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THE MOST DRASTIC
CHANGES TO SACU’S TARIFF STARTED WITH EFFECT FROM 1 JANUARY 2015
Trade policy and customs tariff policy are
synonymous. Trade policy is a set of policy measures that are used to
influence the economic relationship of a country with the rest of the
world, subject to international trade (co-operation) agreements. Governments
use customs tariffs as a trade policy instrument. Since 1988,
Governments have been using the Harmonized System to adapt their
national tariffs to suit their economic needs.
The Southern African Customs Union Tariff is
maintained by South Africa and it is the trade policy instrument of
South Africa and the Botswana, Lesotho, Namibia and Swaziland Countries
(BLNS). The Southern African Customs Union (SACU) is the oldest and
most successful customs union in the world. In its current form, the
SACU Agreement is based on the 1910 Agreement that was re-negotiated
and amended in 1969 and 2003. The SACU Agreement forms a schedule to
the International Trade Administration Act of South Africa and is
available the Jacobsens Harmonized Customs
Tariff, which is the loose-leaf version of the SACU Tariff that is used
by importers, exporters and customs brokers in Botswana, Lesotho,
Namibia, South Africa and Swaziland. Jacobsens
is also available as an online solution at www.jacobsens.co.za.
The main reason for the success behind the SACU
Agreement is that SACU has always had a common external tariff (CET).
South Africa, in consultation with the BLNS-Countries, determines the
tariff rates – and sometimes rebates, refunds and drawbacks – to assist
with the implementation of SACU’s customs tariff policy. Amendments to
the SACU Tariff are also published in South African Government Gazettes.
The trade policy of SACU has changed drastically
since 1925.
Certain distinctive phases can be identified:
Around 1925, SACU adopted a trade strategy based on
import substitution. In terms of this strategy the SACU Tariff had high
tariff walls and a complex tariff structure to protect the development
of domestic industries in SACU.
Several studies following the economic decline
between 1983 and 1990 recommended reform to the customs tariff regime
that existed at that time. Amongst the reforms following from the
recommendations were programmes for the
implementation of rebates, refunds and drawbacks. Examples of such programmes included the General Export Incentive
Scheme (GEIS).
The basis for a fundamental shift in SACU’s trade
policy was a study and subsequent report of the Industrial Development Co-operation
(IDC) of South Africa, entitled “The Modification and the Application
of Protection Policy” (1990).
In terms of this report the tariff rates were
reduced and more uniform tariff rates were introduced. The SACU Tariff
was thus simplified substantially.
The most drastic changes to the SACU Tariff was introduced with effect from the 1 January 1995,
when the WTO Agreement (the successor of the General Agreement on
Tariffs and Trade to which South Africa was a founding member 1947)
entered into force.
In terms of this agreement, there were drastic
changes to the Import and Export Control Act, 1963 (which was repealed
by the International Trade Administration Act 71 of 2002) were made,
and the import control on agricultural products were abolished and
replaced by higher rates of duty on agricultural products, which was
still in line with WTO commitments.
The rates of duty that existed at that time were
gradually reduced. In 2000, South Africa also entered into
WTO-compliant trade agreements with the EU (SA-EU Trade Development and
Co-operation Agreement) and the SADC Trade Treaty entered into force.
The rates of duty on goods coming from these areas were also phased
down and a SADC Free Trade Area was reached in 2008.
The first agreement between SACU and EFTA (Iceland,
Lichtenstein, Norway and Switzerland) entered into force in 2006. In
terms of this agreement there is a gradual reduction on goods traded
between SACU and EFTA. SACU reduces the customs duties on goods coming
from EFTA states with effect from 1 January on an annual basis.
The rates of duty on many goods have been reduced to
free, and many on the rebates, refund and drawback provisions have been
abolished because they have become redundant. However SACU are now
increasingly making use of anti-dumping duties, countervailing duties
and safeguard duties.
We will focus on the changes to the SACU Tariff and
SACU’s trade policy in more detail next week.
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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.
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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 International
Trade Administration Commission (ITAC) published a notice regarding
several applications concerning amendments to the Customs Tariff for
South Africa and Botswana, Lesotho, Namibia and Swaziland.
Comments are due by 23 January 2015.
The first application
relates to an increase in the general rate of customs duty on
zinc-coated/galvanized steel, aluminium-zinc
coated steel and paint-coated steel, classifiable under tariff
subheadings 7210.41, 7210.49, 7212.30, 7210.61, 7210.90, 7225.99,
7210.70 and 7212.40 from free of duty to 10% ad valorem. (ITAC
Reference 05/2014. Enquiries: Ms Ramphabana and/or Mr N. Mahlalela. Telephone: (012) 394 3627, (012) 394
3684. E-mail: nramphabana@itac.org.za and/or nmahlalela@itac.org.za.
The second
application relates to the reduction in the general rate of customs
duty on primary cells/batteries, cylindrical (excluding those of a
height not exceeding 7mm), of a diameter exceeding
19mm, classifiable under tariff subheading 8506.50.25, from 10%
ad valorem to free. (ITAC Reference 07/2014. Enquiries and correspondence
to be directed to Ms M Moloto.
Telephone:
(012) 394 3676. Fax: (012) 394 4676. Email: mmoloto@itac.org.za. Download the notice (Government
Notice No. R. 1155 of 2014) http://www.gov.za/sites/www.gov.za/files/38319_gen1155.pdf
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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.
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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 since the amendments that were released on 22
December 2014.
Download the latest Customs Watch to have access
to the latest tariff amendments.
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