Clarity needed on SADC preferential tariff treatment

What are the requirements in terms of the SADC agreement on preferential tariffs? That’s one of the vexing questions facing the shipping industry and customs practitioners for which further clarity is needed, says Johannesburgbased Shepstone & Wylie partner Freek van Rooyen. “The product must have its origin in an SADC country. However, must the product be transported from there to a customer in another SADC country, with a paper trail between the producer and the customer, or is the paper trail irrelevant as long as the movement is from a supplier in one member state to the end customer in another member state?” is the question that Van Rooyen asks. “Based on our interaction with SA Revenue Service, although a product may originate in a member state and be directly transported to the end user in another member state, it will not qualify for any preferential tariff treatment if the paper trail isn’t directly between those two entities,” he told FTW. It’s not uncommon, says Van Rooyen, to find a trader based in a foreign jurisdiction purchasing a product from a supplier in an SADC country, and although the product may initially be destined for export, en route the trader may sell the product to an end customer in South Africa. An example would be a transaction concluded while the product is being moved directly from a producer in Zambia to a consignee in South Africa. “In my view, it’s not clear cut, as the agreement and applicable pieces of legislation refer to a direct consignment. In both the scenarios above, the product is directly consigned from the producer to end customer, both located in SADC member states. It seems wrong that only in the case where the invoicing and direct consignment is between the producer and end customer, both based in an SADC member state, will the end customer enjoy the preferential tariff regime on importation.” A distinction must be drawn between the term “consigned directly” and selling a product directly to a customer, he added. “Where the legislature uses the term ‘consign’, there seems no justification for Sars to insist on the direct sale relationship, but hopefully in time to come there will be a matter referred to court that will give us clarity on this issue. At the moment Sars disallows the use of an SADC certificate if there’s a middle party involved that is based in a non- SADC member state.” CAPTION: Freek van Rooyen … not clear cut.