Changes in Customs duty – buyers and sellers are protected

The Customs Act 91 of 1964 (“the Act”) provides a measure of protection to buyers and sellers of imported or excisable goods affected by an amendment in the rate of duty. A contract may be entered into between two parties based on the duties in place at the time of the signing of the contract. However, as we know, the rate of customs duty or any other duty imposed under any of the schedules to the Act may be amended at any time. This will alter the actual “landed” cost of goods. Section 59 (1) of the Act gives the seller of goods the right to recover from the buyer, as an addition to the contract price, a sum equal to any amount paid by him/her as a result of any increase in duty, in the absence of agreement to the contrary. Say for example an importer purchases pencils from an exporter in Ireland. He and the exporter enter into a contract of sale, using the DDP Incoterm. When the contract is concluded the rate of duty is set at 15%. However, while the first shipment is on the water, the rate of duty increases to 20%. The exporter is obliged to pay the additional duty to Customs. However, the importer argues that since they signed the contract of sale at a 15% rate of duty that is all he is willing to pay. In such a scenario, the exporter could rely on Section 59 (1) of the Act to support his claim that the importer is obliged to pay him the additional 5% duty. Section 59 (2) affords the same level of protection to the buyer in that it makes provision for the buyer to deduct from the price payable an amount equal to the decrease in duty since the time of signing the contract to the date of customs clearance. Not only does the Act protect buyers and sellers but Section 59 (3) also protects signatories to a contract involving the hiring of goods. This section reads as follows: “The provisions of this section shall also apply to a contract for the hiring of any goods or the use of any goods in rendering a service at a contract price, and the expressions “seller” and “purchaser” shall correspondingly be construed as including the person by whom and the person to whom the goods are hired or the service rendered.” Section 59 of the Act theoretically provides for easy adjudication in situations where either party stands to lose out as a result of an amendment to one of the schedules to the Act. However, it is an entirely different matter in practice when trying to convince a foreign supplier to conform to our Act.