Questions remain in Distell classification case

The vagaries of Customs classification often call for skills beyond those of the Customs expert – and a recent case involving Distell’s winebased aperitifs is a case in point. While Distell ultimately lost its appeal to have the product classified as a non-spirituous beverage, Johannesburg-based Shepstone & Wylie partner Freek van Rooyen, who was involved in the case, believes that the outcome is not clear cut. “The base product is a stripped, fermented wine to which is added distilled spirits and flavourants,” said Van Rooyen. Sars ruled that the product be classified as “other spirituous beverages,” while Distell contended that it should be classified as “vermouth and other wine of fresh grapes flavoured with plants and other aromatic substances, alternatively a mixture of fermented beverages and non alcoholic beverages”. Needless to say spirits pay a substantially higher rate of excise duty than fermented products. According to Van Rooyen, the question centred around whether a fermented product stripped of all its essential characteristics retained the status of a fermented product or not. The Supreme Court of Appeal held that the stripped product could no longer be considered a wine and took on the essential characteristics of a spirituous beverage when, in the fortification process, a distilled product was used to fortify the product. “But it is not clear from the judgement,” says Van Rooyen, “what the required ratio of fermented to distilled product should be that would result in its classification as a spirituous beverage. If, for example, you take 750 millilitres of stripped fermented product and a half a tot of distilled spirits, should this new product be considered to be a spirituous beverage?” For the moment, however, Distell will need to cough up the additional duty. INSERT ‘It is not clear from the judgement what the required ratio of fermented to distilled product should be.’ CAPTION Freek van Rooyen ... a question of ratio.