Category / Customs Law

by Mike Poverello

World Customs Tariffs – post World War 1

I came across a document prepared by the Canadian Reconstruction Association titled – Tariff Policies Throughout the World – published in 1921. It comprises a survey of tariff legislation since the armistice (end of WW1), which shows that every important country in the world was protecting its own industries and striving to reduce its dependence upon outside sources of supply, and that “Protection” is established and accepted as the fiscal policy of the nations of the world more generally and firmly than ever before.

The story told by these tariff developments is absolutely one-sided, a world-wide resort to tariff protection, recognition of the value of industrial development and of the home market, and a general strengthening of protective systems.

Two significant statements by the governments of the day bear testimony to this fact. The Spanish Government summarized cogently the world tariff situation at the time: “Many countries have taken and are taking measures to prevent the invasion of their markets by foreign goods; tariff barriers are being raised and other restrictive measures adopted on all sides; the situation is developing towards a worldwide tariff war. The new customs tariff is an instrument prepared for use in a tariff war, if necessary.” Not less worthy of heeding is a statement issued by the Australian government: “customs duties which are not high enough to be effective are worse than useless.”

What a strange contrast to today’s circumstances where the WTO seeks at all costs to ensure the dismantling of all barriers – tariff and otherwise. Now read what things were like in our own backyard.

SOUTH AFRICA

Conditions during the war were, in effect, such as would have obtained under an almost prohibitive tariff and as a result the industries of South Africa experienced a tremendous development. The Minister of Finance in his budget speech in 1920, stated that no less than 2,000 new factories had been established in that Dominion since the fiscal year 1915-16, that in the past four years industrial production had increased 50% and that the country was advancing rapidly in the direction of becoming self-supporting in respect of all the necessaries of life. Protectionist sentiment in the Union is strong.

The budget introduced into the Union Parliament on April 15, 1921, provided for an increase of various customs duties, and the Government has announced its decision to appoint an Advisory Customs Tariff Board which will be called upon, among its other functions, to report on “what steps may be necessary to assist and develop the industries of the Union.”

Two recent developments indicate the attitude of South Africa in regard to protection and encouragement of domestic industries. In the Spring of 1921, in order to protect the shoe manufacturing industry of South Africa, principally against competition from the United Kingdom, the Government prohibited the importation of leather footwear, except under license, with the provision that licenses should be issued only for the importation of such shoes as the South African manufacturers were unable to produce. By a proclamation of May 11, 1921, the Government brought certain goods within the scope of the “dumping” clause of the Union customs tariff and the “dumping” duty has now been made applicable to wheat, flour, and wheat meal imported from Australia, the amount of such duty to equal the difference between the price at which these products are sold for home consumption in Australia and the price for which they were sold for export to South Africa, except that, as under the Canadian Customs Act, the special or dumping duty must not exceed 15 %.

The policy of the present South African Government (circa 1921) is frankly to enable South African industries to continue in operation, to encourage new manufacturing industries and the utilization of the resources of the Dominion, and to prevent the Union from becoming a dumping ground for other countries. While the question of revenue is being kept in mind, the maintenance of South African industries is regarded as still more important in the interests of the country as a whole. Source: Internet Archive

by Mike Poverello

Shakeup!

Unpacking of the Customs draft Bills reveals more and more surprises – despite the fact that there is still no site of the subordinate rules. Without any shadow of doubt, the ‘clearing and forwarding industry’ will be hardest effected by the ‘change’.  Why is this? Well there are a number of factors.

Firstly, this industry has always faced the immediate brunt of the law. Customs historical focus on the goods declaration – to ensure optimum revenue collection – has always relied on a high degree of competence and compliance from this sector.  As mentioned before, ITC has made significant inroads in this industry to the extent that specialisation in qualified entry clerks (for instance) is no longer an attribute in this sector. Consequential developments, and in particular, the creation of an deferment scheme gave ‘clearing agents’ even more flexibility to manage cash flow and minimise administrative burden. Several clerks and runners either lost their jobs or were otherwise absorbed in the company.  The first round of accreditation also gave forwarding brokers some leverage to accrue their client base. This did however prove ineffective from a compliance point of view especially where shady shippers merely used brokers for their apparent accreditation. Many brokers did however institute due diligence mechanisms to vet existing and prospective clients to ensure their own credibility and compliance with SARS.

Secondly, the specialised skills in valuation, tariff and trade remedies became more difficult to hold onto. This expertise will be found now mostly in the big ‘audit firms’. Still, the larger forwarding houses have retained some of these skills as it is vital to their overall service offerings to local conglomerates and multi-national clients.

Thirdly, the emergence of ITC service providers has likewise created a niche industry that for all intents and purposes seeks increased business knowledge and understanding of the customs compliance regime. Growth in this sector can be attributed to an organic increase in the need to service a greater and more mechanised supply chain. This has been particularly beneficial to the Customs Modernisation Programme as these entities have been relied on to champion the ICT change externally for Customs.

Naturally, the ‘clearing and forwarding’ sector will bound to feel some pain, as there would appear to be no less emphasis of Customs’ pressure on them to maintain ‘seemingly impossible’ levels of compliance. Forwarders would also no doubt feel some level of grievance in that there is still no visibility of parity in the supply chain. By this I mean the allocation and expectation of binding agreements (legal obligations) by SARS on other supply chain operators – carriers, transit sheds, terminals, etc.  Truthfully, this is being done albeit slow and tedious.

Change, despite all the anxiety it creates, brings about opportunity. My wish is that all parties recognise this and make the best of the situation, irrespective of the challenges. In this latter regard challenges relate to the mercenary-like approach of some role-players versus, honesty and business acumen of others. In todays’ world, being scrupulous and morally right does not always translate into being successful or prosperous. Modernisation implies that everyone changes! Some casualties are inevitable.

Next up: We’ll discuss the attributes of the bills in terms of liability, compliance and punitive measures.

by Mike Poverello

Draft Taxation Laws Amendment Bill, 2011 – Impact on Customs

As if the myriad of changes affecting the Customs industry are not enough, there’s some more important considerations for customs traders and practitioners, soon, posed by the Draft Taxation Laws Amendment Bill [2011].

Goods Sold in Bond. For the purposes of the VAT Act, the Bill proposes that ‘the value to be placed on the importation of goods into the Republic which have been imported and entered for storage in a licensed Customs and Excise storage warehouse but have not been entered for home consumption shall be deemed to be the greater of the value determined in terms of subsection (2)(a) or the value of acquisition determined under section 10(3) if those goods while stored in that storage warehouse are supplied to any person before being entered for home consumption.’

Duty free goods imported on a temporary basis. Goods imported in terms of Rebate Item 470.03, which are duty free, will in future have to be declared under a specific rebate sub-item for duty free goods. In addition, provision is also to be made for the importer of duty free goods, where the importer is contractually entitled to keep a portion of the goods manufactured, processed, finished, equipped or packed in lieu of payment for the operations carried out, that importer must:
a) export those goods within the 12 month period, or
b) process a goods declaration for payment of the VAT on the goods retained and pass a voucher of correction amending the quantity and value of the original declaration.

New tax incentives for Industrial Development Zones. Government is seeking to renew its efforts to enhance the Industrial Development Zone (IDZ) regime to encourage industrial development within certain geographical areas. The main focus of the incentive is to promote capital expenditure. Greenfield projects receive an additional 55% allowance and brownfield projects receive a further 35% additional allowance. The additional allowance for greenfield projects located in IDZ’s will be increased to 100% (instead of the current 55%) and to 75% for brownfield projects (instead of the current 35%).This change will be welcomed by IDZ Operators that are constantly looking for ways to make IDZ’s more attractive. In terms of the Customs and Excise Act, it should be noted that duty rebate and VAT dispensations ONLY apply to entities establishing licensed premises within the customs controlled area of an IDZ.

For more information on the above please click here!

The Draft Taxation Laws Amendment Bill, 2011 is available on the SARS website.

 

by Mike Poverello

Why are customs and excise taxes treated differently and left outside of the fold of the Tax Administration Bill?

SARS moved forward in creating a new legislative framework for tax when updates to the Tax Administration and Customs Control Bills were published for comment. Werksmans Attorneys Director Alison Wood says contradictions between the Bills may cause delays.

Read the full article titled Second Draft Customs Control Bill – why are customs and excise taxes treated differently and left outside of the fold of the Tax Administration Bill?

Source: Creamer Media

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by Mike Poverello

Customs Bill makes Local Headlines

The Business Day has published an article featuring the Customs Bills. Prominent attention has been given to the question of penalties under the new dispensation. Given months of industry analysis of the Bills, I think it is a welcomed occurrence that the topic has reached the press. For the full article please click  HERE!

by Mike Poverello

New Customs law pending for South African traders and supply chain operators

The South African Revenue Service (SARS) has just released a 2nd draft of the Customs Control Bill for public comment. The new law will replace the current Customs & Excise Act which is now over 50 years old. The draft bill is radical in its approach mainly due to the organisation’s alignment to the Revise Kyoto Convention and other key WCO standards. There will be an additional opportunity to provide comment on both draft Bills after 16 May 2011 as part of the Parliamentary process. The draft text can be found on the SARS website: http://www.sars.gov.za/home.asp?pid=294.