Tax & Accounting Blog

South Africa Customs Legislation Is Changing For The Future

Blog, Global Trade July 8, 2016

New legislation will affect customs systems, processes and policies

In order to cope with demands of growing global trade and challenges of organized crime, South Africa is moving  forward with international trends  in modernizing customs systems to minimize their disruptive effect on legitimate trade (as much as possible).  International conventions such as the Revised Kyoto convention, the World Customs Organization’s Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework) best practice, globalization, and technology have assisted to support metamorphosis to the South African customs legislative framework. This approach has resulted in changes to systems, processes and policies affecting importers, exporters and service providers.  The New business model that SARS is adopting is Just in time distribution model, e-commerce. In addition South Africa is now rated 20th in World Bank’s Logistics index indicating the easy of customs and simplicity of customs process. [1]

Customs and Excise

 The current Customs and Excise Act 91 of 1964 is over 50 years old, and is getting a long overdue overhaul.  The new Customs and Excise Acts aim to establish a world-class customs control system that meets international standards and best practices, while optimizing trade facilitation. The focus on technology and modernization in the way customs and global trade operate in a borderless world are aligned with the Constitution. This change also takes into consideration the revised Kyoto convention and the World Customs Organization’s Framework of Standards to Secure and Facilitate Global Trade (SAFE Framework). Its aim is to harmonize, secure and facilitate the international trade framework.

The Customs Acts provide end-to-end supply chain visibility for Southern African Revenue Services (SARS), as a result of advance cargo reporting, improved seal provisions and mandatory electronic communications and notifications.

South Africa’s current legislation is unique as it provides customs and excise legislation in one instrument being the current Customs and Excise Act 91 of 1964   However the current customs legislation is to be replaced by following three acts:

  • Customs Control Act, 31 of 2014,(CCA) that establishes a customs control system for all goods imported into or exported from the Republic and that prescribes the operational aspects of the system
  • Customs Duty Act 30 of 2014,(CDA) that provides for the imposition, assessment and collection of customs duties
  • Excise Duty Act, 1964 (i.e. the Customs and Excise Act, 1964, as amended by the Customs and Excise Amendment Act, 32 of 2014) that provides for the imposition, assessment and collection of excise duties and related levies. This Act will be rewritten in the second phase of the project

When enacted the proposed Customs Acts will offer the following benefits:

  • Simplified customs administration and speedier processes to minimize disruptive effects
  • Terminology that is clear, and in plain language which follows global terminology. This will assist multinational companies in speaking one global trade language across their business
  • The proposed customs acts are designed in a logical and systematic way, with topic-specific chapters which can be easily followed
  • Flexible warehousing and manufacturing options, which will enhance South Africa’s role as a distribution hub and stimulate industrialization respectively
  • The acts also support the objective of the National Development Plan to promote exports and business competiveness, stimulate domestic manufacturing and support small, micro and medium sized enterprises (SMMEs)

Customs stakeholders should take note of the following:

Re-registrations:

The proposed acts require all importers, exporters and any special manufacturing warehouse (OEMs) to re-register on or before 30 days of the CCA’s effective date.

Failure to re-register within the 30 days will result in the lapse of existing customs registrations. Existing excise registrations or licenses are not affected by the enactment of the CCA. SARS has given the assurance that it will have sufficient capacity to handle the process; however some has raised concerns about the practicability of this.

Permissible warehousing:

The proposed CCA differentiates between “public storage warehouses” and “private storage warehouses”.

Some of the biggest changes include:

  • Application for new licenses
  • New receipt and delivery notification requirements by public and private warehouse licensees and licensed carriers
  • Storage of free circulation goods with goods which are not in free circulation
  • Electronic inventory management system
  • Periodic goods accounting reporting
  • Documentary retention and periods
  • Permissible operations in a warehouse
  • Reliance on self-assessment and self-compliance

General clearance and release processes:

The acts will change the timing of certain clearance procedures, and subject them to strict time constraints. There are separate import and export activities for various customs procedures with designated legislation surrounding each activity such as home use processing, inward processing, outward processing, temporary admission procedures, and warehousing procedures.

The changes will affect the following:

  • The submission period for import clearance declarations will be reduced from seven days to three days after arrival due to improvements in the electronic environment
  • If clearance is delayed goods may only be cleared for home use and a penalty impose and these goods will be removed to state warehouse[2]
  • A clearance declaration is now required for transit instead of a manifest/transport document, as effective control can only be exercised when SARS has all the necessary information
  • The date of currency conversion will no longer be shipped on board date . The currency date will be published every Wednesday and will be valid for the week
  • Suppliers of goods will also be able to issue certificate of origin on commercial invoice or other commercial document indicating the country of origin
  • The time period for retaining documentation will be calculated from the end of the calendar year for a period of 5 years as opposed to 5 years from date of entry. This in effect extends retention of documentation in addition to additional documents[3]

Movements within SACU are now “imports and exports”:

The new legislation will change the treatment of the movement of goods within the Southern African Customs Union (SACU), the oldest customs union in the world. Movements within SACU will now be regarded as imports and exports. This is contrary to the current customs legislation.

Other important considerations:

There will also be new compliance measures and changes for traders. It will, in particular, impact the penalties regime, voluntary disclosure process (VDP), reporting requirements, and is likely to increase the levels of responsibility and accountability that customs stakeholders need to show.

This metamorphosis of the customs legislation can have positive outcomes in the entire supply chain. However it is essential to have effective participation between stakeholders, and above all patience with “teething” problems.

The roles and responsibilities of business become more prevalent with the changes, and therefore the acts require for notion of self- assessment. In terms of this notion, persons liable for duties are required, as part of the clearance process, to make their own tariff classification, value determination and origin determination of the goods, to assess the amount of any tax applicable to the goods and to pay tax according to their own assessment. The role of Customs is focused on verification of the self-assessment rather than on assessing the amount of tax itself.

In conclusion, the new laws will give maximum effect to the notion of self-assessment and self – trade compliance.  A heavy burden is placed on business to modernize and revolutionize the trade intelligence to focus on trade compliance. In this ever-changing landscape businesses need to have answers to these questions:

  • Is my technology able to efficiently move goods while staying trade compliant?
  • How transparent and trade compliant is my business?
  • Could I revolutionize the way we operate, control and manage moving goods in the face of changing regulations?

To learn more about ONESOURCE Global Trade and global trade trends, visit our website

References

Customs Control Act 31 of 2014 and rules thereto

Customs Duty Act 30 of 2014 and rules thereto

Customs Excise Act 32 of 2014

Customs and Excise Act 91 of 1964

http://www.sars.gov.za/

[1] http://lpi.worldbank.org/international/global/2016?sort=asc&order=LPI%20Rank#datatable

[2] Section 89, 90  and 92 of the CCA

[3] Section 179 of CCA