Customs Tax Status of Goods

            The Customs Procedure Codes (CPC) and the Tax Status of goods are inextricably linked. The CPC codes indicate what the Tax Status of goods are.

“export taxes from South Africa may become levied for the first time…”

The following definitions are important in understanding the concept of Tax Status in the new Customs Control Act:

Tax” is defined as “an import tax, export tax or domestic tax on goods”.

Taxable” indicates that an “import or export tax has been imposed… in terms of a tax levying Act”.

Tax Levying Act” means any legislation other than the Customs Control Act on which tax is levied. It includes any international agreements to which other legislation applies. It particularly includes the:

–        Customs Duty Act

–        Value-added Tax Act

–        Excise Duty Act

–        Diamond Export Levy Act

–        Diamond Export Levy Administration Act

A Tax Status may be conferred on Home Use goods or goods which attract any other Customs Procedure. The following Tax Statuses may apply to goods:

–        Tax Due Status

–        Tax Free Status (of tax imposed)

–        Tax Refundable Status (on domestic tax such as VAT and Excise duty)

The Customs Duty Act also makes reference to a “Partial Tax Due Status”.

            An interesting development at SARS over the past few years has being the imposition of environmental levies on goods such as plastic bags, tyres, and CO2 tax on motor vehicles.

            Industry rumors are abound that export taxes from South Africa may become levied for the first time in a number of decades. The new Customs legislation makes sufficient provision for the possibility of export taxes.

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What Are Customs Procedure Codes?

            Customs Procedure Codes (CPC) are not easily explained yet, how they work is fairly simple.

            “Procedure” Codes replace the old “Purpose” Codes. The codes follow a common format and common set of rules which all parties can follow. They are designed to indicate the “Purpose” of an import or export Customs declaration. For example, if you intend importing goods for domestic consumption in a free market environment (i.e. free movement of goods), we term this as Duty Paid (Code DP) goods. In the new Customs Acts the corresponding CPC is Home Use (Code A11.00) goods. The tax status of such goods (in this example) is that duty and VAT will be paid upon clearance for importation. Here are some examples of the old Purpose Codes (for imports):

Code

Description

DP

Duty Paid

IR

Industrial Rebate

WH

Warehouse

XDP

Ex Duty Paid

RIB

Removal In Bond

Here are the corresponding new CPC (for imports):

Old Code

New CPC

New Description

DP

A11.00

Home Use of goods, on imported goods

IR

K85.00

Placement of goods under the ‘Processing for Home Use’ procedure

WH

E40.00

Clearance of imported goods into a customs warehouse under the ‘Warehousing’ procedure

XDP

A11.40

Home Use’ of goods, previously placed under the ‘Warehousing’ procedure

RIB

B20.00

National Transit of goods ‘removed in bond’ from port/place of arrival, to place of destination inside the Republic, or a bonded warehouse in a BLNS* country

*BLNS (Botswana, Lesotho, Namibia and Swaziland)

            The coding and wording of the CPC can be a bit confusing at first. I will explain these in more detail as I continue blogging.

            The CPC (the coding) is designed to follow the Customs supply chain in a way that links different movement procedures together; for Customs control purposes. It provides the Customs authorities with the ability to manage the supply chain using a systems approach.

            Importers and exporters use the CPC on the Customs Clearing Instructions to guide their Customs Clearing Agents. Customs Clearing Agents in turn use the CPC (as instructed by their clients) on the Customs Clearance Declaration forms (i.e. the SAD 500).

            In summary, the Tax Status of goods, including the Customs obligations and liabilities of parties during the movement of goods can be determined by understanding the Customs Procedure Codes.