Customs News Bulletin

	1 July 2015

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EXPORT DEVELOPMENT AND PROMOTION ISSUES: INFRASTRUCTURE, TRADE FACILITATION AND THE COST OF DOING BUSINESS

World Bank studies estimate the impact of aggregate infrastructure indicators on the export performance of developing countries. In doing so four indicators for more than 100 countries are taken into account over a defined period. Studies reveal that trade facilitation reforms do improve the export performance of countries. The benefits and impact for developing countries are bigger than those for developed counties.  This apply in particular to investment in physical infrastructure and regulatory reform to improve the business environment in developing counties. The findings of various studies provide evidence that the marginal effect of the transport efficiency and business environment improvement on exports appears to be decreasing in per capita income while the impact of physical infrastructure and information and communications technology on exports appears increasingly important the richer a country becomes.

In an international trade environment of trade liberalisation, trade facilitation has been identified as key instrument to reduce trade costs in developing countries.

Trade facilitation has different meanings.  According to the World Trade Organization trade facilitation means: “the simplification and harmonization of international trade procedures,” with trade procedures being “the activities, practices and formalities involved in collecting, presenting, communications and processing data required for the movements of goods in international trade”.

According to the Swedish Board of Trade, the fundamental principles of trade facilitation are transparency, simplification, harmonization, and standardization.

The WTO Agreement on Trade Facilitation are aimed at border (or customs) facilitation with a view to simplify and harmonize the cost of doing business for governments and traders. Trade facilitation does not only include at-the-border issues, but also beyond-the-border issues, dealing with the business environment, the quality of infrastructure, transparency, and national legislation. All of these factors have an impact on export performance through the cost channel. Trade facilitation measures can be undertaken along two dimensions: a “hard” dimension related to tangible infrastructure such as roads, ports, highways, telecommunications, as well as a “soft” dimension related to transparency, customs management, the business environment, and other institutional aspects that are intangible.  For the purposes of this presentation we will focus on the latter.

In the new South African Customs Control Act 31 of 2014 which will replace the current Customs and Excise Act, 1964 in  2016 there is a close relationship between customs control and trade facilitation, and the South African customs legislation had to be aligned to these instruments since these instruments serve as a modern framework for modern, efficient and cost effective customs control and simplified customs procedures and formalities.

South Africa’s current Customs legislation had to be updated and aligned to international Customs best standards to fully reflect the modern standards of the International Convention on the Simplification and Harmonization of Customs procedures (Revised Kyoto Convention) of the World Customs Organization, the WCO SAFE Framework of Standards to Secure and Facilitate Global Trade and other related instruments the Republic of South Africa has assented to. Both the WCO instruments focus on trade facilitation: The Revised Kyoto Convention on customs control and trade facilitation and the SAFE Framework on supply chain security and trade facilitation. Customs control and trade facilitation are regarded as the same side of a coin. Similarly supply chain security and trade facilitation are regarded as the same side of a coin.

The blueprint for customs modernization and reform, the Revised Kyoto Convention entered into force on 3 February 2006, and negotiations for the WTO Trade Facilitation Agreement commenced in 2004.  The WTO Agreement on Trade Facilitation was signed in Bali, Indonesia in December 2013, seven months prior to the publication of the Customs Control Act in Government Gazette 37862 dated 23 July 2014.

The new South African Customs Control Act recognizes that SARS Customs administration plays a critical role within the context of international trade and tourism in ensuring effective controls that secure revenue recovery, facilitation of legitimate trade and protection of society at large and that customs procedures and formalities should be efficient, transparent and predictable for carriers, importers, exporters, traders, travelers and other persons involved in or affected by customs procedures and formalities and not impede legitimate international trade, economic competitiveness and the movement of people and goods across national boundaries.

The Customs Control Act provides a new legislative framework that was written to achieve a balance between effective customs control, the secure movement of goods and people into and from the Republic and the facilitation of trade and tourism.

The Customs Control Act serves as a “platform” for the implementation of various other laws that impose taxes on goods, and laws that prohibit, restrict or control the import or export of certain goods.

However, in order to make trade facilitation efficient and improve South Africa’s competitiveness – both at an international level and for South Africa’s exporters – and manufacturers that import their input materials the Department of Trade and Industry (the dti) will have to follow the example of other governments and make use of funds that are aimed at capacity building in the area of trade facilitation.  The World Banks also plays an instrumental role in this.

This capacity building firstly aimed at educating all government departments that play a role in trade facilitation.   The project will have to be initiated and driven by the dti as the government department responsible for the development of the trade policy of South Africa’s.

It is recommended that all government departments are educated on trade policy, and then the dti should educate and develop exporters.

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 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. There were no applications to amend the SACU tariff. The last application (List 05/2015/Notice 486 of 2015) was published in Government Gazette 38822 on 29 May 2015. Refer to the Jacobsens Customs News Bulletin of 24 June 2015 for more information. You may wish to download the Jacobsens Customs News Bulletin of 17 June 2015 for more information. This is available for download on www.jacobsens.co.za. Comments on this application was due by 26 June 2015.

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 amendment was published in Government Gazette 38891, R. 533 of 19.06.2015.  The reference number for the amendment is 1/1/1519.

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

On 19 June 2015, SARS Customs published an Amendment of the Customs and Excise Rules under section 19A to amend DA260 Excise Accounts for certain Fermented Beverages The rule amendment (DAR/155) was published on 19 June 2015 in Government Gazette 38878 under Notice R.512. Download the latest Customs Watch to have access to the latest tariff and rule amendments.

Contact Information:	Contact the Author:
Mayuri Govender Jacobsens Editor Tel: 031-268 3273 e-mail to: jacobsen@lexisnexis.co.za	Leon Marais Independent Customs Consultant Tel: 053-203 0727 e-mail to: leon.marais@intekom.co.za

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