CALCULATION OF CUSTOMS VALUE
CALCULATION OF CUSTOMS VALUE
By Carol Dulin
One of the challenges which every importer faces when importing goods into the Republic of South Africa is determining the correct tariff heading of the commodity which he wishes to import, as reflected in the Harmonised Coding and Description System, (the "Harmonised System"). It is very important that the importer identify the correct tariff heading of the goods to be imported as this will have an impact on, inter alia:
(i) the rate of duty payable to the customs authorities,
(ii) whether an import permit is required and
(iii) the payment of any other additional customs duty.
It is furthermore important to correctly classify the commodity, as should the classification of the imported commodity be incorrect, then incorrect duty will be calculated either to the prejudice of the importer or to State Revenue.
The Harmonised System, which is a numerical coding system, is issued by the World Customs Organisation and allows one to systematically and logically classify all goods found in international trade. The harmonised system has approximately 1241 headings and 98 chapters with 23 major sections. All commodities of a similar nature are grouped into chapters and each separate commodity is assigned a particular classification code. The Harmonised Code is furthermore divided into columns. The "Rate of Duty" column is headed "General", "EU" and "SADC". Once goods have been classified in a particular tariff heading, then the duty is calculated according to the "general" rate of duty specified for the tariff heading.
Section 39(1) of the Customs and Excise Act 91 of 1964 ("the Act") prescribes the documentation needed for the calculation of customs value.
"The said person shall further produce . . . invoices as prescribed, shipper’s statement of expenses incurred by him, copy of confirmation of sale or other contract of purchase of sale, . . . and such other documents relating to such goods as the controller may require in each case . . . "
The commercial invoice is important as it reflects a detailed list of the goods to be imported as well as the transaction value and the contract term of sale (also known as an Incoterm). The significance of the incoterm as reflected on the commercial invoice becomes apparent in the calculation of customs value as the incoterm together with the type of cargo will establish the point of valuation. The point at which cargo is valued plays an important role in the final determination of customs duty payable, as, depending on the actual point of valuation, the costs, charges and expenses are either dutiable or non-dutiable. Dutiable costs, charges and expenses already included in the invoice price by virtue of the incoterm must not again be added in terms of Section 67(1) of the Act. In terms of Section 67(2) of the Act, non-dutiable costs, charges and expenses already excluded from the invoice price by virtue of the incoterm, must not be deducted again.
Where there is a dispute as to how the commodity is to be classified in terms of the Harmonised system, then the importer may make an application for a tariff determination (on a DA 314 form) to the Commissioner’s office. In terms of Section 47 of the Act, all customs duty collected shall be paid for the benefit of the National Revenue Fund.
Section 45 (1) (a) of the Act prescribes when the imported commodity becomes liable for payment of customs duty:
"Notwithstanding anything to the contrary in this Act contained, all goods consigned to or imported into the Republic or stored . . . or removed in bond shall upon being entered for home consumption be liable to such duties as may… time".
It is important to note that in addition to customs duty, VAT is also payable on goods at the time of entry into the Republic of South Africa for home consumption and the responsibility for the collection of VAT at the time of entry for home consumption vests with Custom and Excise.
In this regard, Section 13 of the VAT Act No. 89 of 1991 is relevant:
"For the purposes of this Act . . . goods which are entered for home consumption in terms of the Customs and Excise Act, shall be deemed to be have been imported on the date on which they are so entered: Provided further that where any goods have been imported and entered in a licensed Custom and Excise Warehouse but have not been entered for home consumption. Any supply of such goods before they are entered for home consumption shall be disregarded for the purposes of this Act: Provided further that goods imported from Botswana, Lesotho, Swaziland and Namibia shall be declared and tax paid to an officer designated by the Commissioner for Customs and Excise on entry into the Republic in accordance with such procedures and at such place as the said Commissioner may prescribe by rule".
The value for VAT purposes can be calculated in terms of a formula, as follows:
Customs value plus 10% of the customs value plus all duties =ATV
ATV X 14% = VAT.
It should be noted that the Customs and Excise Act 91 of 1964 is an Act of general application across an extremely wide spectrum of commodities. As a result of this general application, disputes often arise as to the correct tariff item applicable. Reference must then be made to chapter notes and general explanatory notes and words must, where possible, be given their ordinary meaning.