Knowing your Rights: The Customs Demand

          Pay now, dispute later… really! Yes really. Your consignment was stopped, your production line is threatened, Customs has a finding and they want you to pay. Both sides have a material interest in the concept of “pay now, dispute later”.

          For live shipments this could present a real problem. Until such time as all outstanding issues are settled your shipment will not be released. This is where your supporting documents and literature (discussed in former blogs) become essential. There are occasions when Customs notifications for administrative action are illogical. But the illogicality thereof can only be proven upon the production of supporting documents and explanations. Your LSP (Logistics Service Provider) will want to upload supporting documents to the Customs electronic system speedily; in order to obviate the action demanded.

          But some traders whose production line is at risk can simply not wait, no matter how illogical. They would prefer to comply with any demand, especially when smaller penalty amounts are involved.

          This approach is going to present problems in terms of the new Customs legislation. Minimum first penalties will be R 2,500 (in the Control Act) and R 5,000 (in the Duty Act). Each subsequent penalty covering the same contravention will thereafter double-up. This rationale will be applied over a period of three years where after your records will be wiped clean to start afresh.

          Another consequence of accepting an illogical decision is the precedence it creates. Once accepted and paid, Customs may expect that subsequent shipments must be treated in the same illogical manner. Also, Customs Post Clearance Inspection Teams will want you to bring additional duties and VAT to account for all prior shipments going 2 years back (this will be 3 years in the new Customs legislation).

          Another big concern about simply paying now and disputing later is that winning disputes with SARS Customs is difficult. In many instances it requires real expertise to appeal a decision. Doing so may occasionally involve employing an expert and paying a consulting fee for such expertise.

          But, any win in the appeals process will help to improve your record of good standing. Therefore, if you have any inclination whatsoever that you may win a dispute with SARS, then you simply must appeal.

          If the Customs findings fall into a grey area of uncertainty, there is another course of action you can take. You can lodge a provisional payment as surety to cover the potential difference in duties and VAT and to cover any penalties, pending finalisation of the matter. These normally relate to Customs Determinations for tariff and valuations. You will still pay initially however, the amounts paid pending a firm decision vide a firm Ruling (i.e. Determination) by the Commissioner for SARS will serve as surety during which time you can appeal. Such sureties are refundable upon a favourable outcome of any Determination.

          Nowadays it is not uncommon for Traders (and even LSPs) to pay for legal and technical expertise to aid in the appeals process. The avoidance of unintended consequences is far more appealing.

          Finally, court action may be another alternative however; this is a whole new league of appeal and will not be covered here.

Knowing your Rights: Customs Searches

          It is a long known fact that Customs has being able to do just about anything when it comes to searches. The only requirements for them were that it had to be Customs related, legal and within reason.

          Customs was able to enter any building, request any document, conduct any search, and to open any records. They were and still are able to use force (including breaking and entering) within reason to gain access to products or information. All of this was allowed with no recourse by the property owner. In fact, till recently the Customs authorities were considered to be the one organ of state with the most powerful and far reaching powers of duties; more powerful than any police or public service no matter how special. Why, you may ask? Well, in the past, Customs did not need to provide written reasons for a search, nor were they required to produce a search warrant.

          While Customs is still able to do all of this, today they can no longer do so at free will. So what has changed?

Firstly, PAJA (Promotion of Administrative Justice Act) number 3 of 2000 was enacted. Without regurgitating the contents of the legislation, the basic premise according to the Act is… “To give effect to the right to administrative action that is lawful, reasonable and procedurally fair and the right to written reasons for administrative action as contemplated in section 33 of the Constitution”. It basically means that prior to any administrative action taken by any Governmental agency including SARS Customs (i.e. not limited only to searches) that you have the right to be given reasons thereof, in writing. It also means that you have the right to be heard and to provide representations prior adherence to any administrative action. The following blogs will delve into the procedures that are generally followed by Customs which enable them to be administratively fair.

Secondly, it has to do with a legislative change which took place recently. The reasons for the legislative change came about as a result of a court action issued in the Western Cape. The court held that for searches to be constitutionally fair, a search warrant must, within reason, be obtained by the Customs authorities prior to any search. The old and the new Customs legislation now contain extensive clauses relating to search warrants. This includes all activities outside of a CCA (Customs Controlled Area), and outside of a Customs registered or licenced premises or a person. Warrantless access may still be gained upon reasonable explanation by Customs to the property owner. Explanations for such warrantless access must entail any real suspicion of breach of the legislation but where waiting for a warrant may take too long.

          But searches are different from simple requests by Customs for you to produce documents. In so doing they may visit your premises. There is therefore no reason why one should not allow Customs access in the ordinary course of business, so long as it is reasonable.