Customs News Bulletin

	10 February 2016

Latest News

COMMENCEMENT OF SPECIAL ECONOMIC ZONES ACT, 2014 (ACT NO. 16 OF 2014)

The Special Economic Zones Act, 2014 (Act No. 16 of 2014) commenced on 9 February in terms of Proclamation R. 6 of 2016 read with section 42 of the Act.

At the same time the Regulations to the Act takes effect.

On Friday 14 August 2015 the South African Revenue Service published three notices that will be implemented with effect from the date the Regulations to be published in terms of the Special Economic Zones Act, 2014 (Act No. 16 of 2014) come into operation.

The Customs Rule amendment that was published on 3 July 2015 will also amend the rules to section 21A of the current Customs and Excise Act with effect from the date that the regulations under the Special Economic Zones Act, 2014 comes into effect which has now been proclaimed as 9 February 2016.

A "SEZ enterprise" is defined in the Customs Control Act, 2014 as an enterprise within a special economic zone or part of a special economic zone designated in terms of section 43(2)(c) as a customs controlled area. 

The term "special economic zone" is also defined in the Customs Control Act as an area designated as a special economic zone in terms of the Special Economic Zones Act, 2014 (Act No. 16 of 2014).

The concept of special economic zones is an international one.  There are many synonyms for special economic zones: free ports, foreign trade zones (FTZ's), export processing zones (EPZ's), industrial development zones (IDZ's) and sector development zones. There are however similarities between these zones: these zones are generally specially designated areas in a country that are set aside for specific activities (such as importing, manufacturing and exporting) with minimum customs intervention. SEZ enterprises qualify for certain benefits: there are subsidies and government assistance on the initial cost of factory setup, and rebates of customs duties and VAT on imported inputs, provided the goods are exported. In South Africa the current IDZ scheme (under item 498.00) also provides for rebates on raw materials for local production, but VAT is not rebated.

The Department of Trade and Industry (the dti) established the Industrial Development Zone (IDZ) programme in the year 2000.

The objectives of the IDZ programme was to attract foreign direct investment, increase exportation of value added manufactured products and creates linkages between local industries and industries that are based in IDZ's in Coega, East London, Richards Bay, OR Tambo, Saldanha Bay and Dube Trade Port (wef July 2014).

The dti were not happy with the performance of the IDZ programme and  SEZs were identified as instruments to improve South Africa’s industrial performance.

There is however a misconception that special economic zones are a geographic area where goods may be landed, handled, manufactured or reconfigured, and re-exported without the intervention of the customs authorities.

The sooner importers, exporters and manufacturers realise that free zones are also subject to customs control, the better.

Download Proclamation No. R. 6 of 2016 and the SEZ Act and Regulations at http://www.gov.za/sites/www.gov.za/files/39667_rg10557_pro6.pdf

DRAFT CUSTOMS CONTROL ACT RULES SECOND ROUND RELEASED

(Comments due by 1 April 2016)

The second draft of the Customs Control Rules made under the Customs Control Act, 2014 (Act No. 31 of 2014), was published for public comment. The due date for comments is on/before 1 April 2016.

SARS published two documents (a clean one and one with track changes) as well as an explanatory memorandum.

According to the SARS Explanatory Memorandum the amendments made to the first draft of the Rules include changes occasioned by external stakeholder comments received after publication of the first draft, internal feedback and SARS operational requirements, changes to give effect to proposed amendments of the Customs Control Act, 2014, (as contained in the Taxation Administration Laws Amendment Bill, 2015), as well as the technical review of the draft as a whole.

It is further stated that technical amendments include the correction of errors, the moving of provisions (for example the moving of definitions to rule 1.1), the adaptation of wording to ensure consistency of similar provisions throughout the text, the insertion of provisions inadvertently omitted, the insertion of general provisions applicable to all the Chapters and the consequential deletion or adaptation of provisions in the various Chapters.

Download the Explanatory Memorandum  and the Draft Notices from  http://www.sars.gov.za/Legal/Preparation-of-Legislation/Pages/Draft-Documents-for-Public-Comment.aspx.

Customs Tariff Applications and Outstanding Tariff Amendments

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 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. 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.

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. The International Trade Commission of South Africa (ITAC) also publishes Sunset Review Applications in relation to anti-dumping duty in terms of which any definitive anti-dumping duty will be terminated on a date not later than five years from the date of imposition, unless the International Trade Administration Commission determines, in a review initiated before that date on its own initiative or upon a duly substantiated request made by or on behalf of the domestic industry, that the expiry of the duty would likely lead to continuation or recurrence of dumping and material injury. The International Trade Administration published a document entitled International Trade Administration Act: Initiation of sunset review of anti-dumping duties on polyethylene terephthalate originating in or imported from Chinese Taipei, South Korea and India. The anti-dumping duties subject to review is polyethylene terephthalate (PET), in primary forms (excluding liquids and pastes) classifiable under tariff subheading 3907.60.9, originating in or imported from the India, South Korea and Chinese Taipei. Refer to anti-dumping duty items 207.01/3907.60.9/0107(70) – 207.01/3907.60.9/03.07(71). Responses 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 by 28 February 2016. Contact the investigating officers Mr Busman Makakola at telephone number +27 12 394 3380 or Mr Emmanuel Manamela at telephone number +27 12 394 3632 or at fax number +27 12 394 0518 for more information. The document was published in Government Gazette No. 39636 of 29 January 2016 under Notice No. 44 of 2016.

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.

There were no tariff amendments at time of publication.  The latest tariff amendments were published on 18 December 2016. This amendments were published in Government Gazettes of 18 December 2015. Refer to the Bulletin of 20 January 2016 for more information.  The loose-leaf pages to amend the Jacobsens Harmonized Customs Tariff was sent to subscribers under cover of Supplement 1064. The loose-leaf amendments for the big amendments was sent to subscribers under cover of Jacobsens Supplement 1065.  If you have not received the updates by now kindly contact LexisNexis’ Customer Care division.

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.

There were no Rule amendments at time of publication. On 31 December 2015, SARS Customs published an Amendment of the Customs and Excise Rules under section 120. Rule 120.09A was inserted to provide for currency conversions for determining value of goods exported or to be exported The rule amendment (supposedly DAR/157) was published on 31 December 2015 in Government Gazette 39569 under Notice No. R. 1294.

Contact Information:	Contact the Author:
Havandren Nadasan Jacobsens Editor Tel: 031-268 3510 e-mail to: newjacobsens@lexisnexis.co.za	Leon Marais Independent Customs Consultant Tel: 053-203 0727 e-mail to: leon.marais@intekom.co.za

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