South Africa’s Revenue Service (SARS) is to replace the current Customs and Excise Act with the Customs Control Act, Customs Duty Act, and Excise Duty Act.

South Africa’s current customs legislation consists of a law that is over 50 years old. Since 1964, it has been added to and amended, but has now become a cumbersome and unwieldy instrument that is difficult for traders and fiscal authorities to use.

The most significant development is that a new Customs Act and a Customs Control Act have been drafted, debated, and circulated for comment. The acts have been approved by Parliament but will probably only come into effect in 2016.

The laws are designed to recognise the significant changes that have occurred in logistics in the last 30 years and, in particular, to recognise the rise in containerisation. The new laws will fight a rising tide of customs fraud with much higher penalties and include a refusal to allow the importing of goods to inland ports, unless full details are declared at the first place of entry.

The monitoring and enforcement bodies consist of the International Trade Administration Commission (ITAC) and SARS. Because it plays such an important part in generating revenue for the fiscus, SARS has considerable efficient and uncorrupted resources at its disposal. Both ITAC and SARS are staffed and run by efficient and well -qualified managers.

The major risk exposure when it comes to present in trade compliance lies in the fact that existing customs legislation applies heavy penalties to a whole range of entities involved in import and export – including the importer, the owner, the freight forwarder, the clearing agent, and the transporter.

If any one of those entities is involved in fraudulent activity all of them can be punished by SARS for non-compliance with customs legislation. Fraud remains a problem, particularly on imports from China and our firm has dealt with numerous cases whereof, although containerised imports where reputable global auditors have produced quantity and quality certificates, from the contents of the imported containers are not what was ordered and paid for. The only way to avoid fraud of this nature is to rely on established trading partners with whom an importer has a relationship and against whom recourse can be taken in the event of fraud.

South Africa, unfortunately, has a significant number of government agencies involved in trade and, accordingly, importers and exporters face significant compliance costs. Business, through its various organised bodies, is lobbying government to cut red tape and reduce the layers of bureaucracy. Until that is achieved, managing compliance costs is limited to ensuring that traders use recognised and experienced contractors to import, export, and clear their cargo.

The new Acts will mean more severe penalties for non-compliance and greater clarity on who is responsible for compliance. There will be additional responsibilities and accountability placed on directors and employees. All companies importing or exporting will have to re-register with SARS, within 30 days of the new legislation being put in place.

South Africa’s major trading partners include the US, Europe, and China. The US and Europe have far-reaching legislation dealing with money laundering, terrorism, and an extensive list of sanctioned countries and individuals.

It is critical for South African firms who wish to trade with the US and Europe to understand that parallel trade with sanctioned countries or individuals will expose them to penalties in the US and Europe. These penalties can be enforced by way of action against exports to those regions, fines against subsidiaries in those areas, or action against funds transferred through the US Dollar and Euro banking systems.

Customs compliance essentially needs two main things. The first is having an education and training programme for staff that ensures all members of staff dealing with customs issues properly understand the obligations under the customs regulations and understand the nuances of the company’s trade.

If this means employing outside consultants to run training programmes, that it is money well worth investing. The second is ensuring a proper and strong relationship with the relevant SARS teams dealing with that sector of the economy. This will ensure that any minor infringements can be dealt with quickly and any potential problems identified in advance and disposed of before they result in non-compliance.