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The Importance of correctly classifying imported goods

30 January 2018
– 5 Minute Read


Goods imported into South Africa are subject to Customs Duty.  While some goods may be exempt from this tax most goods attract Customs Duty.  The purpose of Customs Duty is to protect each country’s economy by controlling the flow of goods, especially undesirable products.  For example, the Customs Duty raised on imported textiles and textile articles, which is a threat to the local textile industry, attracts a generally high Customs Duty.  The other purpose is of course the raising of revenue.  Customs Duty are usually calculated as a percentage of the value of the imported goods.  The Customs Duty rates in South Africa usually vary between 0% and 45%.

The rate at which Customs Duty is levied is made in accordance with a schedule to the Customs and Excise Act.  This schedule classifies goods into various categories.  This schedule is a vast document aimed at categorizing and specifying every commodity which could conceivably be imported into South Africa and which is divided into 22 sections, 99 chapters and sub-chapters which, in turn, are divided into headings and finally sub-headings.  This schedule has its origin in the International Convention in Harmonised Commodity Description and Coding System established under the auspices of the World Customs Organisation.   The aim of this schedule is to ensure uniform interpretation by member states of the said convention.

The specific sub-heading under which a specific item is classified determines the percentage Customs Duty that is payable.  Each sub-heading is given a six digit number, i.e. two digits for the chapter, two digits for the heading and two digits for the sub-heading. For example, Section XI of the schedule includes all textiles and textile articles.  Importation of a jacket may fall under chapter 62 of this section which include “articles of apparel and clothing accessories”.  The relevant heading may be heading number 3, i.e.  “Men’s or boys’ suits, ensembles, jackets, blazers, trousers..”.  The relevant sub-heading may then be sub-heading 33, i.e. “of synthetic fibres”.  This jacket would therefore be imported under subheading 6003.33 and attract a duty of 45%.

Before goods are to be imported into South Africa, the importer needs to declare on the customs declaration form under which sub-heading or tariff code, on other words the six digit code, the goods are so imported.  It is important for an importer to be confident that the tariff code that is entered on the customs declaration is in fact the correct tariff heading and sub-heading since the South Africa Revenue Services may make a determination that another tariff code is applicable to the goods.  As to be expected, SARS usually determines that a specific product falls under a tariff code that attracts a higher Customs Duty than the one entered by the importer.  Such a determination by SARS can essentially only be set aside by the importer by making an application to the High Court of South Africa and asking the court to make a ruling as to what is the correct tariff code for a specific product. 

Our courts have in the past dealt with a number of these tariff classification disputes.  For example, whether a certain crane is a mobile crane or a crane lorry.  If the crane is a mobile crane it would attract 7% Customs Duty whereas if it was a crane lorry it would attract 20% Customs Duty.  Another example was the importation of a sheep carcasses.  To ship the carcasses economically, the carcass was cut up into six pieces.  However, different rates applied to carcasses (lower rate) as opposed to the now cut-up pieces (higher rate). The importer and SARS headed to court to resolve their dispute.  The court ruled that the carcasses are no longer carcasses and classified them as “other cuts with bone in”.  

In order to resolve these differences in interpretation, our courts have laid down the correct approach to tariff classification:  “Classification as between headings is a three-stage approach: first, interpretation – the ascertainment of the meaning of the words used in the headings (and relevant section and chapter notes); second, consideration of the nature and characteristics of those goods; and third, the selection of the heading which is most appropriate to such goods”.

The process of determining the correct tariff code can end up being rather complicated.  It is therefore of the utmost importance for importers to be certain that they classify goods correctly and obtain assistance when in doubt. A different classification by SARS can result in the importation of a certain product suddenly being uneconomical.   This is especially true for products that are constantly improved to include more and more functions.  What was a watch a year ago may soon be a computer or a phone may become a television set.  In other words, the nature and characteristics of the goods may change due to the improvements.  It would be advisable to re-assess the characteristics of the product after each improvement.

A word of caution also to online shoppers purchasing products from overseas; ensure that you are aware of any Customs Duty that may be charged on your purchase if this is not specifically mentioned on the online website.  Usually, online retailers do not include any charge for Customs Duty to be levied by the country of destination or accept liability for such charges.  This can be expected as customs policies vary from country to country and the online retailer may not be able to calculate this beforehand.