Customs rebates provide legal avenue to reduce import duties

A tactical trick of the freight trade is to identify that customs rebates can increase your competitiveness, according to a joint study by Hester Hopkins and Taryn Hunkin of Customs @ Wylie, a specialist division of the Durban-based law firm, Shepstone & Wylie. “The tight economic market, and playing in a global village, require a business to become aware of tools and facilities that enhance their competitiveness,” Hopkins and Hunkin told FTW. Such a tool identified in the study is customs rebates. “These,” said the team, “are a legal way of reducing import duties by complying with a set of circumstances which are clarified in the customs legislation.” The report noted that, over the years, the list of industries and their rebated goods had evolved – and was reflected under Schedule 3 to the Customs Act. However, these listed industries may not cover all industries or all goods. Thus, said the legal beagles, processes are in place where an importer could apply to create a rebate provision. “Accessing rebates might sound daunting because of the criteria and requirements that must be met,” Hopkins and Hunkin added. “But, in reality, the effort is worthwhile to secure a competitive advantage over the next importer.” They point out that there are different types of rebates provided for imported goods that attract customs duties – referred to as industrial rebates and general rebates. “To access the rebates an importer must register with customs and become a rebate registrant,” said Hopkins and Hunkin. “Registration with the International Trade Administration Commission (Itac) 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.” This raised the question: “How can you talk about security for duty that is rebated?” The reason, according to Hopkins and Hunkin, is that customs has no guarantee that the rebate registrant will carry out the undertaking for the rebated goods. “To protect their risk of duties not being paid, and the registrant not doing what they should,” said the team, “customs requests security in the form of a guarantee from an institution such as Credit Guarantee. The amount of the guarantee is based on the amount of duty at risk and, for example, the customs compliance history of the importer.” Note that goods intended for specific industries are listed by their tariff heading – the numerical code assigned to all internationally traded goods. An example is a company importing plates, sheets, strip, film and foil of polymers of polypropylene for the manufacture of printed selfadhesive labels in rolls – which fall under tariff heading 3919.90. Also, that company is not registered as a rebate user under Schedule 3, so the general rate of duty would be 10 %. But, 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 this is how it looks. For 50 000-kilograms of goods under tariff heading 3919.90 at R10/ kg - using the general rate of duty – it would cost an importer R50 000 in duty, and R84 000 in value-added tax (VAT). But, 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 R77 000. “Therefore,” said Hopkins and Hunkin, “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.”