Common Mistakes And Solutions When Shipping IMPs for Clinical Trials in Europe
The Business Case for Shipping IMPs
Investigational medicinal products (IMPs) are vital for clinical trials (CTs) testing new therapies. They also serve patients in Early Access Programs (EAPs) who face serious illnesses with limited treatment options. However, IMPs have not yet received approval from regulatory agencies like the FDA or EMA.
Shipping IMPs internationally presents complexities due to customs regulations and local laws. In the European Community (EC), policies such as EU Council Directive 2006/112/EC and EU CTR 536/2014 Article 62 govern IMP importation. Yet, member states may have unique exceptions.
Challenges Biotechs Face When Shipping IMPs to Europe
When importing goods, Value Added Tax (VAT) and Customs Taxes apply within the EC. Although drug manufacturers often provide IMPs free of charge, it complicates customs declarations. The Commercial Invoice (CI) and other documents like the temporary import license, clinical trial authorization, IMP Dossier, and Certificate of Analysis (CoA) are essential for customs.
Importers of Record (IoR) often assume that because the products are free, their commercial value is zero. This assumption can lead to serious issues.
Failing to adhere to customs and regulatory requirements can expose biotech and biopharma companies to multiple risks. These risks are typically divided into three categories: financial, clinical, and reputational.
Understanding Customs Value for IMPs
Customs value refers to the worth of a product at importation, not its sale price. It includes manufacturing costs, packaging, and transport expenses. This value is usually the amount declared for insurance purposes—reflecting what it would cost to replace lost or damaged goods.
It’s crucial to differentiate the commercial invoice from a sales invoice.
What is the EBTI Database?
Many believe customs officials find it challenging to assess IMP value. However, the European Binding Tariff Information System (EBTI) allows customs to classify products and confirm accurate tariff codes for imports.
Customs may evaluate the commercial value of IMPs using several methods:
- Price Comparisons: Comparing the imported product to similar items.
- Physical Inspections: Inspecting the actual products.
- Additional Documentation: Requesting more information from the importer or manufacturer to verify the customs value.
Risks for Importers of Record and Clinical Trial Sponsors
Failing to adhere to customs and regulatory requirements can expose biotech and biopharma companies to multiple risks. These risks are typically divided into three categories: financial, clinical, and reputational.
Financial Risks
Importers of Record bear the responsibility for any taxes incurred upon importation into the EC. This can lead to fines or delays in product clearance. Sometimes, a financial warranty is required for future shipments, complicating and increasing import costs.
Clinical Risks
IMPs must comply with Good Distribution Practice (GDP) regulations, ensuring product integrity during transit. Issues may result in products being held, returned, or destroyed, affecting trial timelines.
Delays in IMP supply can impact clinical trial results, directly affecting the sponsor’s objectives.
Reputational Risks
Delays in the supply chain or failures to deliver IMPs can harm a sponsor’s reputation. Such setbacks may lead to regulatory scrutiny and potential halting of clinical programs in the affected regions.
Best Practices for Clearing Customs on IMP Imports in Europe
1. Appoint a Local Importer of Record (IOR)
Non-EU companies must appoint a qualified Importer of Record (IOR) to manage customs clearance and comply with EU regulations.
2. Ensure GDP Compliance
Engage logistics providers that adhere to GDP standards. This helps guarantee compliance and minimizes regulatory risks.
3. Navigate VAT and Customs Requirements
VAT and customs duties differ across EU Member States. Some countries offer exemptions, so it’s wise to consult local tax advisers. This ensures compliance and identifies potential savings for clinical trials.
Utilising TARIC and EBTI systems for product classification helps assess customs duties accurately.
Conclusion: Don’t Fear VAT Representation
Many U.S. companies unnecessarily fear that VAT representation in Europe will trigger a Permanent Establishment (PE) risk. This fear is unfounded. VAT representation is purely for handling VAT obligations and does not constitute a taxable presence. Companies use VAT representation procedures regularly without incurring additional tax exposure. By following this straightforward and cost-effective process, biotech and biopharma companies can avoid significant tax risks and secure their commercial future in Europe.
#GOATConsultants™-Level Insights:
Correctly navigating the challenges of VAT, customs duties, and GDP compliance can save companies significant headaches when shipping IMPs. Avoid the traps that many fall into by appointing qualified local partners and leveraging available resources for seamless imports.
For more information on our services, visit our Finance and Tax section.
For more information on clinical trial regulations, visit the European Medicines Agency website.
To learn about GDP guidelines, check the EU Guidelines on Good Distribution Practice.
