Customs and International Trade
Customs Duty Planning For Businesses Locating To South Africa
Customs duty planning can provide significant savings for businesses locating to South Africa, whether through immediate reduction in amounts of duty payable, improved cash flow, or by streamlining procedures and reducing overhead costs.
It is essential that businesses locating to South Africa consider specialists' advice at an early stage to ensure that suitable planning opportunities are identified and maximum savings are achieved.
Shipping and Clearing Process
The foreign shipping and clearance agent should link up with a local clearing company to ensure that documentation and processes are adhered to; otherwise the local harbour authorities will impose strict penalties on any delays resulting there from.
Documentation with regards to equipment and personal effects should be clear and correct; with the latter being received in SA by a foreign staff member with a valid work permit.
Stage Consignment Procedures
This can benefit businesses importing capital equipment in separate consignments. Instead of classifying all the goods separately and completing full customs entries for each consignment, they may be classified as component parts of one functional unit. Machinery, which is in the main deemed duty free, must be complete and in a single unit, otherwise duties will be applied to the separate parts. This means that one low customs duty rate may apply, instead of many different duty rates. Import documentation would also be reduced.
Imports and Exports
Foreign currency is made freely available for import of goods. A few goods require import permits, but the vast majority of products may be imported without a permit. Payment is usually only permitted against proof of import, i.e. by presenting Customs-stamped documentation (though it is possible to pay in advance of shipments).
Export licenses are required only for strategic goods, some foodstuffs and a few other categories. For all exports, the necessary forms and documentary evidence must be filed with Customs and with the exporter’s bank. The proceeds from exports must be remitted to South Africa within six months of the date of the export.
The South African Customs and Excise Act, provides for a range of addition to and deductions from a price used to determine the value for duty purposes of imported goods. Careful planning will ensure that the lowest legal value can be used, thus reducing the overall duty bill.
South Africa has specific transfer pricing legislation and guidelines requiring a South African taxpayer to follow arms length principles in transactions with connected persons outside South Africa. The legislation became effective on 19 July 1995. Non-compliance may result in additional tax penalties of up to 200% on the tax. Great emphasis should be placed on the preparation of documentation to limit the exposure to adjustments.
Tariff Classification of imported goods is the legal responsibility of the importing business, even if entrusted to a freight agent. Classification determines the rate of duty payable, the liability to such things as additional charges and licensing requirements, and the entitlement to preferential duty rates or rebates of duty. Customs planning enables businesses to identify lower duty liabilities and avoid import restrictions.
Inward Processing Relief
A full rebate of the customs duty and VAT is provided for goods for processing and re- exportation. Processing includes simple repacking of goods to the most sophisticated manufacturing process. Certain accounting requirements have to be followed but careful planning can reduce these requirements to a minimum.
Customs Bonded Warehousing
These warehouses allow the deferment of the payment of customs duties and import VAT. Payment is only due at the time the goods are removed from the warehouse. Certain manufacturing operations may also be undertaken in these warehouses subject to special prior approval being received from the Customs authorities.
Anti Dumping and Countervailing Measures
Anti-dumping and countervailing duties are calculated in addition to the normal customs duty that is payable.
A product is considered dumped when it is exported to the Southern African Customs Union (SACU) at a price less than its normal value. The normal value being the domestic selling price of a product or, in the country of export or exports to another country or a constructed normal value in the absence of domestic sales.
Foreign Government imposes countervailing duties in the case of subsidies in an effort to make their exports more competitive.
Both dumped and subsidised exports should cause injury to the relevant South African industry before final measures can be taken. These duties can be country and/or company specific and are imposed for five years. Before the expiry of the 5 year period, they are reviewed to establish the need for a further imposition of another five years. The Board on Tariffs and Trade Act authorises the Board on Tariffs and Trade to conduct anti-dumping and countervailing investigations.
Proper planning can ensure that the product is not subject to an anti-dumping and countervailing investigation. When being party to an anti-dumping and countervailing investigation it is essential that exporters, importers and manufacturers (South African and Foreign) co-operate with the investigating authority in order to get the best dispensation.
Interpretation of Trade Agreements and Rules of Origin
Business people should monitor the constantly changing trading environment and to develop informed marketing strategies. Compliance with the Rules of Origin provisions of the various trade agreements is required and the risks in this area should be mitigated.