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Customs News Bulletin

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1 June 2017

 

 

Latest News

CUSTOMS COMPLIANT GLOBAL TRADE SOLUTIONS

Customs require that accredited customs clients (Preferred Traders) have an appropriate record of compliance with Customs requirements and a satisfactory system for managing their commercial records. However, in the modern customs era in which risk management plays an instrumental role, the wise trader will make sure that he/she complies with all the criteria for Preferred Traders just to enjoy “low risk trader status” –  even if he never intends to apply for Preferred Trader Status.   

The reason therefore is that the WCO has recommended in the guidelines to Part 7 of Chapter 3 of the Revised Kyoto Convention that the basic criteria required for customs accreditation are that the applicant must demonstrate a good record of compliance with all Customs requirements and the maintenance of an adequate system for commercial records.

Compliance with Customs requirements includes:

  • all the elements associated with accurate and correct declarations;

  • adequate security provided to meet obligations;

  • timely duty and tax payments;

  • proper methods for tariff classification and country of origin claims; and

  • no history of significant recurring errors or violations.

In addition to the practical requirements, the assessment of any application by a trader for a special procedure will be based on Customs risk management techniques.

Customs therefore insist that accredited clients (Preferred Traders) have a system which they can audit to determine the client’s record of compliance and risk profile. The internal management system relates to a system of commercial records, financial records and logistics.

It is a requirement that records are maintained for a period of five years when dealing with SARS: for Customs purposes, income tax purposes and VAT purposes.

It is further a requirement that clients are able to communicate with SARS electronically.

Through risk management techniques which are employed during the audit of the client’s systems Customs are able to determine the compliance of the client. Customs may at any time do an audit – or stop any accredited client’s goods if they are of the opinion that the client is non-compliant.

Any international trader should also have an electronic system that communicates with Customs, service providers, suppliers and clients. The system should make use of internet technologies to facilitate the movement of goods and funds across international borders but should also be communicating electronically with service providers in the country. Such a system could appear to be very complex since an international trade transaction involves numerous parties and various steps. In simple terms it involves three steps: shipping the goods (transportation), customs clearance of the goods (compliance) and payment for the goods (settlement).

There should thus be electronic solutions for three different sectors within such a system, namely:

  • Global trade compliance and landed cost solutions (related to the process of the customs clearance process);

  • Global transportation management solutions (relating to the process of transporting the goods); and

  • Global trade settlement solutions (related to the process of settling the transaction financially) .

Since international trade is a very complex process these systems are expensive. Compliance plays a key role in such systems.

In a global village where borders are shrinking no wise business should be without global trade management solutions – in particular those focussing on compliance.

Spending on cross-border logistics which are based on the internet exceeded $1 trillion more than a decade ago. A lot has changed since the introduction of global trade management solutions in 1994. In March 2001, I was employed by a US global trade management solution developer to act as a customs consultant for country-specific international trade legislation in the Southern African Customs Union (SACU). Since then there have been many events that had an impact on international trade legislation. For example the 11 September 2001 attacks in the United States which lead to the United States Trade-Customs Partnership Against Terrorism, the adaption of the WCO SAFE Framework, the Authorised Economic Operator Concept (AEO) in the European Union and in many EU trade partner countries which are all aimed at supply chain security.

The World Customs Organization's (WCO) Revised Kyoto Convention (RKC) also entered into force since then – in 2006. South Africa’s Customs Control Act (Act No. 31 of 2014) is based on the Revised Kyoto Convention. 

 It is based on a number of recommendations that the WCO has made to Customs Administrations, some of which are:

  • Customs administrations should shift from exclusive movement controls to more audit-based controls, e.g. from the introduction of simplified procedures to authorization for trader self-assessment. This will enable Customs to manage the growth in world trade, and the increasing demand to reduce resources, as well as the need for greater trade facilitation.

  • Risk management is the key element in achieving this objective and should therefore be integral to the control programme of a modern Customs administration.

  • Customs administrations should implement compliance or performance measurements in their control programme to keep the programme effective and efficient.

  • Customs/Trade co-operation is essential. It creates awareness of changes in trade practices, provides important information for the evaluation and review mechanism within Customs and indicates the potential for greater voluntary compliance.

  • Customs administrations should increasingly make use of mutual administrative assistance. This will help them to cope with the globalization of trade, markets and fraud, and form a basis for the "seamless flow of information" concept in international trade.

  • Customs administrations should make extensive use of information technology and electronic commerce, particularly in their clearance procedures. This is critical for effective and efficient control as well as trade facilitation.

If you look at the Standards of Chapter 6 of the General Annex to the Revised Kyoto Convention you will see why importers and exporters need to have “low risk” trader status. Accredited client status is a bonus. It is the cherry on the cake.

Standard /

Transitional Standard

Recommendation

 

 

6.1

All goods, including means of transport, which enter or leave the Customs territory, regardless of whether they are liable to duties and taxes, shall be subject to Customs control.

 

 

6.2

Customs control shall be limited to that necessary to ensure compliance with the Customs law.

 

 

6.3

In the application of Customs control, the Customs shall use risk management.

 

 

6.4

The Customs shall use risk analysis to determine which persons and which goods, including means of transport, should be examined and the extent of the examination. (A review of the internal systems is part of the risk management process)

 

 

6.5

The Customs shall adopt a compliance measurement strategy to support risk management.

 

 

6.6

Customs control systems shall include audit-based controls.

 

 

6.7

The Customs shall seek to co-operate with other Customs administrations and seek to conclude mutual administrative assistance agreements to enhance Customs control.

 

 

6.8

The Customs shall seek to co-operate with the trade and seek to conclude Memoranda of Understanding to enhance Customs control.

 

 

6.9

The Customs shall use information technology and electronic commerce to the greatest possible extent to enhance Customs control.

 

 

6.10

The Customs shall evaluate traders’ commercial systems where those systems have an impact on Customs operations to ensure compliance with Customs requirements.

In light of the above, importers and exporters cannot afford not to have extra-ordinary internal systems and IT solutions that are compatible with their systems and which are Customs-compliant. 

 

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 Commission of South Africa (ITAC) published an application to increase the rate of duty on the importation of biaxially oriented polymers of propylene, of a width not exceeding 200 mm, classifiable in tariff subheading 3919.10.43 from 10% to 20%.

The ITAC reference number is 29/2016.

For comments or enquiries contact:

Mrs Ayanda Gandi at endou@itac.org.za or fax (012) 394 4724 or Mr Nkulana Phenya at nphenya@itac.org.za or fax (012) 394 4677.

The application was published in Government Gazette No. 40847 of 19 May 2017 under Notice No. 400 of 2017.

Comments are due by 15 June 2017.

Customs Tariff Application List 03/2017 was published in Government Gazette 40793 of 21 April 2017 under Notice No. 308 of 2017.  

 

 

 

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 amendments to the Common External Tariff (CET) of the Southern African Customs Union (SACU) at time of publication. The latest tariff amendments were published on 31 March 2017.

These amendments were forwarded to Jacobsens Subscribers under cover of Supplement 1088.

The amendments have been published in the Customs Watch which is also available on the Jacobsens website at www.jacobsens.co.za.

 

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 Commissioner of the South African Revenue Services published an amendment to Rule 101A.12 under section 101A to the Customs and Excise Act No. 91 of 1964.

Rule 101A.12 has been amended to amend the time reflected when any amended tariff heading or item to any schedule takes effect on the date of publication.

The new Rule states: For the purposes of paragraph 15 of the agreement, where the Commissioner, either by paper document or electronic communication, on the date preceding the date of publication in the Gazette gives notice of an amendment to any tariff heading or item of any Schedule, a registered user may not submit a clearance declaration giving effect to that amendment before 00.00 on the date of publication.

The Rule amendment (DAR/168) was published in Government Gazette 40486 of 19 May 2017 under Notice No. R. 431.

 

 

 

 

 

Contact Information:

 

Contact the Author:

Havandren Nadasan
Jacobsens Editor

Tel: 031-268 3510
e-mail to:
jacobsens@lexisnexis.co.za

 

Leon Marais
Independent Customs Consultant
Tel: 053-203 0727
e-mail to:
leon@itacs.co.za

 

LexisNexis

 

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