Customs Procedures Presentation

CUSTOMS

FIATA Customs Module

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MANDATE OF CUSTOMS

CUSTOMS IS A DIVISION OF THE REVENUE AUTHORITY RESPONSIBLE FOR:

q Facilitating legitimate trade and travel while ensuring compliance with
customs requirements;

q Controlling and accounting for all imports and exports, including
ensuring that prohibited goods are not imported or exported;

q Collecting and bringing to account all customs and related revenues;
q Administering specific industry schemes, trade measures, international

protocols and other international obligations.
q Responsible for trade statistics

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CUSTOMS VISION

q Stimulating our export competitiveness by effectively implementing the country’s
international trade policies;

q Optimising utilisation of preferential trade agreements;
q Growing and integrating the regional economy through agreements such as the Southern

African development community (SADC) trade protocol;
q Ensuring a level playing field between imported and locally manufactured goods by

preventing evasion of Customs Duties through false declaration or through non-
declaration (smuggling);
q Protecting national industries against harmful unfair trade practices such as under-
invoicing, dumping, subsidised imports, etc;
q Protecting society against the importation of dangerous goods;
q Protecting the country’s wealth by preventing illegal exports;
q Controlling the movement of environmentally sensitive goods under the convention on
the international trade in endangered species (CITES);
q Protecting intellectual property rights by preventing the importation of counterfeit
goods; and
q In co-operation with the international customs and law enforcement fraternity, to
enhance the security of the international trade supply chain.

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OVERVIEW & POWERS OF CUSTOMS

q Customs and Excise Act – applicable legislation which regulates the
following:

q Controlling goods that may be imported into the country and the conditions
for their importation;

q Compliance to the end use of the imported goods;
q Goods that can be exported from a country and the conditions for their

exportation compliance;
q Goods that can be allowed to transit through a country and the conditions

for such movement;
q The procedures that must be followed by importers, exporters and all those

who deal with imported goods;
q The consequences of breaching such procedures;
q Collection of state revenue.

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CHARACTERISTICS OF GOODS

THE FOLLOWING ARE THE CHARACTERISTICS THAT DETERMINE WHETHER OR
NOT THE IMPORTATION OR EXPORTATION OF THE GOODS IN QUESTION WILL BE
ALLOWED AND IF SO UNDER WHAT CONDITIONS OR PROCEDURE: (trilogy)
q Their nature and physical characteristics (classification of goods);
q The country from which the goods originate (origin of goods); and
q Their customs value (valuation of goods).

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WHAT IS CUSTOMS CONTROL?

* As the regulation of international trade requires assessment of each
individual product to determine its customs characteristics, it follows that
customs must be aware of all the goods that cross the border.

* This awareness is only possible if the appropriate control measures are in
place.

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THE CUSTOMS TRILOGY

* CLASSIFICATION, ORIGIN AND VALUE of goods are the technical
attributes of goods and form the main basis on which a
determination of the customs treatment of goods is made.

* These aspects of customs scope, which form the all-important
core of the customs profession (although often “invisible” to
ordinary people), are now considered here in some detail

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CLASSIFICATION OF GOODS

* Classification of goods in general can take many forms and can
be based on all sorts of arguments or considerations.

* Different people have different criteria for classifying goods for
their own purposes.

* However, one thing is common with all classification systems –
* “things with similar characteristics are associated or classified

with each other. “

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THE HARMONISED SYSTEM

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WCO Harmonised Coding System of Classification

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REASONS FOR CLASSIFICATION

q To establish the applicable rate of duty;
q To determine whether anti-dumping, countervailing or other

protective duties on specified goods are applicable;
q To compile international and local trade statistics;
q To ensure compliance with trade agreements; and
q To determine whether permits/certificates are required.

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ORIGIN OF GOODS

* One of the responsibilities of Customs is to administer trade
agreements which are protocols under which two or more
countries agree to accord preferential treatment to specified
goods traded between them.

* Every trade agreement includes the criteria to be used to
determine whether or not products originate in the trading
partners for purposes of preferential treatment.

* These criteria are referred to as ‘Rules of Origin’.

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PRINCIPLES OF ORIGIN CRITERIA

* Firstly, to qualify for preferential treatment under a trade
agreement the goods must be “wholly obtained” in a
participating trading partner and consigned directly from that
trading partner to a consignee in the other trading partner.

* Examples of wholly obtained goods include agricultural products,
minerals or any product whatsoever that is produced from
wholly obtained goods.

* Secondly, where manufactured goods are not wholly obtained
they can also qualify for preferential treatment if they have
undergone “substantial processing” in the trading partner from
which they are exported.

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ORIGIN DETERMINATION SUMMARY

q Extending preference under a trade agreement;
q Quantitative restrictions of goods from specified countries;
q Anti-dumping, countervailing and safeguard duties applied to goods

from specified countries;
q Origin marking;
q Public procurement; and
q Compilation of trade statistics.

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VALUATION OF GOODS

* The value of goods is another very important characteristic of goods
that must be established in the process of Customs Clearance.

* Because of its importance and implications, it is necessary to have
clear and precise Valuation rules, so that the Customs value of goods
applicable in each country that is a signatory to the WTO Valuation
Agreement is predictable.

* This statement begs the questions:
* What is so complex about the Valuation of goods?
* If one buys a jacket from a shop, does one need valuation rules, to

determine how much it is worth?

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GROUPS & TYPES OF CHARGES

The issue of the valuation of goods for customs purposes goes beyond the
purchase of jackets. Customs officers encounter complex transactions with
numerous costs, charges, expenses etc. Paid by one person or the other to the
seller and sometimes to various other persons.
These charges can broadly be grouped as follows:

q Costs of manufacturing the goods, packaging them or otherwise preparing them for
exportation;

q Costs of transporting them to the place where they will be placed on the means of
transport which will convey them to the country of final destination, including the cost
of documentation, storage, handling, repacking, etc. Incurred by whoever it may be
whilst the goods await to be placed on board that means of transport (i.e. aircraft, ship,
train, etc.);

q Cost of actually freighting the goods to the country of destination; and
q Any other costs which are immediately or remotely connected with the particular

goods being imported including bank charges or other costs of financing, fees
demanded by middlemen of miscellaneous descriptions, taxes and other dues suffered
by the importer or some other person as a result of the purchase of the goods.

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VALUATION METHODS

The technical aspects of customs valuation are beyond the scope
of this discussion. It suffices at this level to explain that customs
valuation is determined using the following six methods:

q Transaction value method
q Transaction value of identical goods
q Transaction value of similar goods
q Deductive method
q Computed method
q Fall back method

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CUSTOMS PROCEDURE

After determining the characteristics of goods (i.e. The customs trilogy outlined
above) the correct procedure for clearing the goods is the next to be
determined.
This choice of procedure, the completion of documentation relevant to it, the
administrative processing associated with it and all the checks and balances that
must be put in place and monitored to ensure that the objectives of that
procedure are not compromised, form the bulk of the customs work that is
visible to the outside world.
The correct procedure depends on the following criteria:
q The nature of the goods;
q The status of the owner of the goods;
q The end use of the goods;
q The time when duty is to be paid; and
q The purpose of their importation or exportation.

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REBATED GOODS

The following are some of the rebates divided into two main categories:

Category i: Industrial Rebates
q Goods for the manufacture of other goods; and
q Goods used in the manufacture of other goods solely for export.

Category ii: General Rebates It is important to point
q Goods for the head of state; out that these rebates
q Goods for cultural, educational, charitable organisations; do not cover all goods
q Goods for diplomatic missions/personnel;
q Goods for officials of approved institutions; under all
q Goods imported as travellers’ baggage; circumstances. Their
q Personal effects, sporting and recreational equipment; granting is subject to
q Vehicles for persons on permanent change of residence; stringent terms and
q Household effects; conditions that must
q Deceased estate and inherited goods;
q Abandoned goods; be satisfied by
q Bona fide unsolicited gifts; and persons who qualify
q Goods imported by refugees. to apply for such a

rebate.

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WHAT REGULATES THE CUSTOMS ACT

q It specifies what is permissible in respect of importation and/or exportation
of goods and all matters relating thereto;

q It authorises the commissioner to use his discretion to permit, within limits
of that discretion, certain specified things that may not be ordinarily
permissible under the act;

q It specifies ‘how’ what is permissible must be executed;
q It authorises the commissioner to regulate how the permissible must be

executed in cases where the act itself does not so regulate;
q It outlines the rights and obligations of both customs officers and the

public;
q It gives the commissioner and customs officers powers to enforce the

provisions of the act; and
q It provides for consequences to be suffered by persons who infringe any

provisions of the act.

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CUSTOMS OFFENCES – (MANY)

q Failure to obey lawful instructions of an officer or to produce documents demanded by an
officer;

q Refusing to stop when ordered to do so by a customs officer or refusing to be searched;
q Breaking a customs seal or a lock that has been placed by a customs officer on a vehicle,

container, premises, etc;
q Removing goods from a place they have been placed by a customs officer;
q Failure to fully and truthfully declare goods that are being imported of about to be exported;
q Failure to report the arrival or to seek authority for departure of a vehicle, aircraft, ship, etc;
q Failure to allow customs officer to take stock of un-cleared goods stored in a bonded

warehouse;
q Failure to maintain proper stock and any other records of which it is his duty to keep;
q Pretending to be a customs officer when the person is not one;
q Resisting detention or apprehension by a customs officer or rescuing a person who has been

so apprehended;
q Damaging or destroying goods that are about to be seized by a customs officer in order to

prevent their seizure; and
q Being found in a place where illegal distillation of alcoholic beverages is taking place even

though one may not be actively involved in the process.

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CUSTOMS ADMINISTRATIONS IN THE 21ST CENTURY

* The global landscape in which the customs authority operates is complex,
fluid, and highly sensitive to external drivers

* The growth in international trade and travel, continued initiatives to liberalise
trade, more complex trade rules,

* The proliferation of regional trade agreements, and security threats.
* The explosion of international trade in recent decades and the growth of

technology have left many customs administrations overwhelmed.
* South Africa is currently a party to a number of trade agreements and

opportunities for further agreements at the same time, the freer movement
of goods and people means that we will be exposed to greater levels of cross
border criminal activity.

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WCO – SAFE FRAMEWORK OF STANDARDS

* The WCO SAFE Framework of Standards (2018 latest version), for
example, aims to promote seamless movement of goods through
secure international trade supply chains.

* It relies on increased cooperation and the sharing of real-time
information between customs administrations. The framework
also calls for customs administrations to perform inspections on
each other’s behalf.

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WCO – KEY OBJECTIVES SUMMARY

q Harmonisation of Customs systems and procedures;
q Simplifying Customs procedures to facilitate legitimate trade;
q Promoting international co-operation against customs offences;
q Developing instruments and the framework for securing the

supply chain;
q Research and analysis into issues and trends of strategic

importance;
q Promoting good governance and integrity in customs

administrations; and
q Building the capacity of customs administrations through

training and technical assistance programmes.

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KEY GLOBAL CONVENTIONS & UNIONS

The WCO works primarily through the development and promotion of
international conventions and instruments the following of which are the most
important:
q European Economic Union (EEC)
q The Revised Kyoto Convention (RKC) on the simplification and harmonisation of

customs procedures;
q International convention on the Harmonised Commodity Description and

Coding System (provides for systematic classification of goods);
q WTO Valuation Agreement (provides for systematic customs valuation of

goods);
q Istanbul Convention (regulates temporary importations);
q International Convention on mutual administrative assistance for the

prevention, investigation and repression of customs offences (Nairobi
convention); and
q Arusha Declaration on Integrity (contains guidelines on promoting integrity in
customs).

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QUESTIONS & ANSWERS

For further information on this and other Training Courses offered
by GMLS, please contact us at:
Website: www.gmls.co.za
Email: [email protected]

Office Mobile: +27 82 852 3626
Tel: +27 44 813 0052
or +27 10 880 4342

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