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Angola CustomsThe introduction in the coming months of a new customs tariff in Angola is feeding expectations among economic agents that replacing the current regime will be a stimulus to the country’s growth.

A new customs tariff system, submitted to the Council of Ministers and expected to be implemented this year, proposes cuts on import duties on foodstuffs such as fruit and vegetables, cooking oils and grains (including wheat flour), as well as raw materials such as iron, steel and aluminium products as well as second-hand cars, the Angolan press reported.

The aim is to replace the existing customs tariff system – introduced in 2014 before the start of the economic and financial crisis now facing the country – which is generally regarded as protectionist of local farmers and manufacturers, seeking to make imports more expensive in order to encourage diversification of an economy that is highly dependent on oil.

The current tariff has been the subject of much criticism from local and international companies as well as from the World Trade Organization (WTO).

In its most recent report on Angola, the Economist Intelligence Unit (EIU) said replacing the current tariff would likely be a positive move, as it had the effect of increasing the cost of domestic production and reducing competition in the market.

Despite tariff protection, the EIU points out that operational challenges – such as a lack of electricity, poor supply chain management and lack of human resources – have kept the country dependent on imports.

In addition to this, the fall in the price of oil following the introduction of the 2014 tariff has limited access to foreign currency for Angolan companies, making payments to suppliers abroad difficult and, as the kwanza has weakened, imports have become significantly more expensive.

“If and when (the new tariff is) applied, the cost of imports should fall and this should help fight inflation. A less protectionist customs regime should also stimulate Angola’s trade with its neighbours and can help the country finally meet the long-standing promise of joining the Southern African Development Community’s free trade zone,” the EIU said.

“A review of Angola’s current punitive customs regime should give a positive boost to the national economy. However, it is still unclear when the new tariffs will be applied,” it said.

In 2016, Angola formalised its accession to the International Convention for the Simplification and Harmonization of Customs Procedures (Kyoto Convention) of the World Customs Organisation, which aims to facilitate international trade.

Each acceding country has a deadline of 36 months to apply the general rules of this agreement, which provides for the minimisation of customs controls between members, thus facilitating and simplifying international trade. Source: macauhub

I really enjoy TRALAC’s Newsletter – their analysis is always concise and down-to-earth. This Hot Seat Comment is no exception. One often wonders about the impact and nett result of tariff changes and trade remedies. Here we get some insight.

The clothing and textile industry has a long history in South Africa and is still a very important source of employment, especially for women and in poorer communities. The industry is geographically bound to specific provinces, including the Western Cape, KwaZulu-Natal, the Free State and Gauteng. In many rural areas the clothing and textile sector is often the only source of formal employment. Since about 2002 the Rand appreciated substantially and South African exports became less competitive in the global market. Coupled with the trade liberalisation, in terms of South Africa’s WTO offer, the clothing and textile industry has experienced sustained import competition due mostly from Asian imports. In order to try and remedy large-scale factory closures and employment losses in the industry the Southern Africa Clothing and Textile Workers Union (SACTWU) applied for an increase in the import tariffs of 124 clothing tariff lines to the WTO bound rates of 45 percent in 2009. These clothing tariff lines are classified under Chapter 61 and 62 of the South African Tariff Book and include various clothing items, including men’s woven and knitted shirts, jackets and trousers; babies’ garments; and women’s woven and knitted jackets, skirts, dresses and trousers. Although the retailers objected to an increase in import duties the International Trade Administration Commission (ITAC) granted the application and general customs duties on 121 clothing tariff lines were increased from 40 percent to 45 percent, while the general customs duties on three tariff lines (hosiery) was increased from 20 percent to 45 percent.

imagesIn its application SACTWU stated three reasons for the application: there has been a significant increase in imports under these 124 tariff lines flowing into South Africa; market disruptions in the SACU industry which have resulted in factory closures and retrenchments warranted increased protection for the domestic industry; and increased tariffs will provide both relief and show increased confidence in the industry. The retail industry objected to the application on the following grounds: the loss of business in the manufacturing industry can not only be attributed to price competition, but also inefficiency in the local industry; increased duties will have an inflationary effect impacting the ability of consumers to buy clothing at competitive prices; and increased duties will have a punitive effect on the rail sector and the end consumers. In its decision the Commission found the declining rate of investment and employment in the clothing sector coupled with increased imports a disturbing trend. The Commission decided that an increase in customs duties will enable manufacturers to protect existing jobs, increase market penetration and price competition and growth the domestic manufacturing sector in the export market. However, the question of whether the increase in these customs duties have been successful in reaching its goal of decreased imports and increased domestic production, sales and exports still remain.

Import and export data sourced from the World Trade Atlas (2013) and production and sales data sourced from Statistics South Africa (2013) show the following patterns in the clothing industry between 2009 and 2012:

  • Over the time period imports of the 124 clothing tariff lines increased by 15 percent, from approximately US$ 834 million in 2009 to approximately US$ 1.2 billion in 2012.
  • The top five importing countries were China, Mauritius, India, Madagascar and Bangladesh, accounting for 89 percent of the total imports of these clothing articles into South Africa over the time period.
  • China mainly exported men’s, boy’s, women’s and girl’s cotton trousers; knitted sweaters and pullovers; cotton and knitted t-shirts; and knitted babies’ garments to South Africa between 2009 and 2012.
  • South Africa’s exports of these clothing tariff lines increased by 6 percent, from approximately US$ 71 million in 2009 to approximately US$ 84 million in 2012.
  • These clothing articles were mainly exported to African countries, including Zambia, Mozambique and Zimbabwe.
  • The production index of the physical volume of production (base year is 2005) show there has been a significant decrease in the volume of production of knitted and crocheted articles and wearing apparel in South Africa. The index decreased from an average of 108.11 in 2009 to an average of 79.82 in 2012.
  • The sales of knitted and crocheted articles and wearing apparel also declined over the time period. Actual value of sales declined by 3 percent, from approximately US$ 18 billion in 2009 to approximately US$ 16 billion in 2012.

Although there has not been a significant lapse of time since the increase of import tariffs the data gives the short term response of imports, exports, and production to the change in import duties in November 2009. Immediately after the increase in tariffs there was an initial decrease in exports, production and sales.  However, exports recovered by the end of 2012, while production and sales are still significant lower than pre-2009 levels. SACTWU has also recently indicated that employment in the clothing, textiles and leather sector seems to be more stable over the last two years. However, one of the main objectives of the increase in import duties, to deter lower priced imports mainly from Asia, has not been accomplished. Source and content credit – Willemien Viljoen, TRALAC Researcher.

The recent death of a close friend and colleague – Lester Millar – brings to mind, once again, the dire situation of a dwindling ‘knowledge base’ in the area of Customs’ core competency. In an era where most customs or border management authorities are happy to employ people with a variety of tertiary qualifications – with the idea that this alone will be sufficient to ‘arm and support’ them in the field of customs/border control and management – what happened to the skills of yesteryear which allowed both government and trade practitioners to exercise their technical abilities to agree or disagree amicably on a customs tariff or valuation interpretation that could result in thousands of rands (ZAR) going to state coffers or the retailer’s bank account?

Many would argue that with the extent of automation and modern techniques, customs core skills are no longer valid or even necessary. Indeed the extent and design of systems goes so far as removing the relevance of human intuition and decision-making. Today we have automated risk management, automated duty calculation and declaration processing, automated cargo and goods accounting, any even a call centre – so is there really a role for a Customs specialist in the 21st century? Customs Managers today have their reports and other so-called ‘empirical data’ to rely on for decision-making and strategizing. The year-end revenue rush, it-self, relies on such computer generated reports negating the need for an internal ‘think-tank’ to devise means of collecting the hidden revenue before the deadline.

For those in the trade, a similar situation exists, with some difference however. The traditional customs clearance and cargo reporting process is highly mechanised these days and if your systems are up to the task, you can rest assured staff can remain glued to their seats and screens without having to venture to the Customs House. Here too, lies a significant change. The traditional Custom House no longer exists and is basically home to the ‘Customs Frontline’ which deals with ‘physical’ intervention and other trade services. Tariff, Valuation and Origin are now confined to back-office functions accessible via a call centre or tiered response mechanisms embedded in Customs’ new automated workflow; that is, if physical or telephonic access to regional customs specialists have been removed.

Few can dispute the advantages of technology supported processes. Yet, when things go array, even the knowledgeable people have difficulty in resolving an issue. Some suggest that human discretion is dangerous and counter-productive, which perhaps is true if left to an uncouth, power-crazy customs or border control official. Yet, ‘discretion’ is a tenet most necessary for interpretative and cognitive skills which once most Customs Officials used to have.

So what is this core competency to which I refer? First of all Customs competency requires an officer to reason, interpret and apply the customs law in the “fairest” possible way based on the facts at his/her disposal. So it means the officer must have an ability to discern; importantly between right and wrong. Discernment must also take into account an acute understanding of previous/historical evidence relating to a case. For a customs official, it will be important to comprehend the rights and legal obligations of the parties concerned, as well as the documentation relating to the case/transaction. Moreover, where a case/transaction deals with a matter of ‘tariff’, or ‘valuation’ or ‘origin’ the officer must at least have the basic knowledge and skills of the internationally defined rules of interpretation in these disciplines. I say ‘at least’, because in any of the mentioned areas, it may require an expert opinion to further conclude the outcome of a matter.

While automation will take care of validation and computation to the n’th degree, storing and retrieving vast amounts of data in milliseconds, the fact remains that a competent ‘human being’ is still required to preside over a complex decision. Good systems are built on ‘rules’, not exceptions. It is the latter therefore that requires ‘customs core competency’ to resolve.

Our dear friend and colleague Lester was gifted with a phenomenal ability to distill and comprehend information. This knowledge made him one of our finest, and sadly virtually last remaining tariff experts. Add to this, a wonderful and helpful nature and willingness to serve the public – a not too common trait nowadays. Adios Lester…..since we did not fully profit from your time with us, may we at least profit from our loss!