A letter from SARS
The Clothing & Textile Industry in South Africa has over the past years suffered significant setbacks as a result of under valued importations, especially from the Far East, and abuse of rebate and other trade schemes. This has lead to the closing down of numerous manufacturers and traders within this industry, and sequential to this a huge number of job losses.
As much as the impact from an industry and labour perspective is serious and has reached alarming proportions, so is the effect on the economy and it is believed that significant revenue losses has harmed the fiscus due to non compliance. In an attempt to curb such non compliance, SARS Customs has embarked on a clothing and textile campaign which will result in periodical targeted interventions.
A critical decision that will impact on your compliance is that all targeted consignments will be examined at the first port of entry regardless of the place where clearance has been processed. In light of this, you are hereby advised that clearances processed at Gauteng for goods landed in Durban will be examined at Durban in the event of the consignment being stopped.
You are duly advised to ensure that these stopped consignments are placed in a Durban depot for examination by the Durban Team. The Durban office will facilitate the movement of all documents with the Gauteng offices. In the event that stopped consignments are removed without the examination being conducted in Durban, you are hereby advised that such consignment will be required to be returned to Durban for the exam. This will also apply for rail consignments.
15 December 2008
Enquiries
Ashika Pillay (Customs) /
Patrick Tshikosi
Telephone
(031) 328 7000/
(011) 225 9000
Comments on SARS actions by Mark Bennett
While there is a need to stop smuggling of textile and apparel goods, stopping containers for inspection it may disrupt factory production – especially if it is demanded that a container wait in Durban (or the port where it first entered the Customs Union) for inspection for a considerable period of time! Extensive delays in inspecting containers which contain fabrics (and trims) could result in many workers being placed on short time as their factories wait for and this would result in them losing substantial amounts of pay. In worst case scenarios delays in getting fabrics will result in delays in getting orders made-up which may result in delays in finished goods being received by the US/EU based retailer or brand – this may lead to orders being cancelled or the retailer dropping Southern Africa as a destination from which to source goods (causing job loss).
I do not know what the implications will be for containers of fabrics and trims destined for Lesotho, or Swaziland or Botswana which may get stopped for inspection. But I should imagine that they may get stopped too. I have a fear that SARS may could adopt a rather pedantic approach to inspections and may look for minor discrepancies between what the documentation accompanying the container states and what is in the container. I have heard that SARS may be fining some companies who are transiting goods through the SA for export to destinations outside of SACU on the basis that documentation states that there will be 1 500 boxes in a consignment (in a container) and they find that that there are 1 502 boxes.
If goods consigned to the BLNS are affected it will be necessary for your local Revenue Authority to ask SARS as to how long these inspections may take – and to get an undertaking from SARS that inspection times will be kept to a minimum. SARS should be asked to allocate significant additional human resources so that containers can be expeditiously unpacked and then repacked and then sent on their way.
Mark Bennett
Southern African Trade & Industry Specialist
Information from SARS
Duties that are levied on imported goods
Three kinds of duties are levied on imported goods:
customs duties (including additional ad valorem duties on certain luxury or non-essential items);
anti-dumping and countervailing duties; and VAT (which is also collected on goods imported and cleared for home consumption).
Customs duty
Customs duty is levied on imported goods and is usually calculated as a percentage on the value of the goods (set in the schedules to the Customs and Excise Act). However meat, fish, tea, certain textile products and certain firearms attract rates of duty calculated either as a percentage of the value or as cents per unit (for example, per kilogram or metre). Additional ad valorem customs duties are levied on a wide range of luxury or non-essential items such as perfumes, firearms and arcade games.
For more see the Reference guide to ad valorem excise duty.
Anti-dumping and countervailing duty
Anti-dumping and countervailing duties are levied:
on goods considered to be "dumped" in South Africa; and
on subsidised imported goods.
These goods are the subject of investigations into pricing and export incentives in the country of origin; the rate imposed will depend on the result of the investigations. These duties are either levied on an ad valorem basis (as a percentage of the value of the goods) or as a specific duty (as cents per unit).
The amount and type of duty imposed on a product is determined by the following main criteria:
the value of the goods (the customs value);
the volume or quantity of the goods; and
the tariff classification of the goods (the tariff heading).
Value-Added Tax
Section 7(1)(b) of the Value-Added Tax Act 89 of 1991 levies VAT at a rate of 14% on the importation of goods into South Africa from export countries - including Botswana, Lesotho, Namibia and Swaziland. However, certain goods imported into South Africa are – under Section 13(3) read with Schedule 1 - exempt from VAT on importation.
Section 13(2)(a) of the VAT Act sets the value to be placed on the importation of goods into South Africa. The value is deemed to be: the value of goods for customs duty purposes; plus any duty the Customs and Excise Act levies on the importation; plus 10% of that value.
However, Section 13(2)(b) provides that the value is not increased by the factor of 10% if the goods have their origin in Botswana, Lesotho, Namibia or Swaziland.
Determining customs values
Customs values are set by the General Agreement on Tariffs and Trade (GATT) valuation code, which involves six valuation methods.
The majority of goods are valued using method one, which is the actual price paid or payable by the buyer of the goods. The "free on board" price forms the basis for the value, but allows for certain deductions (such as interest charged on extended payment terms) and additions (such as certain royalties).
Customs officials pay particular attention to:
the relationship between the buyer and seller;
payments outside of the normal transactions (such as royalties and licence fees); and
restrictions that have been placed on the buyer.
These factors can result in the price being increased for the purpose of determining customs value, directly affecting the duty payable.
For more information see the Customs valuation guide.
Customs declarations
A declaration made to Customs on a bill of entry at the time of importation and exportation must be accurate and correct. Acceptance of the bill of entry by Customs does not mean that the information provided has been accepted as being correct.
These bills of entry and related documents must normally be retained for five years. If errors are detected by Customs - whether duties were payable or not - the Act provides for penalties of up to three times the value of the goods, in addition to the forfeiture of the goods.
Importers importing commercial goods into South Africa, and exporters exporting commercial consignments from South Africa, must register with SARS. Non-commercial consignments are, however, excluded from registration, provided that this is limited to three importations per year.
Rebates
Certain rebates, such as industrial rebates, are available on goods that meet specific criteria and have been imported for a specific industry. General rebates may apply if goods have been imported:
temporarily;
for repair;
as passengers’ baggage; or
for local manufacturing destined for the export market only.
The Clothing & Textile Industry in South Africa has over the past years suffered significant setbacks as a result of under valued importations, especially from the Far East, and abuse of rebate and other trade schemes. This has lead to the closing down of numerous manufacturers and traders within this industry, and sequential to this a huge number of job losses.
As much as the impact from an industry and labour perspective is serious and has reached alarming proportions, so is the effect on the economy and it is believed that significant revenue losses has harmed the fiscus due to non compliance. In an attempt to curb such non compliance, SARS Customs has embarked on a clothing and textile campaign which will result in periodical targeted interventions.
A critical decision that will impact on your compliance is that all targeted consignments will be examined at the first port of entry regardless of the place where clearance has been processed. In light of this, you are hereby advised that clearances processed at Gauteng for goods landed in Durban will be examined at Durban in the event of the consignment being stopped.
You are duly advised to ensure that these stopped consignments are placed in a Durban depot for examination by the Durban Team. The Durban office will facilitate the movement of all documents with the Gauteng offices. In the event that stopped consignments are removed without the examination being conducted in Durban, you are hereby advised that such consignment will be required to be returned to Durban for the exam. This will also apply for rail consignments.
15 December 2008
Enquiries
Ashika Pillay (Customs) /
Patrick Tshikosi
Telephone
(031) 328 7000/
(011) 225 9000
Comments on SARS actions by Mark Bennett
While there is a need to stop smuggling of textile and apparel goods, stopping containers for inspection it may disrupt factory production – especially if it is demanded that a container wait in Durban (or the port where it first entered the Customs Union) for inspection for a considerable period of time! Extensive delays in inspecting containers which contain fabrics (and trims) could result in many workers being placed on short time as their factories wait for and this would result in them losing substantial amounts of pay. In worst case scenarios delays in getting fabrics will result in delays in getting orders made-up which may result in delays in finished goods being received by the US/EU based retailer or brand – this may lead to orders being cancelled or the retailer dropping Southern Africa as a destination from which to source goods (causing job loss).
I do not know what the implications will be for containers of fabrics and trims destined for Lesotho, or Swaziland or Botswana which may get stopped for inspection. But I should imagine that they may get stopped too. I have a fear that SARS may could adopt a rather pedantic approach to inspections and may look for minor discrepancies between what the documentation accompanying the container states and what is in the container. I have heard that SARS may be fining some companies who are transiting goods through the SA for export to destinations outside of SACU on the basis that documentation states that there will be 1 500 boxes in a consignment (in a container) and they find that that there are 1 502 boxes.
If goods consigned to the BLNS are affected it will be necessary for your local Revenue Authority to ask SARS as to how long these inspections may take – and to get an undertaking from SARS that inspection times will be kept to a minimum. SARS should be asked to allocate significant additional human resources so that containers can be expeditiously unpacked and then repacked and then sent on their way.
Mark Bennett
Southern African Trade & Industry Specialist
Information from SARS
Duties that are levied on imported goods
Three kinds of duties are levied on imported goods:
customs duties (including additional ad valorem duties on certain luxury or non-essential items);
anti-dumping and countervailing duties; and VAT (which is also collected on goods imported and cleared for home consumption).
Customs duty
Customs duty is levied on imported goods and is usually calculated as a percentage on the value of the goods (set in the schedules to the Customs and Excise Act). However meat, fish, tea, certain textile products and certain firearms attract rates of duty calculated either as a percentage of the value or as cents per unit (for example, per kilogram or metre). Additional ad valorem customs duties are levied on a wide range of luxury or non-essential items such as perfumes, firearms and arcade games.
For more see the Reference guide to ad valorem excise duty.
Anti-dumping and countervailing duty
Anti-dumping and countervailing duties are levied:
on goods considered to be "dumped" in South Africa; and
on subsidised imported goods.
These goods are the subject of investigations into pricing and export incentives in the country of origin; the rate imposed will depend on the result of the investigations. These duties are either levied on an ad valorem basis (as a percentage of the value of the goods) or as a specific duty (as cents per unit).
The amount and type of duty imposed on a product is determined by the following main criteria:
the value of the goods (the customs value);
the volume or quantity of the goods; and
the tariff classification of the goods (the tariff heading).
Value-Added Tax
Section 7(1)(b) of the Value-Added Tax Act 89 of 1991 levies VAT at a rate of 14% on the importation of goods into South Africa from export countries - including Botswana, Lesotho, Namibia and Swaziland. However, certain goods imported into South Africa are – under Section 13(3) read with Schedule 1 - exempt from VAT on importation.
Section 13(2)(a) of the VAT Act sets the value to be placed on the importation of goods into South Africa. The value is deemed to be: the value of goods for customs duty purposes; plus any duty the Customs and Excise Act levies on the importation; plus 10% of that value.
However, Section 13(2)(b) provides that the value is not increased by the factor of 10% if the goods have their origin in Botswana, Lesotho, Namibia or Swaziland.
Determining customs values
Customs values are set by the General Agreement on Tariffs and Trade (GATT) valuation code, which involves six valuation methods.
The majority of goods are valued using method one, which is the actual price paid or payable by the buyer of the goods. The "free on board" price forms the basis for the value, but allows for certain deductions (such as interest charged on extended payment terms) and additions (such as certain royalties).
Customs officials pay particular attention to:
the relationship between the buyer and seller;
payments outside of the normal transactions (such as royalties and licence fees); and
restrictions that have been placed on the buyer.
These factors can result in the price being increased for the purpose of determining customs value, directly affecting the duty payable.
For more information see the Customs valuation guide.
Customs declarations
A declaration made to Customs on a bill of entry at the time of importation and exportation must be accurate and correct. Acceptance of the bill of entry by Customs does not mean that the information provided has been accepted as being correct.
These bills of entry and related documents must normally be retained for five years. If errors are detected by Customs - whether duties were payable or not - the Act provides for penalties of up to three times the value of the goods, in addition to the forfeiture of the goods.
Importers importing commercial goods into South Africa, and exporters exporting commercial consignments from South Africa, must register with SARS. Non-commercial consignments are, however, excluded from registration, provided that this is limited to three importations per year.
Rebates
Certain rebates, such as industrial rebates, are available on goods that meet specific criteria and have been imported for a specific industry. General rebates may apply if goods have been imported:
temporarily;
for repair;
as passengers’ baggage; or
for local manufacturing destined for the export market only.
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