In response to a letter relating to determinations, Jed Michaletos, SA Revenue Service chief officer Customs and Excise, assured me that they would always act as a neutral party in accordance with the Revised Kyoto Convention. This is a critical factor in our system as this is also related to our GATT agreement and our commitment as a member of the World Customs Organisation.
For those who are interested, the United Nations Conference on Trade and Development (Unctad) has written an extremely interesting article entitled ‘Non-tariff measures to trade’ which explains indirectly why neutrality is a critical factor and also relates to measures that distort normal trading conditions.
Authorities can distort international agreements and impede trade indirectly - and from that article one can understand how an incorrect determination can impede trade. It goes further than this however as it also points out that authorities should also not indulge in measures that deliberately delay or obstruct trade using bureaucratic measures.
Apart from the obvious examples in relation to determinations which are deliberately incorrect in classifying a product, there is a clear-cut example of impeding trade in relation to the delay in the issuing of Letters of Authority (LOAs) by the National Regulator for Compulsory Specifications (NRCS) - with the time lag of 120 working days to approve LOAs.
It’s therefore clear that an authority that claims to adhere to GATT and the Revised Kyoto Convention must not only act as a neutral party but also as expeditiously as possible and make sure that the authorities act as an independent body.
My hope is that once the dust has settled in respect of the delayed Customs-related Acts that an independent body will be created to adjudicate determinations. It can act as an as an intermediary in order to avoid expensive litigation which is beyond the reach of most traders.
The Tax Ombudsman could be used if it becomes fully independent from Sars and is allowed to intervene in any disputes that arise beyond the limited scope it has at present and which stops once an issue becomes a legal dispute..
The establishment of an independent Customs court (independent from Sars) may also be an alternative solution. A suggestion was made to me once that determinations should be handled by an independent body to the Sars Customs.
The objective of all these ideas is to make sure that when a determination is made it is done on a neutral basis not influenced by revenue, budgets or performance bonuses.
In the past there was transparency in tariff determinations because such determinations were published in the Government Gazette. It is highly recommended by the Revised Kyoto Convention that tariff determinations should be published. Regrettably this procedure was abandoned by Sars Customs claiming it was too laborious.
The reason I say regrettably is because by publishing such determinations this can serve as a guide to traders and more importantly a monitoring system can be set up and an industry can react if a wrong classification is made that might give a competitor an advantage.
It is critical that all determinations should be published even if it is in an abridged format. The name of the company and product plus the tariff heading should be sufficient in a situation where a company does not want to disclose a formula. Once a product is released in the market place the secrecy of the product can soon be discovered by a competitor in this modern age. It is therefore difficult to understand why secrecy is necessary. Transparency is a critical factor and can become a valuable tool in avoiding inconsistencies in classifications which can create unfair competition and in some instances loss of revenue.
In relation to tariff classification I was delighted when I heard of the appointment of Theo Colesky to oversee the tariff classification section. He wrote an excellent, very interesting thesis on tariff classification titled ‘A complete study on Customs tariff classification’ which I found an extremely well researched document and a must-read for anyone involved in classification. It’s unfortunate that someone with his credentials is no longer involved with this department of Sars.
