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Customs News Bulletin

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25 October 2017

 

 

Latest News

SA OCEANS ECONOMY PROGRESSES WELL

President Zuma recently reported on the progress of the implementation of Operation Phakisa for the Oceans Economy.

President Zuma said that, to date, Oceans Economy projects have unlocked a combined R24.6 billion in investment from government and the private sector, and have created more than 6 500 jobs.

In a post cabinet media briefing Minister Mmamoloko Kubayi said on Thursday that the largest investment in the Oceans Economy, facilitated through government incentives, was directed to infrastructure development of mainly ports, manufacturing, boatbuilding, aquaculture and scientific surveys in the oil and gas sector.

Operation Phakisa focuses on unlocking the economic potential of South Africa's oceans, which could contribute up to R177 billion to the GDP by 2033 and between 800 000 and one million direct jobs.

Forty-seven detailed initiatives have been identified, which on implementation, will increase the Oceans Economy's GDP contribution by R20 million and lead to the creation of 22 000 direct new jobs by 2019.

Government plans to establish the single largest boatbuilding facility in Southern Africa. The KwaZulu-Natal Boatbuilding Park in the Port of Durban will harvest potential from new investment, exports and job creation.

 

Classification Corner                                                                                                                    

AN INTRODUCTION TO RULES OF CLASSIFICATION UNDER THE HS

In most cases, goods are classified in HS-based Customs Tariffs by application of Rule 1, which states, in part, that the terms of the heading and legal Section and Chapter Notes dictate. In many instances there can be no argument about the classification. 

GRI 2 has 2 parts. Under GRI 2 (a), goods in unassembled form (semi-knocked down or completely knocked down) are classifiable within the same heading as the complete article. GRI 2 (a) also deals with the classification of incomplete or unfinished goods.

GRI 2 (b) directs the classifier to GRI 3, which applies when goods could potentially be classified in more than one heading.

The first binder of the HS Explanatory Notes provides useful guidance (explanatory notes) on the application of the General Rules of Interpretation and should be consulted.

GRI 3 (a) deals with the classification of goods which could fall in more than one heading but which is eventually classified in one heading only because that heading has a more specific description than the other heading. See for example windscreens for vehicles are classified as articles of glass of Chapter 70 and not Section XVII as parts of vehicles. (This is an example of classification by application of GRI 3 (a) which states that when goods are potentially classifiable in one or more headings, the goods are to be classified in the more specific heading.

Rules 3 (b) states that, if goods cannot be classified by application of GRI 3(a), then one needs to determine the essential character of the goods and classify them accordingly. These cases should generally be submitted to SARS for determination as there are many factors that determine the essential character of a good. 

If goods cannot be classified by application of GRI 3 (a) or GRI 3 (b), then the applicable headings must be considered and the goods must be classified in the last heading that could potentially apply.

GRI 4 is seldom used. It deals with akinship. It basically states that, when there is no provision for a product in the HS, goods must be classified in the heading to which they are most akin to.

GRI 5 deals with the classification of packing materials and containers – for short term or long term use – for example camera cases imported with the cameras. Refer to the first part of the Harmonized System Explanatory Notes for a detailed explanation.

GRI 6 deals with the classification of goods in the subheadings, on the same principles of GRI 1 to 5. In this regard the number of dashes in the subheading are comparable and must be used. One must consider all the one-dash subheadings in a heading, then the two-dash subheadings, if applicable, then the three-dash subheadings if applicable. The SACU CET is only subdivided up to four-digit dashes.

 

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.

There were no applications to amend the Common External Tariff (CET) of the Southern African Customs Union (SACU) at the time of publication.

 

 

 

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 6 October 2017.

The tariff amendments were sent to subscribers under Jacobsens Supplement 1095.

 

 

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 the time of publication.

The latest Rule amendment (DAR/169) was published in the Government Gazette 41165 of 6 October 2017. The notice number is R. 1081.

 

 

 

 

 

Contact Information:

 

 

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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