Customs Compliance in South Africa

Logistics personnel don’t always get taught about customs procedures. DSV’s Customs Manager in Port Elizabeth, Graeme Lennie, has written a free white paper to help businesses avoid some of the pitfalls. To get free expert insight about key aspects of South Africa’s customs rules visit Free White Paper 

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Business Implementation with your LSP (Logistics Service Provider)

          Most Traders use one LSP (Logistics Service Provider) for both the Freight Forwarding and Customs Clearing components of their business. Some use separate LSP, one for Freight Forwarding and another for the Customs Clearing. The reasons for the latter may be for cost benefits, to meet buyer or supplier requirements or because of the Incoterms (International Commercial Terms) agreed. There may be more reasons for this but, whichever the case, there will need to be a full implementation of both your Freight Forwarding and Customs Clearing requirements with your LSP.

          Most LSP companies have specific implementation procedures. These may take different forms of SOP (Standard Operating Procedures). Documented procedures will be used to implement your specific requirements for customs and logistical processes. Some information will also be pre-captured onto the LSP internal IT systems.

          As mentioned in previous blogs, the more your LSP knows about your business, the better off you are. In fact, why not invite some of the staff from your service provider to your premises for a guided tour. Take them though your business processes and production line. Show them the product/s you import, produce, process, sell or export. This will help freight forwarding personnel to gain a better understanding of your requirements and unique logistical challenges, i.e. packing space, loading bay restrictions, temperature control, delivery time frames, etc. It will also help the forwarding personnel to guide the Customs Clearing procedures within their own (LSP) organisation.

          Personnel involved in Customs clearing who visit your premises will gain a better understanding of the unique characteristics, features and design aspects of your import or export products. This will help for tariff classification issues which affect the rates of duty and the OGA (Other Government Authority) requirements, i.e. for certificates and permits.

          Any LSP which conducts both of the freight forwarding and Customs Clearing components of your business will generally have a well-integrated communications and document control system to manage your work. A seamless integration of all procedures is achieved. Using different LSPs for the Forwarding and the Customs Clearing components may occasionally have its challenges, especially with regards to document handover procedures.

          The consequences of getting this wrong may impact on your business negatively regardless of who is responsible for errors in the process.

          You will want to ensure that all procedures and requirements are well communicated and implemented with all parties at all times.

Knowledge of Customs Affairs

          I was asked at a conference in Durban in recently whether Customs clients will in the future have to write a Customs exam as proof of knowledge. While this is true for clients wanting to attain the SARS Customs PTA (Preferred Trader Accreditation), it is not true for all Customs clients. Well, not at this stage anyway.

          But it does not mean that if you are not participating in the SARS PTA that you do not need to know more. SARS is increasingly contacting traders, importers and exporters directly. This may be part of a concept known as the Customs-to-Business Partnership. More about this can be found on the WCO (World Customs Organisation) website www.wcoomd.org/. The concept requires a lot more interaction between Customs and business going forward. It may also have to do with the greater level of accountability that the new Customs legislation places onto traders.

          When Customs do contact you directly, officials expect you to have an understanding of what they are talking about. The Customs Clearing Agent is no longer the sole provider of information to the authorities. This is most prevalent when SARS conducts post-clearance inspections of your books. SARS generally goes two years back in your records. However, in the new Customs legislation SARS audits will go back three years.

          The consequences of not having Customs knowledge may result into incorrect duty assessments. It can cause a lot of pain and financial heartache to resolve issues which arise. A lack of knowledge also causes frustration on the part of Customs officials who find themselves going in circles between the Trader and the Customs Clearing Agent. By the time payment is demanded, very short lead times are provided. Leniency in this regard is also harder to come by.

          So, what do you need to know and where will you find the information? We can take a leaf from the SARS Customs External Guide on Accreditation (SC-CF-07 dated 22 November 2012, which can be found at www.sars.gov.za under “Find Publication”, section 7.3 of the document). SARS requires Traders to have knowledge in the following areas of business:

1)      General issues;

2)      Accreditation legislation and audit (for PT clients);

3)      Tariff Classification;

4)      Valuation;

5)      Rules of Origin;

6)      Prohibited and Restricted Goods and Import Control;

7)      Penalty Provisions and Risk;

8)      Appeals process;

9)      Internal Controls; and

10)    Integrity (also covered);

These are the minimum areas of Customs knowledge that you should have today. The 9 or 10 pages of summaries are a good start to increase your Customs knowledge. We will in any event be discussing these in the blogs which follow.

            Finally, there are a number of Customs Training Providers which offer various forms of Customs training to Traders and Clearing Agents alike.