19-10-2011 | Tariff structure set to change

in association with:

By now South African traders would have encountered several changes being introduced to customs administration in South Africa by the Customs Control Bill and the Customs Duty Bill. By 2012 these traders will be faced by some further changes to the current status quo.

On 1 January 2012 the 2012 version of the Harmonised System (“HS”) Nomenclature will be implemented in terms of section 48(1)(c) of the Customs and Excise Act. The 2012 version is merely part of the 4-6 yearly amendment to the HS Nomenclature. The implementation of the 2012 HS Nomenclature will change the current structure of the South African Customs Union (“SACU”) tariff book. As such product codes and descriptions will change. The main changes include:
• the classification and coding of goods of specific importance to food security and the early warning system of the United Nations’ Food and Agriculture Organisation (“FAO”). This is to assist with the monitory on these products for global food security. Many new additional subheadings has been created for this purpose;
• the creation of new subheadings for the separate identification of certain edible vegetable, roots and tubers, fruit and nuts, as well as cereals;
• the creation of new subheadings for specific chemicals under the Rotterdam Convention and ozone-depleting substances controlled under the Montreal Protocol; and
• the deletion of many subheadings due to the low volume of trade in these goods, separate identification of certain commodities in either existing or new headings, some advancements in technology and changes aimed at the clarification of text to ensure uniform application of the HS Nomenclature.

The majority of the changes apply to the agricultural, chemical, paper, textile, base metal, machinery and hi-tech sectors whilst there are 37 amendments that will apply to a variety of other sectors. The World Customs Organisation has published a correlation table correlating the 2012 changes to the current 2007 version of the HS Nomenclature. SARS has also published the draft amendments to the Schedules to the Customs and Excise Act. These amendments cater for the 2012 changes to the HS Nomenclature, but it also includes the following:
• the phase-down of the duties in terms of the Trade Development and Cooperation Agreement between South Africa and the European Union;
• the phase-down of duties in terms of the free trade agreement between South African and the European Free Trade Association (consisting of Liechtenstein, Iceland, Norway and Switzerland);
• the phase-down of duties in terms of the MIDP;
• the reduction in the rate of duty on paper and paper board;
• the reduction in the rate of duty on aluminium products classifiable under tariff headings 76.06 and 76.07;
• the reduction in the general rate of duty on organic surface-active agents and primary polymers;
• and technical adjustments including requests for the creation of additional tariff subheadings for statistical purposes from industry and other government agencies.

In the majority of instances the duty rates will remain unchanged, but the classification of the goods will change, which is of course important for customs declaration purposes, which is the trader’s obligation and not that of SARS. It is thus important for traders to ensure that they are familiar with the impact the 2012 HS nomenclature will have on their business to ensure that they are compliant by 1 January 2012. As such traders must make sure that they known how their goods are classified as the 2012 HS nomenclature changes this for some products. Any such change could also potentially mean that there may be a change in duty applicable to that product, which unexpectedly increases costs and potentially reduces profits. Potentially traders could also lose out on rebates that they are eligible for under the current system. It may also be that goods that are subject to protection in the form of anti-dumping duties or countervailing measures may no longer benefit from such protection and the current beneficiaries may have to apply to the International Trade Administration Commission of South Africa (“ITAC”) to rectify such unforeseen circumstances. It may also be that such an anti-dumping duty or countervailing measure may now apply to a product to which it was not intended to apply. Traders must make sure that they clear their goods under the correct tariff heading in order to avoid potential seizure of the goods and costly penalties. Businesses monitoring the volume of trade in certain goods must make sure that they now monitor the correct tariff. Applications for any trade remedies (anti-dumping duty, countervailing measures or safeguard action) and tariff amendments which are in progress at the time of the change in the 2012 HS Nomenclature may have to be amended to provide for the different tariff that may be applicable.