Customs Supporting Documents: AVAILABILITY

          “Immediate” is the only phrase left to describe the level of availability of supporting documents for Customs today.

          The logic behind this has to do with the fact that in order to have submitted a Customs declaration, one had to have had the relevant documentation to do so. In addition, with the speed of electronic communications today there is little reason why documents cannot be made available on demand, barring public holidays in the supplier’s country, and time zone variants.

          In the new Customs legislation it is stated that any documentary requests must be complied within 24 hours of request, unless otherwise specified in writing. When SARS Customs conduct large audits they will generally provide longer periods of time, such as 7 or 14 days. One may in some instances be able to negotiate for longer periods of time.

          Most supporting documents may be presented to Customs in photocopy format. They do not need to be original. However, there are some exceptions. When requested, permits, certificates and in some cases invoice declarations must be original. The invoice declaration (which has to do with trade agreements and preferential rates of duty) must in some instances, contain the supplier’s original signature. Traders who qualify for preferential rates of duty via trade agreements such as the TDCA (Trade, Development Cooperation Agreement) commonly referred to as the EU / SA Trade Agreement, and the SADC (Southern African Development Community) must supply original certificates on demand.

          Failure to provide documentation on time is an offence in terms of the new legislation. Furthermore, failure to provide full and accurate information which results in revenue prejudice is a disciplinary offence. Such offences are subject to a minimum penalty of R 2,500.

          Your LSP (Logistics Service Provider) will have most of the documentary requirements on hand. Most LSPs keep these records in electronic format, which makes it easy to access and to pass on. However, one challenge facing the industry and traders now is the length of time for which records must be stored. In the new legislation, records must be maintained for a period of 5 years including the year in which it was created. This may have the effect of having to keep records for nearly six years in some instances. Records (whether physical or electronic) must be kept on site for a period no less than 12 months.

          Literature (which was discussed in the former blog) will remain a challenge for some.

Customs Supporting Documents: LITERTURE

          Literature requirements for Customs purposes are somewhat misunderstood. Yet it is something that Customs require fairly often.

          The production of literature is primarily required for tariffing purposes, a process we also refer to as classification. The tariff code affects the rate of duty as well as the prohibition and restriction of goods. It is therefore important to be able to produce the correct literature at short notice.

          So, what is literature? Literature is exactly what you are reading now. It is a document containing literary work. The literary work for Customs purposes has to be descriptive. It must contain a 100% breakdown of the constituent material of the product. It must include product specifications, drawings, design works, functionality, features, or a chemical analysis. Although ‘what the product is going to be used for’ has no bearing on classification, it does help the reader to understand what the product is. Tariff classification is based purely on what you see in front of you, and not what it might become or be used for later on.

          Literature has to be merit based. The merits of literature hinges on three aspects.

Firstly, it must be generated or documented by the supplier, not the importer. The reason for this is that an importer has a material interest in how the rates of duty are affected. An importer may therefore provide false or misleading information. The importer was not party in the production of the product. According to the authorities they therefore have no authority to comment on the constituent material of the product; strictly speaking.

Secondly, literature must be formally documented. It cannot be a hand or type written letter or e-mail drawn up by an individual or company. Literature is normally documented by persons who hold some authority over the product, i.e. product development specialists, laboratory scientists, a manufacturer and so forth. Literature may also be given authority by virtue of it being printed on a formal company technical or specifications letterhead, pamphlet or catalogue. In some cases SARS may accept explanations on a supplier’s letterhead, but not in all cases.

          Thirdly, the identification marks and numbers on the literature must correspond to the marks and numbers embossed on the product. If these do not match, the literature is insufficient. Likewise, the marks and numbers on the literature must match that of a commercial invoice.

          There are cases where supplier’s literature is very hard to come by, normally owing to trade secrets. In such instances, the literature may be sent to the Customs authorities directly from the suppliers e-mail address (as an attachment), with prior arrangements. Customs Officials are legally bound to confidentiality clauses. Alternatively, a third party (i.e. independent), nationally accredited chemical laboratory may conduct a chemical analysis of the product. This can be done at the importer or exporters home country. Customs however do not take responsibility for the analysis fees even though they may, in the absence of literature, demand such analysis.

          Finally, a MSDS (Material Safety Data Sheet) is not normally an acceptable form of literature. A MSDS does not contain product material information other than what is required for safety purposes.

Customs Supporting Documents: THE AUDIT TRAIL

          In my early Customs days, assembling supporting documents was like a ritual. It was even like a science. We would dismantle and re-assemble hordes of documents. There was a method to it and a purpose behind each file type. It was important to collate and re-assemble documents into a specific sequence. It had to do with a concept known in the auditing profession (and numerous others) as the “Audit Trail”. An Audit Trail in this scene has to do with a set of documents which, if put into order of occurrence (whether in forward or reverse order) should resemble a chain of events. The chain tells you a story. Anything missing in the chain or that is out of sink in the story is cause for concern and hence, cause for an in-depth assessment.

          Today, much of this concept of sequence and feel has being lost to EDI (Electronic Data Interchange). However, it remains a very important concept to know for any type of assessment.

          Whenever Customs request for a standard set of supporting documents, the following should be supplied (these are listed in a somewhat traditional sequence for assessment purposes):

1)      Customs Release Notification, if applicable.

2)      Customs Declaration, if applicable.

3)      Commercial invoice.

4)      Packing list.

5)      Customs Worksheet.

6)      Transport document.

7)      Freight statement.

8)      Certificates and Permits.

9)      Customs Vouchers of Correction, if applicable.

10)  Literature.

11)  Any other supporting documents specifically requested. These may include indent orders, proof of payment and contracts of sale, supplier price lists, third party contracts, and so forth.

Whenever analysing a set of documents, sit back and review the chronological order of the pack and sequence of events. Ask what should come first, what follows and so forth? You will quickly see if something is missing.

Here are some examples of things you can look out for. Ask yourself: does the indent order number appear on the invoice; does the invoice number appear on the packing list; do the product codes on the invoices match the packing list; do the product codes which appear on the invoice reflect properly on the suppliers literature; are all the invoice pages present (i.e. the last page which contains valuable information is often left off); do the invoices reflect the full payment (i.e. not only the 50% advance payment); are all the invoice numbers which appears on the proof of payment present; do all the values, weights and quantities on the invoice and packing list tie up to the transport document; and so forth.

          Photocopies of supporting documents are generally acceptable today. The only real exceptions are permits, certificates, and in some cases invoice declarations. Invoice declarations pertain to trade agreements where the authorised signature on the invoice must be original. The rest may be photocopies unless the authorities request the originals to be produced.

Clearance Instructions: CONTENTS

          Much of the contents of the Clearance Instructions will become the contents of our discussions which follow this Blog.

          One departure from past requirements on the Clearance Instructions is the insertion of the tariff heading. In the past, traders were required to indicate the tariff heading on the Clearance Instructions. Today, SARS Customs is giving the option for traders to provide either the tariff heading, or a precise description of the goods. It is in any event a requirement in terms of the legislation that traders must provide a description of the goods on the commercial invoice. What is different here is the word “precise” description. Most commercial invoices today contain abbreviated descriptions, if at all. The description now required on the instructions (if provided in lieu of a tariff heading) should be enough to allow both the LSP (Logistics Service Provider) and Customs with the ability to tariff a product without further inputs or literature to be produced.

            The contents of the instructions proposed in the Rules to the new legislation are included below (abbreviated):

a) Name and customs code of the principal issuing the instruction.

b) Customs procedure or whether for home use.

c) Origin of the goods.

d) Origin determination, if applicable.

e) The tariff heading or a precise description of the goods.

f) Tariff determination, if applicable.

g) Price paid or payable.

h) Quantity of the goods.

i) Valuation method.

j) Value determination, if applicable.

k) Any advance ruling applicable to the goods.

l) Destination of the goods.

m) Trade agreement, if applicable,

n) GSP (General System of Preferences) if applicable.

o) Tax payment method.

p) Any other information which may be applicable.

The Customs procedure (point b) is similar to the old Purpose Codes (i.e. Duty Paid, Industrial Rebate, etc.).

The ROO (Rules of Origin) (point’s c – d) are becoming more important to Customs than before. It will eventually become a larger area of study than tariff and valuations. This is because of the increasing importance of regional trade agreements such as the TDCA (Trade, Development Cooperation Agreement) commonly referred to as the EU / SA Trade Agreement, and the SADC (Southern African Development Community).

Advance rulings (point k) is a new buzzword in the new legislation. All Customs Rulings (i.e. Customs Determinations) regardless of their nature will be valid for a period of three years only. Traders will need to re-apply for Customs Rulings every three years for them to remain in force.

Trade Agreements (point m) relates to preferential rates of duty. This is similar to ROO.

Tax Payment Method (point o) relates to whether SARS must be paid by cash, deferment or Vat only payments. This is normally managed by your LSP.

            These issues will be discussed in the numerous Blogs and Sections which follow.

Clearance Instructions: METHODS

          The SARS legal division is currently reviewing some of the methods of instructions discussed below. These discussions are inclusive of all the methods and considerations that are still under review.

          SARS has become pretty serious about the requirement for traders to complete the Clearance Instructions. Going forward, all new trader registrants will need to indicate which personnel in their organisation have the authority to sign Clearance Instructions. The new application forms will contain provision for the name, designation and identification number of the individuals who are duly authorised to sign on their organisations behalf. When clearance documents become queried or audited by SARS, they will be in a position to verify the details and signatures on the instruction with their internal records.

          There are four methods which may be used for completing a Clearance Instruction:

1)      Clearance Instruction: this is a form which is completed by the Trader per shipment.

2)      Singular Clearance Instruction: this term recently coined by SARS is a blanket instruction used for repetitive clearances of goods of a similar or identical nature over a specified period of time.

3)      Draft Clearance Declaration: a ‘draft’ Customs clearance declaration may be completed by the LSP (Logistics Service Provider), printed, and signed by the Trader. The signed Draft Declaration may be used as a Clearance Instruction,

4)      Power of Attorney: a trader may sign a Power of Attorney over to the LSP who may in turn complete Clearance Instructions on behalf of the Trader.

A Singular or Blanket Clearance Instruction would normally be accompanied by an indemnity to the LSP. The indemnity will serve to indemnify the LSP of any risk should the information pertaining to the Singular Instruction change without prior notice. It is important therefore to ensure that the LSP is continually informed of any changes such as a change of personnel (who are authorised to sign instructions), company details, clearance requirements, and so forth.

          Signing a Power of Attorney over to a LSP grants the service provider with the authority to complete instructions on your behalf. This has the effect of handing your rights over to the LSP and by virtue of this, indemnifies the LSP against recourse. It will be equally important to keep your LSP abreast of changes in clearance requirements.

          It is advised that traders who make use of methods other than the standard Clearance Instructions should review these forms annually. This is in any event a requirement by SARS Customs for those Traders who are involved in the PT (Preferred Trader) accreditation system.

          Going forward, Clearance Instructions must be complete for all modes of transport, even for airfreight clearances.