Customs News Bulletin

From time to time certain government departments publish draft legislation to inform stakeholders about their intention to amend legislation, and to invite comments. The commentary period ranges from 2 week to longer periods, depending on the urgency of the matter.

The Bulletin focuses on the publication of information relating to such matters which impact on Customs and Excise legislation and on broader import and export legislation.

WAS THE WCO INTEGRITY PROGRAMME THE REASON BEHIND THE SARS COMMISSIONER’S RESIGNATION?

Background to Mr Magashula’s resignation

In a statement issued by the Minister of Finance, Mr. Pravin Gordhan, on Friday 12 July 2013 it was announced that Mr. Oupa Magashula, the Commissioner of the South African Revenue Service (SARS) resigned with immediate effect following an investigation into allegations of impropriety against him.

On 24 March 2013, Mr Gordhan indicated that he would  institute a thorough investigation into allegations against Magashula following media reports which were based on a telephone conversation during which Mr Magashula was recorded offering a Chartered Accountant a job at SARS. The conversation was facilitated by a Mr Timothy Marimuthu whom media reports alleged had influence over Mr. Magashula. The effect of these reports was to raise questions about the integrity of staff recruitment processes at SARS.

Mr Gordhan then appointed retired Constitutional Court judge, Justice Zak Yacoob, to head up an inquiry into the claims.

Justice Yacoob’s committee was mandated to, amongst other things, establish whether the event referred to in the media reports of 24 March 2013, had resulted in any breach of SARS processes or good governance.

The committee did not have powers to subpoena witnesses. People who gave evidence before the committee did so voluntarily. This meant that all the people who gave evidence to the committee, especially those who are named in the report, had to give consent for publication of those sections of the report that relate to their evidence. For this reason, the report was published on the websites of National Treasury and SARS at 17h00 on Friday 12 July 2013.

In summary, the key findings of the report are as follows.

1. In relation to the terms of reference number 1 and 2, the key findings of the report are that:

a)      Mr. Magashula had, by his conduct, placed the reputation and credibility of SARS at risk;

b)      Mr. Magashula was much less frank with the committee than the committee would have expected
of a person who had the integrity essential to his position;

c)       Mr. Magashula caused the Minister to make an incorrect statement to the public with regards to the potential candidate’s curriculum vitae not having been sent to SARS.

d)      Mr. Magashula’s interaction with Mr. Marimuthu was more frequently than he had initially admitted to the
Minister and the committee; and

e)      Mr. Magashula had reported to the Minister and the committee (during his first appearance before it) that
he had had no further communication with the potential candidate, while it later transpired that she had sent five emails to the Commissioner’s private SARS email address.

2. The allegations of Mr Marimuthu’s influence over Mr. Magashula could not be probed because Mr Marimuthu did not respond positively to the request for an interview.

3. The committee was unable to pronounce on the precise number of people who may have been involved in what the committee sees as the attempt to blackmail the SARS Commissioner.

4. The committee found no evidence that Mr Magashula committed a crime.

Mr Magashula was given a copy of the report on Tuesday, 09 July 2013. On 10 July 2013, he admitted to the Minister and the Deputy Minister of Finance that his actions constituted failure to promote and maintain a high standard of professionalism and ethical behaviour that is expected of the Commissioner of SARS.

After considering the report and its recommendations, the Minister will do the following:

1.    Accept Mr Magashula’s resignation with effect from 12 July 2013.

2.    Instruct the Audit Committee of SARS to investigate whether the Commissioner’s behaviour breached any of the tax and customs processes at SARS.

3.    Appoint a committee to review SARS’ governance and ethical standards, especially as they pertain to the office of the Commissioner.

4.    In addition, the Minister will ask the public to also review the code and recommend improvements. Submissions from the public will be considered by the review committee.

Further details on the committee to review SARS’ governance and ethical standards as well public participation in the review will be announced shortly.

In the press release the Minister of Finance reassured South Africans that the SARS management team and employees are committed to:

1.    The highest level of integrity;

2.    Best service to South Africans; and

3.    Fair implementation of tax and customs laws.

"The South African Revenue Service is one of the key pillars of our fiscal order, and therefore, our democratic dispensation. It is an institution whose very foundation is built on the trust and credibility that South African taxpayers have in it. It is therefore critical that those to whom the stewardship of this vital fiscal institution is entrusted conduct themselves, during and after working hours, in a manner that ensures that they are above question," the Minister said.

This is in line with the fact that customs administrations around the world play a key role in trade facilitation, revenue collection, community protection and national security, and with the World Customs Organisation (WCO) statement that the lack of integrity in the customs industry can distort trade and investment opportunities, undermine public trust in government administration and ultimately jeopardise the well being of all citizens. According to the WCO, integrity is a prerequisite for the proper functioning of any customs administration

The Minister expressed his gratitude towards Mr Magashula for his contribution to SARS during his tenure as Commissioner since 2009.

Both the Minister and the Commissioner were praised over the weekend for Mr Gordhan’s decision to investigate the allegations, and for Mr Magashula’s decision to resign.  It was said that Mr Magashula acted correctly to resign.

In my opinion, both Mr. Gordhan and Mr. Magashula had no choice to act in the manner in which they did – that is by appointing the commission of enquiry and by resigning – especially considering South Africa is a member state of the WCO, and in light of the WCO taking steps to protect the integrity of customs administrations worldwide.

The WCO Integrity Programme

These steps and actions are in line with the WCO Integrity Programme.

·         The conclusion of the Revised Arusha Declaration in 2003.

·         The development of the Integrity Development Guide as a comprehensive integrity tool set to assist Members in implementing the Revised Arusha Declaration.

·         In June 2005, in response to the recommendation made at the 3rd Global Forum on Fighting Corruption and Safeguarding Integrity, the WCO produced the first version of the WCO Compendium of Integrity Best Practices in collaboration with its Member administrations.

·         The development of a database of the integrity best practices (Integrity Best Practice Resource Centre).

·         There have been many undertakings to improve integrity in the customs industry at national and regional levels, in addition to the global efforts. Key examples are the Maputo Declaration, adopted in March 2002 by the Heads of Customs across the African Continent; and the Nairobi Resolution on Integrity (done at Nairobi, Kenya, in February 2007).

·         The customs-related panel at Global Forum V on Fighting Corruption and Safeguarding Integrity in Sandton, Gauteng (South Africa), 4 April 2007.

·         The Integrity Development Guide for use in Revenue Agencies.

One wonders if the Minister would still have appointed the commission of enquiry, and whether or not Mr. Magashula would still have resigned were it not for the Integrity Programme and all steps to eradicate corruption in customs administrations.

Mr. Ivan Pillay, currently the Deputy Commissioner at SARS, has been appointed acting Commissioner until the appointment of a commissioner of SARS.

Download the press release issued by the Minister of Finance for more information.

SUNSET REVIEWS

In accordance with the Anti-Dumping Regulations (ADR) and Countervailing Regulations (CVR), any definitive anti-dumping or countervailing duty shall be terminated on a date not later than five years from the date of imposition, unless the authorities determine, in a review initiated before that date on their own initiative or upon a duly substantiated request made by or on behalf of the domestic industry, that the expiry of the duty would be likely to lead to continuation or recurrence of dumping and injury or subsidized exports and injury.

The International Trade Administration Commission of South Africa (ITAC) has notified all interested parties, in Notice No. 664 of 2013 which was published in Government Gazette No. 36592 of 28 June 2013, that, unless a duly substantiated request is made by or on behalf of the SACU industry, indicating that the expiry of duty would be likely to lead to the continuation or recurrence of dumping and injury or subsidized exports and injury, the following anti-dumping and countervailing duties will expire in 2014:

ITAC will conduct its investigations in accordance with the relevant sections of the International Trade Administration Act, the Anti-Dumping Regulations (ADR) and the Countervailing Regulations (CVR), read with the World Trade Organisation (WTO) Agreement on Implementation of Article VI of the GATT 1994 and the Agreement on Subsidies and Countervailing Measures.

Manufacturers in the SACU of the products listed above, who wish to submit a request for the duty to be reviewed prior to the expiry date thereof, are requested to do so not later than the close of business day on 29 July 2013. In instances where no comments or replies are received within these time limits, ITAC will recommend the termination of the duties on the date of expiry.

SACU manufacturers who do submit a request timeously are requested to subsequently submit duly substantiated information, indicating that the expiry of the duty would be likely to lead to the recurrence of dumping and injury or subsidized exports and injury, to the ITAC, on or before the date as specified.

The request by manufacturers in the SACU of the subject products, and duly substantiated information, indicating what the effect of the expiry of the duties will be, must be submitted in wring to:

The Senior Manager: Trade Remedies I, International Trade Administration Commission (ITAC), Block E – The DTI Campus, 77 Meintjies Street, Sunnyside, Pretoria, South Africa.

The postal address is: The Senior Manager: Trade Remedies I, Private Bag X753, PRETORIA, 0001, SOUTH AFRICA.

Enquiries may be directed to the Senior Manager: Trade Remedies I, Ms Carina Janse van Vuuren at telephone (012) 394 3594 or at fax (012) 394 0518.

Customs Tariff Applications and Outstanding Tariff Amendments

Notice 633 of 2013; List 12/2013: Notice 634 of 2013, Notice 635 of 2013

The International Trade Administration Commission (ITAC) is responsible for tariff investigations, amendments, and trade remedies in South Africa and on behalf of SACU.

Tariff investigations include:

Increases in the customs duty rates in Schedule
No. 1 Part 1 of Jacobsens. These applications apply to all the SACU Countries, and, if amended, thus have the potential to affect the import duty rates in Botswana, Lesotho, Namibia, Swaziland and South Africa.

Reductions in the customs duty rates in Schedule No. 1 Part 1. These applications apply to all the SACU Countries, and, if amended, thus have the potential to affect the import duty rates in Botswana, Lesotho, Namibia, Swaziland and South Africa.

Rebates of duty on products, available in the Southern African Customs Union (SACU), for use in the manufacture of goods, as published in Schedule No. 3 Part 1, and in Schedule No. 4 of Jacobsens. Schedule No. 3 Part 1 and Schedule No. 4 are identical in all the SACU Countries.

Rebates of duty on inputs used in the manufacture of goods for export, as published in Schedule No. 3 Part 2 and in item 470.00. These provisions apply to all the SACU Countries.

Refunds of duties and drawbacks of duties as provided for in Schedule No 5. These provisions are identical in the all the SACU Countries.

Trade remedies include:

Anti-dumping duties (in Schedule No. 2 Part 1 of Jacobsens), countervailing duties to counteract subsidisation in foreign countries (in Schedule No. 2 Part 2), and safeguard duties (Schedule No. 2 Part 3), which are imposed as measures when a surge of imports is threatening to overwhelm a domestic producer, in accordance with domestic law and regulations and consistent with WTO rules.

Dumping is defined as a situation where imported goods are being sold at prices lower than in the country of origin, and also causing financial injury to domestic producers of such goods. In other words there should be a demonstrated causal link between the dumping and the injury experienced. To remedy such unfair pricing, ITAC may, at times, recommend the imposition of substantial duties on imports or duties that are equivalent to the dumping margin (or to the margin of injury, if this margin is lower).

Countervailing investigations are conducted to determine whether to impose countervailing duties to protect a domestic industry against the unfair trade practice of proven subsidised imports from foreign competitors that cause material injury to a domestic producer.

Safeguard measures, can be introduced to protect a domestic industry against unforeseen and overwhelming foreign competition and not necessarily against unfair trade, like the previous two instruments. In the WTO system, a member may take a safeguard action, which is, restricting imports temporarily in the face of a sustained increase in imports that is causing serious injury to the domestic producer of like products. Safeguard measures are universally applied to all countries, unlike anti-dumping and countervailing duties that are aimed at a specific firm or country.

Schedule No. 2 is identical in all the SACU Countries.

The ITAC has received the following application concerning amendments to the SACU Customs Tariff:

NOTICE 633 OF 2013 PUBLISHED IN GOVERNMENT GAZETTE 36575 OF 21 JUNE 2013:

NOTICE OF INITIATION OF AN INVESTIGATION INTO THE ALLEGED DUMPING OF DISODIUM CARBONATE (SODA ASH) ORIGINATING IN OR IMPORTED FROM THE UNITED STATES OF AMERICA

ITAC received and accepted an application alleging that disodium carbonate (soda ash) were being dumped in the Southern African Customs Union (SACU) market, causing material injury to the SACU industry concerned.

The applicant, the Government of Botswana , on behalf of Botswana Sosa Ash, submitted sufficient evidence and established a prima facie case to enable ITAC to arrive at a reasonable conclusion that an investigation should be initiated on the basis of dumping, material injury and causality.

The product allegedly being dumped is disodium carbonate (soda ash), classifiable under tariff subheading 2836.20, originating or imported from United States of America (USA).

Responses to the questionnaire and any information regarding this matter and any arguments concerning the allegation of dumping and the resulting threat of material injury must be submitted in writing to:

The Senior Manager: Trade Remedies I, International Trade Administration Commission (ITAC), Block E – The DTI Campus, 77 Meintjies Street, SUNNYSIDE, PRETORIA, SOUTH AFRICA.

The postal address is: The Senior Manager: Trade Remedies I, Private Bag X753, PRETORIA, 0001, SOUTH AFRICA.

All responses, including non-confidential copies of the responses should be submitted to ITAC by 21 July 2013.

Enquiries may be directed to:

Mr Elias Tema at telephone +27 12 394 3640 or Mr Andre Zietsman telephone at +27 12 394 3673 or at fax +27 12 394 0518.

Download Notice No 633 of 2013 for more information.

LIST 12/2013 – NOTICE 634 OF 2013 PUBLISHED IN GOVERNMENT GAZETTE 36575 OF 21 JUNE 2013:

Increase in the Rate of Customs Duty on Certain Plates, Sheets, Film, Foil and Strip, of Plastics, Non-Cellular and Not Reinforced, Laminated, Supported or Similarly Combined With Other Materials

The International Trade Administration Commission (ITAC) has received an application for an increase in the rate of customs duty on certain plates, sheets, film, foil and strip, of plastics, non-cellular and not reinforced, laminated, supported or similarly combined with other materials, such as:

· biaxially oriented with a thickness exceeding 0,012 mm but not exceeding 0,06 mm, not heat shrinkable, printed, not metallised; and

· biaxially oriented with a thickness exceeding 0,012 mm but not exceeding 0,06mm, not heat shrinkable, unprinted, not metallised;

classifiable under tariff subheadings 3920.20.25 and 3920.20.30 from 10% to 20%.

Contact Mr Nkulana Phenya or Ms Ayanda Ndou for more information at fax (012) 394 4677 or (012) 394 4724.

Representations should be submitted to The Chief Commissioner, ITAC, Private Bag X753, PRETORIA, 0001 by 19 July 2013.

Download Notice 634 of 2013 for more information.

Customs Tariff Application List 11/2013 was published under Notice 524 of 24 May 2013 in Government Gazette 36472.

NOTICE 635 OF 2013 PUBLISHED IN GOVERNMENT GAZETTE 36575 OF 21 JUNE 2013:

NOTICE OF INITIATION OF AN INVESTIGATION INTO THE ALLEGED DUMPING OF FROZEN POTATO CHIPS ORIGINATING IN OR IMPORTED FROM BELGIUM AND THE NETHERLANDS

ITAC received and accepted an application alleging that potato chips were being dumped in the Southern African Customs Union (SACU) market, causing material injury to the SACU industry concerned.

The applicant, McCain Foods (SA) (Pty) Ltd, supported by Nature’s Choice Products (Pty) Ltd, Lambert Bay Foods and Potatoes South Africa, submitted sufficient evidence and established a prima facie case to enable ITAC to arrive at a reasonable conclusion that an investigation should be initiated on the basis of dumping, material injury and causality.

The product allegedly being dumped is frozen potato chips, classifiable under tariff subheading 2004.10.90, originating or imported from Belgium and Netherlands.

Responses to the questionnaire and any information regarding this matter and any arguments concerning the allegation of dumping and the resulting threat of material injury must be submitted in writing to:

The Senior Manager: Trade Remedies II, International Trade Administration Commission (ITAC), Block E – The DTI Campus, 77 Meintjies Street, SUNNYSIDE, PRETORIA, SOUTH AFRICA.

The postal address is: The Senior Manager: Trade Remedies II, Private Bag X753, PRETORIA, 0001, SOUTH AFRICA.

All responses, including non-confidential copies of the responses should be submitted to ITAC by 21 July 2013.

Enquiries may be directed to:

Mr Edwin Mkwanzi at +27 12 394 3742; Mr Sandile Mantolo at +27 12 394 3902; Ms Mercy Mukwevho at +27 12 394 3907 or Ms Boniswa Mehlomakulu at +27 12 394 3818 or at fax +27 12 394 0518.

Download Notice No 635 of 2013 for more information.

Customs Tariff Amendments

With the exception of certain parts of Schedule
No. 1, such as Schedule No. 1 Part 2 (excise duties), Schedule No. 1 Part 3 (environmental levies) Schedule No. 1 Part 5 (fuel and road accident fund levies), the other parts of the tariff is amended by SARS based on recommendations made by ITAC resulting from the investigations relating to Customs Tariff Applications received by them. The ITAC then investigates and makes recommendations to the Minister of Trade and Industry, who requests the Minister of Finance to amend the Tariff in line with the ITAC’s recommendations. SARS is responsible for drafting the notices to amend the tariff, as well as for arranging for the publication of the notices in Government Gazettes.

During the annual budget speech by the Minister of Finance in February, it was determined that parts of the tariff that are not amended resulting from ITAC recommendations, must be amended through proposals that are tabled by the Minister of Finance.

Once a year big tariff amendments are published by SARS, which is in line with the commitments of South Africa and SACU under international trade agreements.

Under these amendments, which are either published in November or early in December, the import duties on goods are reduced under South Africa’s international trade commitments under existing trade agreements.

Four notices to amend the SACU Customs Tariff were published in Government Gazette No 36638 of 12 July 2013.

A new rebate provision (rebate item 315.03/7616.99/01.06) is created to provide for aluminium slugs for impact extrusion used in the manufacture of aerosol cans as recommended in ITAC Report No. 431.  (Notice No R.  473).

The General rate of customs duty on wire nails has been increased from 5% to 15% as recommended in ITAC Report No. 432 by the deletion of subheading 7317.00.10 (wire nails) and by the insertion of three new subheadings (7317.00.02, 7317.00.04 and 7317.00.06).  (Notice No R.  474).

The General rate of duty on constant-velocity (CV) joints has been reduced from 20% to free of duty as recommended in ITAC Report No. 433 by the insertion of subheading 8708.50.30.  (Notice No R. 475).

Rebate item 311.40/5208.4/01.05 is amended to include boxer shorts classifiable in tariff headings 62.07 and 62.08 as part of the manufactured products as recommended in ITAC Report No. 434.  (Notice No R.  476).

Subscribe to the Jacobsens Customs Watch or download the latest Customs Watch to have access to the latest tariff and rule amendments.

Customs Rule Amendments

The Customs and Excise Act is amended by the Minister of Finance. Certain provisions of the Act are supported by Customs and Excise Rules, which are prescribed by the Commission of SARS. These provisions are numbered in accordance with the sections of the Act. The rules are more user-friendly than the Act, and help to define provisions which would otherwise be unclear and difficult to interpret.

Forms are also prescribed by rule, and are published in the Schedule to the Rules.

The last amendment was published in Government Gazette No 36433 of 10 May 2013 under Notices No. R. 339 and R. 340 (DAR/117 and DAR/116 respectively). In terms of these notices:

The Rules for section 76 for the purpose of a refund application contemplated in section 76(4) of the Act are amended by the insertion of form VOC CR 001; and

Rule 59A.03(1)(a) is amended to give effect to risk based use of temporary registration code 70707070.

Download the amendments to view the notices.