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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.

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Clearance Instructions: PURPOSE

          It is commonly referred to as the Clearing and Forwarding Instructions. Such instructions are made out on a shipment level. There are two components namely 1) Clearing, and 2) Forwarding. The completion of the form is a requirement by the LSP (Logistics Service Provider) for a Trader to ‘instruct’ or inform them of clearing and forwarding requirements.

          The ‘forwarding’ components of any instruction is not a legal requirement. It assists a LSP to understand all logistical requirements per shipment. Examples of forwarding instructions may include the mode of transport, packing, loading, delivery, unpacking requirements, temperature control during transport, and any special requirements.

The Customs Clearance information on the instructions is a legal requirement in both the old and the new Customs legislation. The Clearance Instruction is dealt with in section 176(1)(c) of the Customs Control Act number 31 of 2014, and in Rule 7.6 of the Rules to the Act. SARS has not provided a standard template of this form.

LSPs therefore improvise by setting up their own templates. While traders are generally requested to complete the “Agents” Clearing and Forwarding Instructions, some large traders use their own templates. There is nothing untoward about whoever’s template is used, so long as the minimum legal requirements are contained therein. Some large Traders supplement the Clearing and Forwarding Instructions with SOPs (Standard Operating Procedures). The SOPs are designed to apply to all shipments as a standard requirement of the Trader’s needs, i.e. for large quantities of highly repetitive clearances. This allows the instruction form to be simplified or even nullified. Such methods are normally accompanied by indemnities at contractual level.

            So, what are the consequences of incorrect instructions, or not using instructions at all? Any incorrect or false information supplied to SARS Customs is an offence in terms of the legislation. The instruction shows the real intention of the trader at time of clearance. For example, if the importer requires a shipment to be cleared under rebate of duty but who accidentally instructs the LSP to bring duties to account, SARS Customs may argue that the importer had no intention to make use of the rebate facilities in the first instance. The importer will have a tough time qualifying for a reimbursement of the duties in a subsequent refund application. One occasionally lands up seeking legal recourse which is a cumbersome affair.

In the new legislation, a consequence of the Clearance Instruction not being utilised at all is that all Customs liabilities may become transferred from a Trader to the LSP. While this may appear to set the Trader free from Customs liability, the Trader may in the same instance lose legal standing over his own shipment. This double dilemma (i.e. transfer of liability and losing legal standing) affects both parties negatively.

            In the new legislation, the Clearance Instructions will become more important for the clearance of goods than before.

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Product Implementation with your LSP (Logistics Service Provider)

          This primarily involves tariff classification and you’re TPL (Tariff Parts Library). It will also involve landed costings, Customs TDN (Tariff Determinations), which purpose codes to use (i.e. whether duty paid or rebate clearances), certificate or permit requirements and how part numbers and descriptions must be captured. Many of these aspects will be communicated on the Clearing Instructions to your LSP on a shipment basis. However, it is a good idea to have a holistic discussion about these on a regular basis. For now, we will delve into the tariffing procedure and your TPL.

          There are different approaches when aligning the tariffing procedure with your LSP. These mostly involve the process to be followed for tariffing, responsibility, liability in some cases and sources of information. Your decisions will be influenced by how you and your company view compliance, as mentioned in the Blog “A2 Who’s Responsibility is Self-Compliance”.

          However, you should not allow issues pertaining to responsibility and liability to get in the way of one primary fact namely, that you must be compliant. The authorities are more concerned with the fact that the information must be correct.

          Most TPL are built over time. As and when goods are imported, product codes and descriptions are added to the list and tariffed. What you end up with is a TPL. It will be a good idea for you to keep a central database of your TPL on your premises, especially if you use multiple logistics service providers. In this way you can ensure that different LSPs consistently use the same tariff headings when clearing the same products. It may also help you to monitor when an agent suddenly changes tariff headings. There would normally be a good reason for this. It also helps with consistency when you decide to move from one LSP to another, for whatever reason. You do not want a second or even a third LSP to start the process from afresh. This increases your risk.

          For Traders participating in the PT (Preferred Trader) accreditation system, SARS will be interested in your TPL. They will conduct audits on your premises and that of your LSP. They will want to determine whether you and your LSP have the same information. This speaks to the concept of integrity. They will want to know that you are personally involved in establishing, auditing and maintaining the TPL, even if this is being managed by a third party.

          Finally, always ensure that you receive periodic (i.e. monthly) updates from your LSP of new parts and tariffs that are added to the TPL.

0 comments on “Business Implementation with your LSP (Logistics Service Provider)”

Business Implementation with your LSP (Logistics Service Provider)

          Most Traders use one LSP (Logistics Service Provider) for both the Freight Forwarding and Customs Clearing components of their business. Some use separate LSP, one for Freight Forwarding and another for the Customs Clearing. The reasons for the latter may be for cost benefits, to meet buyer or supplier requirements or because of the Incoterms (International Commercial Terms) agreed. There may be more reasons for this but, whichever the case, there will need to be a full implementation of both your Freight Forwarding and Customs Clearing requirements with your LSP.

          Most LSP companies have specific implementation procedures. These may take different forms of SOP (Standard Operating Procedures). Documented procedures will be used to implement your specific requirements for customs and logistical processes. Some information will also be pre-captured onto the LSP internal IT systems.

          As mentioned in previous blogs, the more your LSP knows about your business, the better off you are. In fact, why not invite some of the staff from your service provider to your premises for a guided tour. Take them though your business processes and production line. Show them the product/s you import, produce, process, sell or export. This will help freight forwarding personnel to gain a better understanding of your requirements and unique logistical challenges, i.e. packing space, loading bay restrictions, temperature control, delivery time frames, etc. It will also help the forwarding personnel to guide the Customs Clearing procedures within their own (LSP) organisation.

          Personnel involved in Customs clearing who visit your premises will gain a better understanding of the unique characteristics, features and design aspects of your import or export products. This will help for tariff classification issues which affect the rates of duty and the OGA (Other Government Authority) requirements, i.e. for certificates and permits.

          Any LSP which conducts both of the freight forwarding and Customs Clearing components of your business will generally have a well-integrated communications and document control system to manage your work. A seamless integration of all procedures is achieved. Using different LSPs for the Forwarding and the Customs Clearing components may occasionally have its challenges, especially with regards to document handover procedures.

          The consequences of getting this wrong may impact on your business negatively regardless of who is responsible for errors in the process.

          You will want to ensure that all procedures and requirements are well communicated and implemented with all parties at all times.

0 comments on “Advance Research of Import & Export Requirements”

Advance Research of Import & Export Requirements

          I have seen it all too often. Consignments imported or exported without the required documents or an understanding of the duties and taxes involved.

          I recall a particular occasion when an importer came to visit us at the local Customs Branch. He had imported a consignment of wooden articles and curios from Bali, Indonesia. The consignment was stopped and inspected. Some of the articles had no import certificates (wooden articles require treatment certificates). Some of the articles had no import permits (second-hand or used goods require an import permit). And, some of the goods were cleared with incorrect descriptions and therefore with the incorrect tariff headings. This resulted in an under-payment of duties and taxes as well as the seizure of half of the consignment.

We had a meeting with the importer who was overwhelmed at the time. During the meeting the gentleman started to gasp for air, stating that this would be the end of his marriage and the farm he owned. I spotted a brown paper bag near to me; a sample drawn from a previous consignment. As he leaned to the floor we began to resuscitate him with the paper bag. We then gave him some water to help him relax. He recovered from the hyperventilation incident and went on to comply with the requirements where he could.

          But private individuals are not the only persons who make such mistakes. In another incident a company imported a large machine to go into a plant in the nearby vicinity. The company failed to declare the full value of the consignment (i.e. being part payment, he only produced invoices for the 30% advance payment and not for the full amount). This resulted in a large underpayment in duties and taxes. In order to obtain the machine from Customs storage, and in order to save face with his local buyer, the director of the company sold numerous company and private assets (including his house) in order to pay for the shortfall. I believe that the gentleman went on to make a success of his business.

          Advance research of the import and export requirements is key. But do not stop at only the Customs requirements. There are about 13 OGA (Other Government Authorities) which may intervene in your consignment. Some of these include for example: ITAC (International Trade Administration Commission); NRCS (National Regulator for Compulsory Specifications); and the PHO (Port Health Officer) to mention a few. For the OGA, you can visit the SARS website where you can review the List of Prohibited and Restricted Imports and Exports. This will help you with many of your permit and certificate requirements. Go to www.sars.gov.za. Search under “Customs” and then “Travelers”. The list applies to corporates as well.

          You will need to know your product very well, conduct your own research, and ask for advice from your Customs Clearing Agent. From time to time you should also ask for a second opinion, especially if you are not sure of something.

          Finally, do this before the goods are on the water. Do this even in spite of the provisions of the new Customs legislation; the conditions of which have changed in this regard.