Customs Duty and VAT

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Duties

There are 3 kinds of duties are levied on imported goods:

Customs duties (including additional ad valorem duties on certain luxury or non-essential items)
Anti-dumping and countervailing duties
VAT (which is also collected on goods imported and cleared for home consumption).

Anti dumping and countervailing duties are levied:

On goods considered to be "dumped" in South Africa; and
On subsidised imported goods.

These goods are the subject of investigations into pricing and export incentives in the country of origin. The rates imposed will depend on the result of the investigations. These duties are either levied on an ad valorem basis (as a percentage of the value of the goods) or as a specific duty (as cents per unit).

The amount and type of duty imposed on a product is determined by the following main criteria:

The value of the goods (the customs value)
The volume or quantity of the goods
The tariff classification of the goods (the tariff heading)

How is VAT calculated on imported goods?

The VAT rate in South Africa is currently 14%

To calculate VAT on imported goods, the ATV (added tax value) needs to be determined first.

This is shown as:

[(Customs Value + 10% thereof) + (any non-rebated duties levied on the goods)] x 14%

= [ATV] x 14%

= VAT payable

The 10% mark-up shown in the customs value in this calculation is applicable when goods are imported from a country outside the Customs Un esotho, Namibia or Swaziland), the 10% will not be added to ion. Therefore, if goods have their origin in any of the BLNS countries (Botswana, L the calculation.

When goods are exported to any of the BLNS countries, the same applies (no mark-up on the customs value to determine ATV).

EDI – Electronic Data Interchange

EDI, or electronic data interchange, is essentially a "paperless" trading system. It involves the electronic transfer of data, by established message standards, from one computer application to another.

Growth in world trade means businesses are increasingly developing better ways of managing the movement of raw materials, stock and finished goods. EDI organises the flow of information from one end of the supply chain to the other.

What are the benefits of using EDI?

This is a fully automated process that needs little or no intervention by either party
Declarations can be accepted round-the-clock
Quicker retrieval of cargo through the reduction of clearance times
A reduction in manual administrative processes resulting in fewer errors and no duplication (ensuring the data is inputted correctly)
Harmonised business relationships with other bodies such as Transnet Port Terminals, Transnet Rail Terminals, airlines and container depots

MPR – Manifest Processing System

The Manifest Processing System (MPR) is SARS’s automated solution for the receipt and processing of prescribed reports in respect of international cargo to be imported into, or to be exported from, the Republic.

SARS requires, in line with international practices, that cargo be reported to it prior to arrival for the purposes of screening and risk assessment. Furthermore, the subsequent matching of cargo reports against their corresponding customs clearances provide assurances to both Customs and trade that all goods are accounted for and lawfully released.

MPR brings a number of operational benefits to legitimate and compliant trade, including:

The expedited movement of commercial truck traffic through land border posts
The enhanced administration of the movement of transit cargo across multiple land border posts
As well as full paperless reporting benefits to compliant airlines and shipping lines.

Reports may only be submitted electronically to the MPR system by means of Electronic Data Interchange (EDI) in the prescribed UN/EDIFACT (United Nations Electronic Data Interchange For Administration, Commerce and Transport) message standards.

Valuation

The General Agreement on Tariffs and Trade (GATT) valuation code, which involves six valuation methods, sets customs values.

All major trading countries have accepted the GATT Agreement on customs valuation.

The Valuation Agreement dictates six methods of valuation, which must be applied in strict hierarchical order. The methods, in order of precedence are as follows:

The transaction value of the goods, i.e. the price actually paid or payable
The transaction value of identical goods
The transaction value of similar goods
The “deductive” method (where the customs value is derived from the selling price of the imported goods in the Republic)
The “computed” method (where the value is derived from the built-up cost of the imported goods)
The so-called “fall back” method, being one of the other five methods applied more flexibly.

However, the majority of goods are valued using method one, which is the actual price paid or payable by the buyer of the goods. The "free on board" price forms the basis for the value, but allows for certain deductions and additions.

Customs officials pay particular attention to the following:

The relationship between the buyer and seller
Payments outside of the normal transactions (such as royalties and licence fees)
Restrictions that have been placed on the buyer.

These factors can result in the price being increased for the purpose of determining customs value, directly affecting the duty payable.