New Draft Revenue Amendments & Buying Commission

Aug 21, 2008
Author: Shepstone & Wylie

Hester Hopkins of attorneys Shepstone & Wylie


South Africa is a signatory to the WTO GATT Agreement which contains various articles addressing technical topics such as Rules of Origin and Customs Valuation. Of particular importance at the moment is Article VII which relates to Customs Valuation and the interpretation thereof.

The crux of the colloquial application of the provisions of Article VII is that, generally signatories to the GATT Agreement would align their local legislation to that contained in Article VII. However, where the local legislation differs from the provisions contained in Article VII local legislation takes precedent over that contained in the agreement, writes Hester Hopkins, National Manager of Customs @ Wylie, an initiative of Shepstone & Wylie’s International Trade Department

Buying commission is one such deviation. The GATT Agreement considers buying commission to be a fee paid by an importer to his agent for the service of representing him abroad in the purchase of the goods being valued.

In contrast to this, South African Customs has extended the meaning of this definition by allowing the buying agent to also pay for the goods. Thus in SA buying commission is considered to be any fee paid by an importer to his agent for representing him abroad in the purchase of and payment of the goods.

This deviation is due to be stubbed out in the new Draft Revenue Amendments Bill currently out for comment. SA Customs is proposing that their current definition be aligned with that of the GATT Agreement by removing reference to "payment". Thus for buying commission to be considered not dutiable the buying agent may not pay for the goods on behalf of the importer.

The change in definition will trigger a review of buying agents' contracts en masse. Not reviewing whether buying commission will be dutiable or not might leave importers at risk of contravening the Customs Act by deducting buying commission from the transaction value, when in fact, it is not legally allowed.

Comments on the draft amendments are due between 20 August and 5 September 2008.