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.

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 WHAT TO LOOK OUT FOR IN 2014

South Africa’s customs and excise legislation is currently contained in the Customs and Excise Act 91 of 1964 ("the Act"), which provides for the levying of customs and excise duties as well as other duties and taxes such as fuel levies, air passenger tax and environmental levies. To enable the administration and collection of these taxes the Act prescribes an extensive system of customs control focussed on the import, export, manufacture and use of goods. For purposes of convenience and common sense these control mechanisms also serve a secondary purpose, viz. to enforce legislative restrictions on the import and export of certain regulated goods, and especially to combat the smuggling of illicit goods into and out of the Republic

The Act was written to cater for the needs of the time when the focus was on control.  The Act was extensively amended over the years to keep pace with new approaches and to soften and modernise the system, however, the basic structure of the Act remained unchanged and still contains a strong undercurrent of rigidity reminiscent of the era in which it was written.

Developments such as the re-admission of South Africa in the global economy in 1994, the entry into force of the World Trade Agreement in 1995 resulting in globalisation and the 2001 Twin Towers attack there has been increasing pressure on countries to work towards a better balance between their needs for rigid customs control and the facilitation of the international movement of travellers and goods.

Changes over the past 50 years has made it impossible to amend the 1964 Act due to its current structural arrangement to serve as a vehicle for implementing a modern system of customs control in accordance with current international trends and best practice.

Today there is still a need for an effective customs control system (as a mechanism for revenue collection, protection of society and combating of crime).  However, in order to cope with the demands of growing global trade and crime the international trend is to modernise customs systems in order to minimise their disruptive effect on legitimate trade and tourism as much as possible.

This has to a large extent been achieved through the amendment of international instruments which provides a model for simple, predictable and efficient customs systems by optimising available technology that would neither compromise the traditional objectives of customs control nor disrupt the flow of goods and people between countries.

 The Revised Kyoto Convention which provides a model framework for customs control and is regarded as the blueprint for a modern, efficient and cost-effective customs system is only one example of such an instrument. South Africa as a Member of the World Customs Organisation has acceded to the Revised Kyoto Convention on the 18 May 2004.

It was thus recognised by Customs in South Africa that there is a need to restructuring South Africa’s customs and excise legislation (1) to give effect to the Revised Kyoto Convention (RKC) and other binding international instruments, as well as (2) to establish a sound, clear and logical legislative framework that would enhance and “speak to” the many other legislative instruments that rely for their implementation on customs control. This will be easy to understand if one realises that in international trade Customs administrations are always the first point of entry (for imports) and the last point of exit (for exports) and that Customs internationally act as agents on behalf of a host of other government departments in order to protect citizens, industry and the environment.

The rewrite of the customs legislation began in 2003.  The dissection of the Customs and Excise Act, 1964, and rewrite of the current customs and excise legislation was a mammoth task that took several years to complete. For that reason it was decided to split the customs and the excise aspects of the task and to complete the project in more various phases.  It was decided to start the process by the drafting of two Customs Bills, namely a Customs Control Bill and a Customs Duty Bill) and secondly by the drafting of an Excise Bill which will replace the excise legislation.  South Africa’s current legislation is unique in the sense that it currently provides for Customs and Excise legislation in one instrument.

The intention has always been to proceed only with the two Customs Bills and once enacted into law to retain the current Customs and Excise Act, 1964, for the continued administration of excise duties until the proposed Excise Act comes into effect. The position would thus be that the two Customs Bills would replace the provisions of the current Customs and Excise Act, 1964, in relation to customs only and that the 1964 Act would for the time being continue to apply to excise duties.  It is very likely that the Customs legislation will enter into force in 2014.

Once the Customs legislation is enacted, the current legislative framework will be split into three separate pieces of legislation that would eventually replace the Customs and Excise Act, 1964, viz. –

           i.         a Customs Control Act that establishes a customs control system for all goods imported into or exported from the Republic and that prescribes the operational aspects of the system; (due to enter into force in 2014);

          ii.            a Customs Duty Act, that provides for the imposition, assessment and collection of customs duties (due to enter into force in 2014); and

         iii.            an Excise Duty Act, that that provides for the imposition, assessment and collection of excise duties.

The draft Customs Control Bill draft Customs Duty Bill were published on the 30^th October 2009.  Comments were due by 26 February 2010. In summary the Customs Control Bill deals with operational issues, while the draft Customs Duty Bill deals with duty liability.  The Customs Duty Bill is modelled on the platform of the Customs Duty Bill.

Both bills were issued separately for a brief second round in 2011.  Comments on these bills were due one month after issue. For example the Customs Control Bill was released for comment on April 18 2011, with comments due by May 16 2011.

The South African Revenue Service (SARS) extended an invitation to interested parties to comment on the draft Customs Duty Bill on the 20th of May 2011.  Comments were due by the 6th of June 2011.

All these Bills together with the Explanatory Memorandum and Comment Sheet templates were covered in the Jacobsens Customs News Bulletins when they were published in 2009 and in 2011. 

Third versions of the draft Customs Control Bill and the draft Customs Duty Bill were published on the SARS website on the 8th of August.  These were marked "DRAFT – pre-certification version".

SARS advised that these draft Bills were the versions that the Office of the State Law Advisors reviewed and which they made available for to the public for information purposes only. As with the other revisions there have been changes to the sections and chapters of the bills. For the third time the new version was substantially different than the previous version.

In the meantime the Customs Bills became part of the Parliamentary process and they were published on the Government website.  Download the latest bills, the Customs Control Bill (Bill 45 of 2013) and the Customs Duty Bill (Bill 43 of 2013).  

The Bills are also available on the SARS website at http://www.sars.gov.za/Legal/Preparation-of-Legislation/Pages/Bills.aspx.

We will look at the implications of the new legislation for importer, exporters and industry soon.

Customs Tariff Applications and Outstanding Tariff Amendments

Notice 1129 of 2013; List 18/2013

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.

ITAC has received the following applications concerning amendments to the Customs Tariff of the Southern African Customs Union (SACU).  These applications related to:

1.       Application for creation of a rebate provision on plates, sheets, film, foil and strips of poly (methyl methacrylate)

ITAC has received an application from Libra Bathrooms for the creation of a rebate provision for other plates, sheets, film, foil and strips of poly (methyl methacrylate) non-cellular and not reinforced, laminated, supported or similarly combined with other materials, classifiable in tariff subheading 3920.51, for the manufacture of sanitary ware of plastics classifiable in tariff heading 39.22.

Enquiries: Ndivhudza Ramphabana, Tel: (012) 394 3627or e-mail: nramphabana@itac.org.za.

Representations should be submitted by 22 December 2013.

2.    Amendment of the duty structure for certain new pneumatic tyres of rubber

Tariff subheading 4011.10 covers new pneumatic tyres of rubber, of a kind used on motor cars, including station wagons and racing cars.

Currently the tariff subheading is not subdivided into 8-digit subheadings.  The current general rate of duty is 30%. 

ITAC has received an application to revise the duty structure by the introduction of different 8-digit subheadings with different proposed formula duties, for example 30% or 2884c/kg less 70% and 25% or 2780c/kg less 75%.

Some of the reasons for the application are that there has been a massive influx of low-priced and under-invoiced tyres, mainly from China.

The intention of the introduction of the reference price into the duty structure is to counter under-invoicing.

ITAC Reference 34/2013, Enquiries: Ms Lufuno Maliaga at (012) 394 3835 or  lmaliaga@itac.org.za or Mr Oatlhotse Madito tel. (012) 394 3692 at omadito@itac.org.za.

Representations should be submitted by 22 December 2013.

3.     Amendment to Rebate Item 498.00

Rebate item 498.00 provides for Imported goods admitted under rebate of duty for use in specified activities in the Customs Controlled Area (CCA) contemplated in Section 21A.

The Department of Trade and Industry (the dti) has applied for the amendment of Note 1 to rebate item 498.00 and the insertion of Note 9 to Schedule No. 3 because companies located within a CCA, intending to import manufacturing inputs are currently at a disadvantage in terms of customs duty which has to be paid on the imported content at the time the manufactured goods are declared for domestic use in terms of rebate item 498, and under Schedule No 3 which applies outside the CCA a manufacturer qualifies for a rebate of customs duty but pays Value Added Tax (VAT), if they choose to supply their finished products into the domestic market.

ITAC Ref 231/2013, Enquiries: Dumisani Mbambo, tel (012) 394 3743, dmbambo@itac.org.za, or Ndivhudza Ramphabana, tel (012) 394 3627, nramphabana@itac.org.za

Representations should be submitted by 22 December 2013.

Customs Tariff Application List 17/2013 was published under Notice 1090 of 2013 in Government Gazette 36996 of 8 November 2013.

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.

Various tariff amendments were published on the 13^th of December 2013.  These amendments all relate the amendment of the Notes to Part 3 of Schedule No 6 resulting from refunds on distillate fuel (diesel) in various sectors (farming, mining, etc.). 

Please note that four Government Gazette notices have been published with various implementation dates.  The notices were published in Gazette No 37150 of 13 December 2013. The Notice Numbers were R. 997 to R. 1000.

The amendments were sent to subscribers under cover of Supplement 1029 which went to print on the 17^th of December 2013.

Subscribers will soon be able to view a PDF version of the amended pages at new.jacobsens.co.za.  

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. 

Two Government Gazette Notices were published to amend the Customs and Excise Rules on the 13^th of December 2013.   

Under the one amendment the Diamond Export Levy Rules under section 18 were amended. Various DL 163 forms were also amended as well as form DL 185.  Please also note the implementation and deletion dates of Rule 14.02 in Schedule No. A.

In the second amendment form DA 185.4B1 in respect of Licensing Client Type 4B1 in respect of Special Manufacturing Warehouse was amended.

The notices and amended forms were published in Government Gazette 37124 of 13 December 2013 under Notices R. 975 and R. 976. The SARS reference numbers for the amendments are DAR/130 and DAR/131.

Download the amendments to view the notices.