Customs rebates increase competitveness

Oct 19, 2008
Author: Customs @ Wylie

The tight economic market and playing in a global village require that businesses become aware of tools and facilities that enhance their competitiveness. Many of these tools are overlooked through lack of understanding or knowledge, write Hester Hopkins and Taryn Hunkin of Customs @ Wylie, an initiative of Shepstone & Wylie.

One such tool is Customs rebates, which are a legal way of reducing import duties by complying with a set of circumstances which are clarified in the Customs legislation.

Over the years the list of industries and their rebated goods have evolved and are listed under Schedule 3 to the Customs Act. These listed industries may not cover all industries or all goods thus processes are in place whereby an importer could apply to create a rebate provision.

Accessing rebates might sound daunting because of the criteria and requirements that must be met, but in reality the effort is worthwhile to secure a competitive advantage over the next importer. Different types of rebates are provided for in relation to imported goods that attract customs duties. These types of rebates are referred to as industrial rebates and general rebates.

To access the rebates an importer must register with Customs and become a rebate registrant. Registration with ITAC (International Trade Administration Commission) may also be a requirement. The registration process is subject to a number of provisions and may require the importer to put up security for the duties which will be rebated. You might be asking: "Security for duty that is rebated?"

The reason is that Customs has no guarantee that the rebate registrant will carry out the undertaking with regard to the rebated goods. To protect their risk of duties not being paid and the registrant not doing what they should, Customs request security in the form of a guarantee from an institution such as Credit Guarantee. The amount of the guarantee is established based on the amount of duty at risk and, for example, the Customs compliance history of the importer.

Goods intended for specific industries are listed by their tariff heading - the numerical code assigned to all internationally traded goods.

For example, a company imports plates, sheets, strip, film and foil, self-adhesive, of polymers of polypropylene for the manufacture of printed self-adhesive labels in rolls under tariff heading 3919.90, and that company is not registered as a rebate user under Schedule 3, the general rate of duty would be 10%. If the company importing these goods was a registered rebate user, it would be entitled to a full rebate of duty.

When put into rands and cents the example looks as follows: 50,000 kg of goods under tariff heading 3919.90 at R 10.00 per kg, using the general rate of duty, would cost an importer R 50,000 in duty and R 84,000 in VAT. If the importer was registered as a rebate user under rebate item 307.01, the duty would be fully rebated and the amount payable as VAT would be reduced to R 77,000.

Therefore, when considering a rebate facility, one must also keep in mind the fact that a rebate of duty will also impact on the amount of VAT that will be due to Customs.

In some cases, for example, goods imported by diplomats for diplomatic missions have no reference to the tariff heading but it is the circumstances that trigger the rebate. Also when importing goods under a rebate item the goods should be imported into a rebate store licensed by Customs and Excise.

While there are many different situations and at first glance it may sound complex being rebate registered can provide importers with a considerable cost advantage and is worth looking into. Customs @ Wylie is fully versed in applying for rebate registration, complying with all the conditions as well as applying for the creation of rebate facilities, where these do not exist.