and furnish the
particulars which the Customs require to be declared for the
application of that procedure;

(e)  the term " Customs control " means measures applied to ensure
compliance with the laws and regulations which the Customs are
responsible for enforcing;

(f)  the term " security " means that which ensures to the
satisfaction of the Customs that an obligation to the Customs will be
fulfilled. Security is described as " general " when it ensures that
the obligations arising from several operations will be fulfilled;

(g)  the term " person " means both natural and legal persons, unless
the context otherwise requires.

COMMENTARY

(1)  The expression " worked " also includes changes in packaging or
get-up whose effect is to present, for purposes of retail sale,
products which, for example, were imported in wholesale packagings.

(2)  The amount of import duties and taxes might be lower after
processing of the imported goods even if the tariff classification
were to remain unchanged. This could occur, for example, because the
weight of the products obtained is less than that of the imported
goods.


Principles


1.   Standard

Processing of goods for home use shall he governed by the provisions
of this Annex (1).

COMMENTARY

(1)  There is no obligation on States to accept all the provisions of
the Annex and reservations in respect of any Standards and Recommended
Practices that they are not in a position to apply may be entered (see
Article 5 of the Convention).

     Customs authorities are free to enact rules on aspects of
processing of goods for home use which are not covered by specific
provisions of this Annex.

     Customs authorities may grant facilities greater than those
provided for in the Annex. The granting of such greater facilities is
recommended in Article 2 of the Convention.


2.   Standard

National legislation (1) shall specify the conditions to be fulfilled
and the Customs formalities to be accomplished for processing of goods
for home use.

Notes     1.   The granting of approval for processing of goods for
home use may be made subject to the condition that the proposed
processing operations are regarded by the competent authorities as
beneficial to the national economy.

     2.   The right to process goods for home use may be reserved to
persons established in the Customs territory and whose operations meet
the requirements of the Customs authorities.

     3.   The Customs authorities normally give approval for the
processing operations to be carried out at a particular place (e.g.
the importer's premises) and by specified persons.

     4.   The Customs authorities may set standard rates of yield for
the operations involved in the processing of goods for home use.

COMMENTARY

(1)  See commentary on Article 3 of the Convention.


3.   Standard

The granting of the procedure of processing of goods for home use
shall be subject to the condition that the Customs authorities are
able to satisfy themselves that the products resulting from the
processing have been obtained from the imported goods.

4.   Standard

The granting of the procedure of processing of goods for home use
shall be subject to the condition that the original state of the goods
cannot be economically recovered after the processing.


Scope


5.   Standard

Processing of goods for home use shall be allowed in respect of
specified categories of goods undergoing approved processing
operations (1).

Note Approval may be restricted to processing operations which result
in products classifiable under specified tariff headings.

COMMENTARY

(1)  Countries which accept this Annex are invited to specify the
categories of goods to which the procedure is applicable and the
processing operations which have been approved.


6.   Standard

Processing of goods for home use shall not be limited to goods
imported directly from abroad but shall also be granted in respect of
goods ex Customs transit, ex Customs warehouse or from a free zone.


7.   Recommended Practice

Processing of goods for home use should not be refused solely on the
grounds of the country of origin of the goods or the country whence
consigned.


8.   Standard

The right to process goods for home use shall not be limited to the
owner of the imported goods.


9.   Recommended Practice

Persons who carry on large-scale and continuous processing of the same
type of goods for home use should be granted a general authorisation
covering such operations.

Declaration for processing of goods for home use


10.  Standard

National legislation shall specify the conditions under which the
Goods declaration for processing of goods for home use shall be lodged
and under which the goods shall be produced at the competent Customs
office.

Note The Goods declaration is generally lodged before the goods are
processed for home use but, in cases where the operations involved are
relatively simple, approval may be given for the processing to be
carried out prior to the lodgement of the Goods declaration.


Security


11.  Standard

The form in which security, if any, is to be provided in respect of
processing of goods for home use shall be laid down in national
legislation or determined by the Customs authorities in accordance
with national legislation.


12.  Recommended Practice

The choice between the various acceptable forms of security should be
left to the person concerned.


13.  Standard

The Customs authorities shall, in accordance with national
legislation, determine the amount in which security is to be provided
in respect of the processing of goods for home use.


14.  Recommended Practice

The amount of any security should be set as low as possible having
regard to the import duties and taxes potentially chargeable.

Note This Recommended Practice does not prevent the amount of the
security from being determined on the basis of a single rate where the
goods fall in a wide range of tariff headings.


15.  Standard

When security is to be provided to ensure that the obligations arising
from several operations under the procedure of processing of goods for
home use will be fulfilled, the Customs authorities shall accept a
general security.


16.  Recommended Practice

Customs authorities should waive the requirement for security where
they are satisfied that payment of any sums that might fall due can be
ensured by other means.


Termination of processing of goods for home use


17.  Standard

Processing of goods for home use shall be terminated when the products
resulting from the processing are cleared for home use.


18.  Standard

National legislation shall specify the point in time to be taken into
consideration (1) for the purpose of determining the value and
quantity of goods declared for home use and also the rates of the
import duties and taxes applicable to them.

COMMENTARY

(1)  Between the time when the goods are declared for processing for
home use and the time when they are cleared for home use changes may
occur in the Customs tariff or in the value of the goods, or their
quantity may decrease through evaporation or other losses. It is
therefore necessary to specify the point in time to be taken into
consideration for the purpose of determining the value and quantity of
the goods, and the rates of the import duties and taxes applicable to
them, when they are declared for home use. Because of the diversity of
possible circumstances and cases, and the differences between national
legislations, harmonization of these practices is a difficult matter
at the present time. The Standard therefore
merely lays down that States shall specify in their national
legislations the point in time to be taken into consideration in
determining the value and quantity of the goods and the rates of the
import duties and taxes applicable to them.

     There are two main points in time that can be chosen, viz. the
time of declaration for processing for home use and the time of
declaration for home use, but there are a number of factors to be
taken into account in making the choice (equity to traders, revenue
considerations, effect of changes during processing, etc.).


19.  Recommended Practice

Where justified by the circumstances and at the request of the person
concerned the Customs authorities should approve termination of the
procedure when the products obtained from the processing or working
are exported, placed in a Customs warehouse or introduced into a free
zone.


20.  Standard

Any waste or scrap resulting from the processing of goods for home use
shall be liable, if cleared for home use, to the import duties and
taxes that would be applicable to such waste or scrap imported in that
state.

Note Approval may be given for such waste or scrap to be rendered
commercially valueless under Customs control or to be re-exported.


21.  Standard

Goods intended for processing for home use or products resulting
therefrom which are destroyed or irrecoverably lost by accident or
force majeure before they are cleared for home use shall not be
subjected to import duties and taxes, provided that such destruction
or loss is duly established to the satisfaction of the Customs
authorities. Any waste or scrap remaining after destruction shall be
liable, if cleared for home use, to the import duties and taxes that
would be applicable to such waste or scrap imported in that state.


Discharge of security


22.  Standard

Any security furnished shall be discharged as soon as possible after
processing of goods for home use has been terminated.

Information concerning processing of goods for home use


23.  Standard

The Customs authorities shall ensure that all relevant information
concerning processing of goods for home use is readily available (1)
to any person interested.

COMMENTARY

(1)  This information can be made available through the usual
information media such as regular publications (e.g. official gazettes
and notices) and by arranging for the information to be given promptly
upon request at all competent Customs offices.

*     *     *

II.-ENTRY INTO FORCE

Contracting Parties having accepted the Annex,
with dates of entry into force

               Belgium                  18 January 1992
               France                   28 January 1987
               Germany (Fed. Rep. of)   28 January 1987
               Netherlands              31 October 1987
               New Zealand              28 January 1987
               Portugal                 1 December 1989
               South Africa             8 November 1991
               Spain                    21 September 1991
               United Kingdom           28 January 1987
               EEC                      28 January 1987


III.-RESERVATIONS

Contracting Parties having entered reservations

Contracting Parties Provisions reserved

               Belgium                    7 - 16
               France                     7
               Germany (Fed. Rep. of)     7
               Netherlands                7
               Portugal                   7
               South Africa               21
               Spain                      7
               United Kingdom (1)         7
               EEC                        7
                       
(1) Also applicable to the Channel Islands and the Isle of Man.


IV.-ALPHABETICAL INDEX

     Provisions

Conditions for granting the procedure     3,   4
Conditions to be fulfilled      2
Destruction    21
General authorisation      9
Goods declaration   10
Goods eligible   5,   6,   7
Import duties and taxes
- applicable to processed goods    18
- applicable to waste and scrap    20, 21
- to be waived in case of destruction or loss     21
Information concerning processing of goods for home use     23
Loss 21
Persons entitled      8
Point in time to be taken into consideration for the purpose of
determining
the value and quantity of goods processed    18
Principles       1 to 4
Security
- amount  13, 14
- choice  12
- discharge    22
- form    11
[page unnumbered]
- general security  15
- waiver  16
Termination of processing of goods for home use
- clearance for home use 17
- exportation  19
- introduction into a free zone    19
- placement in a Customs warehouse 19
Waste and scrap     20, 21

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