Sars gets serious about textile under-valuation

SA Revenue Service has singled out under-valuation of imports in the clothing and textile industry as one of seven broad priority areas of focus over the next five years – and plans to introduce a reference pricing database mechanism to address the problem. It’s a move that has been welcomed by the Textile Federation, although executive director Brian Brink warns that it won’t be a magic bullet. According to Brink, a test project was run two years ago and the results are starting to look encouraging – but it’s a little too early to assess the success of the project, he told FTW. According to Sars, the industry is threatened by non-compliance related to valuation as well as country of origin and tariff misclassification, which opens doors to the dumping of goods and under-cutting of prices, all of which affects the viability of the domestic industry. Sars has also committed to identifying systematic solutions to gaps in the clothing and textile value chain related to imports, exports and manufacturing activities under rebate while increasing the number of inspections at border posts. The revenue authority believes that Customs Modernisation will help to create a sound platform for more effective risk management – to be achieved by supporting an integrated border management model to be developed with other government departments. “Sars will also continually enhance and refine its Preferred Trader Programme while increasing its non-intrusive inspection capability.” And it’s not only a Sars initiative, but a joint effort by government, labour and industry to work together in order to manage compliance risks in the industry. “I’m aware that Sars has been trying to establish a trigger mechanism to alert themselves when something suspicious is imported – but they have in the past been reluctant to challenge under-valued goods because internationally there is a valuation code and if the importer declares a product at a certain rate and has an invoice he’s deemed to be right,” said Brink. “They now seem to be taking a harder line and putting in an indicative price of the minimum at which an item should be imported.” Illustrating the challenge faced by Sars and the industry, Brink says that the large majority of blankets from China come in at less that R5 a kilogram. “The fibre that goes into producing a blanket starts at R20-R25 a kilo so how can you land a blanket in the country at that price?’ And while the majority of under-valuations come in from China, he stressed that it was not the only source of under-valued items. Another area that Sars’ seven-pronged compliance approach will target is illicit cigarettes. “Our interventions will continue to focus on clamping down on cigarettes smuggled via warehouses as well as the diversion of cigarettes destined for export back into the local market.”