Banks reject duty deferment form

Guarantor’s liability in dispute
ALAN PEAT
THE LEGAL teams of the “big four” banks – FNB, Standard, ABSA and Nedbank – have rejected the DA 651 guarantee form in its present format, with the FNB currently waiting for at least one of the other banks to join it in an appeal to the SA Revenue Service (Sars) customs to have a vital change made. The banks’ objection to the form is that, in the way it is worded, it doesn’t clearly record the maximum guarantor’s liability – leaving the banks to get hit for whatever amount the Sars commissioner decides is due in the case of the applicant failing to pay. In this “open-ended” format, the banks have all refused to accept the DA 651, and effectively cut off one source of supply of the multi-million rand guarantees that most forwarding agents need to conduct their businesses under the new deferment scheme introduced last November. What the banks are expected to be asking Sars is that the DA 651 reverts to the wording of its predecessor, the DA 653, and states clearly the maximum guarantee liability both for the capital amount and the interest. “A bank is not in a position to issue a revolving guarantee with no limit on value,” said Pieter Rossouw of FNB’s legal department responsible for handling the DA 651 issue. “The form quotes that the guarantor’s liability is limited to a month deferment allowed, but they also quote that the commissioner can call for payment of the amount plus interest in the event of applicant (for the record ‘principal debtor’ is not defined in the guarantee) failing to pay. “This implies that they can call again, as the applicant would have received credit the following month, and that they can make multi demands of the guaranteed amount plus interest – and this interpretation of ours has been confirmed by Sars-customs’ legal department.” He adds that the guarantee can only be cancelled upon the confirmation of the commissioner, and no mention is made that - in the event of the bank paying the guaranteed amount - the debt will be cancelled. This problem is more than one of credit, Rossouw added, with the banks also having the Banks Act’s “capital adequacy” requirements to contend with – where they must hold a sufficient capital amount to cover these guarantees in their entirety. It’s a big blow for the forwarding community until the banks and Sars get the problem sorted out, with at least two forwarders (and not small operations) telling FTW that their businesses cannot continue without having these guarantees. One alternative, we were told, is the insurance companies which handle this sort of trade finance risk – but at a price which far exceeds that charged by banks, and one which could move a company’s bottom line from the black to the red on these import transactions. It’s only a matter of time, Rossouw added, until the necessary minimum of two banks protests to Sars. But, he told FTW, the only guarantee he could get out of customs was that if this was the case Sars would “look at the situation”. Until then, those looking for guarantees to cover customs import duty deferments under the DA 651 are going to be left mostly in the lurch.