The Cova Customs Team monitors legislative updates and changes to South African and global trade legislation where it may impact South African business, on a regular basis. Our highlights appear below, with an option for greater detail, should any of these be specific to your business.

Changes to customs tariffs:

Amendment to Schedule 1 to increase the tariff quota on certain cheeses(two amendments) in terms of the Economic Partnership Agreement with the European Union.

Amendment to Schedule 5 (Note 8) to provide for the granting of arefund/drawback of duty where the customs procedure code was not inserted on the bill of entry.

Proposed changes to amend the customs tariff to provide for duty relief or protection (with due dates for comments):

• Proposed creation of a rebate provision for the importation of styrene-butadiene rubber classifiable in tariff subheading 4002.19.90 used to manufacture tyres.

• Proposed increase in the current rebate provision for woven fabrics of cotton used to manufacture wadding, gauze, bandages, etc.

• Application to create a rebate provision for the import of titanium dioxide(to reduce current duty rate of 10%) for use in the manufacture of paints, varnishes and prepared driers.

SARS customs administration updates:

• SARS commits to a data and technology-driven organisation and advertises senior posts on its website to assist in achieving this.

SARS customs updates:

• Significant changes have been made to the Diesel Refund Scheme(commentary period now open).

Trade updates:

• Brexit has finally happened – no immediate change for the trade in goods.
• New Customs Tariff (HS2022) has been accepted.

Additional details of each of the above items appear below, together with links to the relevant documents.

Changes to customs tariffs

Tariff rate quota (TRQ) changes for cheese imported from the EU

Amendments to Schedule No.1:
The quota relates to fresh (unripened or uncured) cheese, including whey cheese and curd. The quota increased from 7850 to 8000 tons and the allocation changed for all relevant countries (South Africa, Botswana, Lesotho, Eswatini, Namibia)

Government Gazette No. 42985 published on 31 January 2020 (Notice R.82)

With retrospective effect from 1 January 2020

Secondly, for the period below, the quota stayed the same but the allocation changed.

Government Gazette No. 42985 published on 31 January 2020 (Notice R.81)
With retrospective effect for the period 1 September 2019 to 31 December 2019

Refund/drawback of duty now permitted where the CPC is incorrect or has been omitted from the clearance document

Amendments to Schedule No.5:

By substitution of Note 8 to Schedule No. 5, to provide for the granting of a refund or drawback of duty as contemplated in section 75(1)(c), 54D or 54J of the Act in circumstances where the customs procedure code is not inserted on the bill of entry or other export declaration, or have been inserted incorrectly.

Government Gazette No. 42968 published on 24 January 2020 (Notice R.45)

Implemented from 24 January 2020

Application to create a rebate provision on styrene-butadiene rubber (SBR)

The application is for styrene-butadiene rubber (SBR) classifiable in tariff subheading 4002.19.90 (Other: Synthetic rubber), for the manufacture of tyres classifiable in tariff heading 40.11. The applicant is Sumitomo Rubber and the reasons for the application are:

Currently, there is no local manufacturer of styrene-butadiene rubber in the SACU region. The sole manufacturer of the subject product, Karbochem (Pty) Ltd, closed down in 2018.

The customs duty on styrene-butadiene rubber imposes additional input costs in the tyre manufacturing process.

Deadline for comments by interested parties: 22 February 2020

Application to extend the existing rebate from full duty less 11% to full duty on woven fabrics of cotton

The application is to increase the extent of rebate for rebate item 306.02/5208.21/01.06 from full duty less 11% to rebate of the full duty for woven fabrics of cotton, containing 85% or more by mass of cotton, of a mass not exceeding 100 g/m² bleached, in a plain weave, for the manufacture of wadding, gauze, bandages and similar articles (for example, dressings, adhesive plasters, poultices), impregnated or coated with pharmaceutical substances or put up in forms or packings for retail sale, for medical, surgical, dental or veterinary purposes. The general rate of duty is 22%. The applicant is BSN Medical and the reasons given are:

Currently, the bulk of rolls of gauze swabs are imported under tariff subheading 5208.21 with full duty less 11%. The rise in manufacturing costs has escalated, hence to apply for full duty relief.

The company employs 397 people, and the closure of the production facility would result in 197 direct employees losing their jobs.

The impact will be compounded upstream the supply chains as the company sources material and services from various local suppliers

Deadline for comments by interested parties: 22 February 2020

Application to create a rebate provision for the import of titanium dioxide for use in the manufacture of paints, varnishes and prepared driers

The application is to create the rebate provision specifically for Titanium Dioxide classifiable under tariff subheading 3206.11 for use in the manufacture of paints, varnishes, and prepared driers classifiable in tariff headings 32.08, 32.09, 32.10 and 32.11 in such quantities, at such times and subject to such conditions as the International Trade Administration Commission may allow by specific permit. The applicant is Kansai Plascon and the reasons for the application are:

• Titanium dioxide is a vital raw material in the manufacturing of coatings or paint products in the Southern African Customs Union (SACU). In addition, titanium dioxide serves as a vital raw material across many other manufacturing industries, including inter alia adhesives, paper, plastics and rubber, printing inks, coated fabrics and textiles, ceramics, floor coverings, roofing materials, cosmetics, toothpaste, soap, water treatment agents, pharmaceuticals, food colourants, automotive products, sunscreen and catalysts.

• Paint manufacturers are one of the biggest users of titanium dioxide in the SACU market as it is used as the base of most paint colours. Nonetheless, there is currently no SACU manufacturer of titanium dioxide. The last local manufacturer, Huntsman, closed down its manufacturing facility in 2016.

• Since the closure of Huntsman, all titanium dioxide requirements of downstream manufacturers have to be imported at a 10% customs duty. The duty currently serves to unnecessarily increase the cost of importing titanium dioxide and consequently the cost and prices of manufactured end products including paint.

• Given the escalating prices of titanium dioxide on the global market, it is imperative that the rebate facility be created to reduce the cost burden on Kansai Plascon and other manufacturers in the paints and coatings industry.

• Local coating manufacturers are also facing significant import competition of paint originating in other countries. The duty on titanium dioxide thus creates a cost and price disadvantage for locally manufactured paint.

• There is a potential local manufacturer of titanium dioxide, Nyanza Light Metals, and support for this effort is acknowledged. The creation of a rebate facility will be an equitable solution for all parties whilst Nyanza Light Metals continues with its work for construction of a titanium dioxide plant.

Deadline for comments by interested parties: 28 February 2020

SARS Customs Administration Changes

SARS commits to a data- and technology-driven organisation and advertises senior posts on its website

SARS has embarked on a recruitment drive as part of its “journey to reimagine a future revenue authority where increasingly its work will be informed by data-driven insights, self-learning computers, artificial intelligence and interconnectivity of people and devices”.

SARS Customs Updates

Overhaul of the diesel refund scheme – may now be collected by SARS Customs

SARS Customs has published the first drafts of revised diesel refund rules, forms and notes. Extensive consultations took place in 2017, with affected industries and a paper entitled the "Review of the Diesel Fuel Tax Refund System" was also published. This revision is also as a result of workshops and other interactions held in 2018 and 2019. These drafts present an initial view of the diesel refund administration and will form the basis of further industry engagements during the course of 2020.

Deadline for comments: 16 March 2020

Trade updates

Trade between the UK and SA continues after UK exits the EU

On 31 January 2020 the UK left the EU. There is a transitional period until 31 December 2020 during which the UK will remain a member of the EU for purposes of international trade agreements. One of these is the EPA (Economic Partnership Agreement) between SADC and the EU. Given the impending Brexit, a new agreement was entered into in September 2019 which will be known as the SACUM-UK EPA. This will enter into force next year in the event that the existing EPA no longer applies to the UK (i.e. after the transitional period mentioned above).

No tariff changes but companies will need to understand the documentary changes.

HS2022 has been accepted (implementation date: January 2022)

All contracting parties of the World Customs Organisation have accepted the new edition of the Customs Tariff. There are major changes, across numerous chapters (351 changes in total). Interesting products and industries that will be affected include:

• E-waste

• E-cigarettes and other novel tobacco and nicotine-based products

• Drones

• Smartphones

• Diagnostic kits used by the health profession during times of rapid outbreaks of infectious diseases

• Specific chemicals controlled under the Chemical Weapons Convention.

Companies need to start reviewing the changes in 2020 so they are ready for implementation in 2022.

Cova Advisory