Customs stop burn big holes in importers' pockets

Recent activities by the customs division of the SA Revenue Service (Sars) are likely to have a critically adverse effect on importers of goods from foreign lands, according to Quintus van der Merwe, partner and trade specialist at lawyers, Shepstone and Wylie. “Customs,” he told FTW, “assists in maximising the collection of revenue vital to the functioning of our country and also protects the borders against illicit trade. “That said, customs – as part of its mandate and vision – states that it is committed to facilitating trade.” But recent times have once again highlighted a Sars focus on maximising revenues and preventing non-compliance. “This,” he added, “clashes somewhat dramatically with customs’ undertaking to facilitate trade.” There is no doubt that customs is regularly faced with goods that have been under-declared, incorrectly classified or which may be the subject of a deliberate attempt at the evasion of payment of revenues, Van der Merwe added. “But the problem is that the revenue authorities tend, on occasion, to have a ‘knee-jerk’ reaction. “Anyone involved in the importation of textiles in recent months will attest to the fact that the quest for eradicating illicit trade has had a dramatic effect on the many honest businessmen who are simply trying to get ahead in business.” Van der Merwe suggested that there appeared to be a Sars project in which large numbers of containers were stopped, and clearing agents or importers were called on to produce documents to enable Sars to form a risk assessment of the goods. “Some of these ‘shopping lists’ for documents run into several pages long,” he said. “Often documents are called for to be provided by overseas suppliers who frankly have no interest in the problems of the buyer or the importer once the goods have been sold. An example is the request for intricate costings, which most suppliers are reluctant to give their customers.” Van der Merwe added that, “rather perplexingly”, it appears that customs has a policy of refusing to release the goods against payment of provisional payments. “The net result is that the goods cannot be moved until customs’ risk assessment has been finalised.” The difficulty he saw here was that, due to a large number of stops and a limited number of personnel, these queries had been taking an inordinately long time to resolve. “In the meantime,” he said, “the importer is obliged to pay the storage costs of the container, as well as the hire (demurrage) payable on containers that are not turned in to the shipping line in time.” These costs collectively must run into millions, Van der Merwe estimated,. Although customs’ legislation and the Kyoto Convention (to which SA is a signatory) does provide for release of goods against payment of provisional payments, as well as the possibility of an embargo release, he noted that most containers remained in container depots until Sars was able to resolve the numerous queries. “Another problem is that many of the goods subjected to stops are ultimately destined for delivery to chain stores,” Van der Merwe said. “A lot of these goods, in turn, are seasonal. The result is substantial frustration all along the logistics chain – cancellation of certain contracts and late delivery penalties, all of which have to be borne by the importer. The result is often that the goods, when released, are being delivered at a loss to the importer.” It may occur to readers that surely someone who feels aggrieved has the right to approach the courts for appropriate relief. But Van der Merwe pointed out that, where you are talking about a container of goods only worth R500 000, which may result in a profit of 10% of the value of such goods, it is hardly worth approaching a court for relief where the legal costs will outweigh any favourable result. “The net result is costing our economy huge amounts of money,” he told FTW. “It is therefore critical that the revenue authorities find a way to efficiently deal with such stops – failing which, they may ultimately be hurting the goose that lays the golden egg.” CAPTION Quintus van der Merwe … Customs hurting the goose that lays the golden egg.