Industry has raised concern over long delays in the issuing of tariff determinations (TDN) which are taking anything from six months to a year due to a massive backlog at the South African Revenue Service (Sars).
Industry experts told FTW it was an accepted fact that an application for a TDN would take a minimum of six months to a year to be finalised. This is contrary to the customs and excise act which stipulates that these decisions must be considered within 90 working days.
According to a source, more than 60% of TDNs are applied for as a direct result of customs interventions such as physical inspections and post-clearance audits where the declared HS Code is overturned by customs. This inevitably results in additional duty and VAT (and penalties) being called for.
“The only course of action is for the importer to lodge an Internal Administrative Appeal, supported by an application for a tariff determination, which is in itself an unfair process as the trader must prove that customs is wrong, not that they are correct,” said Clifford Evans, customs liaison manager for Berry and Donaldson.
“This is where the problem begins as these applications must be submitted to the branch office where they are captured and then forwarded to the tariff section in Pretoria.” There were endless examples of applications takings months before being captured in the local branch office, said a clearing agent working in Johannesburg.
“Our company sent an application in January to the branch office and it has yet to be captured,” he said. “We have another pending application that was sent to head office by the branch office in January and that application is not close to being on the system yet.”
He said it often took anything from two to four months to be captured by a local branch office. “That in itself is ridiculous. If one calls and asks why it is taking so long they simply say they are backlogged. One could possibly understand a backlog of a month or two but this has now been going on for two years.”
Appeals and TDNs in Cape Town are not processing any faster and are unattended for months. “These applications are being held up for anything up to three months in Cape Town and then, when they finally reach Pretoria, we are informed that there is a backlog of six months (in many cases this is extended to eight months),” said Evans.
According to Sars spokesman Sandile Memela, the time taken to issue a TDN depends on several factors that include amongst others the complexity of the commodity to be classified, the completeness of the application, the number of applications received at head office, and the time lapse between the submission at the branch office and the capturing and forwarding to head office.
He confirmed the process was taking longer than usual at present. “There are many reasons for the massive increase in the number of applications for tariff determinations,” he said.
“The compulsory application by every manufacturer and importer of alcoholic beverages for a tariff determination, the introduction of the Health Promotion Levy on sugary beverages, and the necessity of obtaining tariff determinations for registration purposes where clients are unsure of where to classify the products – as well as the shortage of staff to deal with the increased demand.”
This, he said, had resulted in a backlog. “However, Sars has put measures in place to address the backlog – which include the appointment of additional staff in this critical area, the working of overtime and making use of graduates from the graduate programme,” said Memela.
Industry experts say these measures have yet to make a practical difference on the ground. “One must not forget that while this process to get a TDN is taking place, the trader is forced to pay the rate of duty demanded by customs and not the rate of duty declared – and in the unlikely event that the ruling is in the client’s favour, refunds may be applied for.”
Industry, however, only has a two-year window period to apply for the refund. “The way the act is worded the trader is allowed to apply for the refund two years prior to the determination by the commissioner. So, every day that goes by that you are waiting for a TDN is one day less to apply for the refund,” said an industry source.
“The refund process is yet another time-consuming process that has an enormous financial impact on small to medium businesses,” said Evans. “There is consensus that customs officers are, at the time of intervention, incorrectly classifying goods based on revenue and not the general rules of interpretation process.
The backlog has therefore been created by customs themselves as they must now deal with possibly thousands of TDN applications from unhappy clients who do not agree with the commissioner’s decision.”
According to Memela the window period may be shortened due to a possible delay in the issuing of a tariff determination. “But even so the period is considered to be ample to apply for a refund of duty. Secondly, not all applications for a refund are dependent on a tariff determination,” he said
