Release for free circulation

What it means

Release for free circulation is the customs procedure by which goods from outside the EU acquire the status of Union goods. Once released, they can be traded freely throughout the EU like domestic goods. It is the most common way of importing goods for sale or production.

On release, customs duty is paid at the rate set in the TARIC tariff on the customs value of the goods, plus any anti-dumping duty and excise duties. Import VAT also arises, which a VAT payer usually settles through its VAT return.

A customs declaration is lodged electronically for the release. The importer must have an EORI number, and customs may inspect the goods before release, take samples or ask for further documents, for example on origin.

How it works in practice

With the first import we check with the client the correct tariff classification and duty rate, the origin of the goods and whether any restrictions or licences apply. Wrong classification can mean paying additional duty even years later.

In the books we include duty and customs clearance costs in the acquisition cost of the goods. Import VAT is not an expense: a VAT payer reports it as both output and input VAT in the same return if it meets the conditions, and the import document is checked in audits.

Most companies use a customs representative who lodges the declaration for them. The contract must make clear whether representation is direct or indirect, as that determines who is liable for the customs debt.

What to watch out for

The value stated in the customs declaration must reflect the real price including transport to the EU. An undervalued invoice is easily detected in an audit and leads to additional duty, VAT and a fine.

Once released for free circulation, goods cannot simply be moved back into another customs procedure. If the goods will be re-exported, processed or stored, we recommend considering a customs warehouse or inward processing, which defer or relieve duty.