22 August 2019 by Tax & Exchange Control Alert

Customs & Excise Highlights

This week’s selected highlights in the Customs & Excise environment since our last instalment.

  1. Amendments to the Rules to the Customs & Excise Act, 91 of 1964 Act (Act) (certain sections quoted from the SARS website):

1.1   On 8 August 2019, the substitution in item 202.00 for form DA 1 – Report inwards/outwards for ships.

  1. New authority case law (certain sections quoted from the judgment):

2.1   Acti-Chem SA (Pty) Ltd // CSARS, Case No: 8540/2017 in the High Court of South Africa, Kwazulu-Natal Division, Pietermaritzburg. We quote from the judgment, delivered by Gorven J on 15 August 2019, in relation to a rebate item in Schedule 3 to the Act:

“The applicant contends that it is entitled to a rebate on goods imported by it … The rebate item in question is item 306.07 of Schedule 3 to the Act. This concerns ‘[p]repared waxes, not emulsified or containing solvents.’ The industry under which it is listed is ‘Polishes and Creams’ (the industry) … Following an inspection of the applicant’s books and documents in September 2013, the respondent (the Commissioner) issued a determination letter dated 25 February 2014.This asserted that the imported goods had been used ‘otherwise than in accordance with the item under which entry was intended for.’

…….

And s75(2)(a) provides:

‘A rebate of duty in respect of any goods described in Schedule No. 3 shall be allowed:

a)only in respect of goods entered for use in the production or manufacture of goods in the industry and for the purpose specified in the item of the said Schedule in which those goods are specified.’

…….

The relevant note to Schedule 3 reads:

‘The imported goods . . . shall . . . be admitted for use in connection with the production or manufacture of goods in the industries specified . . .’

The imported goods must accordingly be used ‘in connection with the production or manufacture of goods’ in the industry.

…….

The imported goods are AC 540, an Ethylene-Acrylic Acid Copolymer and AC 673P, an Oxidised Polyethylene Homopolymer (the imported goods). The products manufactured by the applicant using the imported goods are Quecolin ESP and Quecolin HW1 (Quecolin). Neither of these is a polish or cream. They can be used in the manufacture of polishes or creams. The applicant does itself not use them to do so. They can also be used to manufacture goods other than polishes or creams.

…….

The failure to specify under the heading ‘Polishes and Creams’ that the imported goods under discussion must be used for a particular product within that industry does not mean that they need not be used in the industry, only that any product which is a product or cream is acceptable.

…….

In my view, the phrase ‘in connection with’ simply means that the initial importer need not itself manufacture polishes or creams from the imported goods. This can be done by a subsequent entity. However, the manufacture of polishes or creams from the imported goods is necessary before it can be said that they have been used ‘in connection with the production or manufacture of goods in the [industry]’.

…….

If Quecolin is used by others to do so, the applicant’s use is one ‘in connection with’ the manufacture of polishes or creams. I accordingly find that the manufacture of Quecolin without more does not qualify the applicant for the relevant rebate. It must ultimately be used to manufacture polishes or creams in order to do so.

…….

The question, then, is whether the ‘predominant use’ of Quecolin in the polishes and creams industry is sufficient … In the first place, the wording of the present provision does not support this interpretation. If that were intended, the note would presumably read ‘for predominant use’ and not simply ‘for use’. Secondly, the clear purpose of the rebate is to promote the polishes and creams industry. This seems to me to require that the imported goods are ultimately used to manufacture polishes or creams. If this were not so, the rebate would not serve its purpose.

…….

Since the applicant does not manufacture polishes and creams from Quecolin, this must ultimately be done by a subsequent entity for the rebate to apply.

…….

The language of the provisions, the context of granting the Commissioner the powers in question and the purpose of rebates being to promote the industry all coalesce to show that the ultimate, exclusive use of the imported goods must be for the manufacture of polishes or creams. Also, that the polishes and creams must be manufactured by a rebate registrant … Since the applicant does not manufacture polishes and creams and the entities to which the applicant sells Quecolin are not rebate registrants, the rebate claimed by the applicant does not apply”.

The relevant rebate item, being the subject of the judgment, provides as follows:

“.

The judgment therefore confirms that even in the event of the relevant rebate item (above quoted part not in bold) does not specify which exact product must be manufactured from the imported product, the products described in the Industry section (above quoted part in bold) of the item must be manufactured in accordance with the quoted sections of the Act and the notes to the Schedule.

  1. Amendments to Schedules to the Act (certain sections quoted from the SARS website):

3.1   Regarding Schedule 1 Part 1, the substitution of tariff subheadings 7210.11, 7210.12.10, 7210.12.90 and 7212.10, to increase the rate of customs duty on tinplate from free of duty to 10%.

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