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Knowing your Rights: The Appeals Process

          Now that we have discussed searches, the Customs demand and the pre-appeals process, we can go through the formal appeals process.

          You have received the Letter of Demand and you have decided to go with the internal appeals process with SARS Customs. Also, you have paid up all the amounts demanded which will include the outstanding duties, taxes, penalties and interest.

You will have 30 working days from the date of the Letter of Demand within which to lodge the first appeal.

          The first level of appeal is with the local Customs Branch Office which made the adverse decision. This is called the IAA (Internal Administrative Appeal) process.

If this fails, the second level of appeal will be with the Office of the Commissioner for the SARS. This is called the ADR (Alternate Dispute Resolution) appeals process. Your appeal may be mailed directly to the Commissioner’s Office or alternatively, it may be addressed via the local Customs Branch Office.

          You will have 30 working days after the IAA response letter (if unsuccessful) from SARS to appeal by ADR. In each instance, SARS is required to establish a separate and independent review committee known as the Appeals Committee. You may also (in addition to written representations) elect to make representations in person to the Appeals Committee.

          In some cases (prior to appealing) you might require SARS Customs to provide further explanations or reasons for a decision made. If so, you should, within the 30 working days in any instance, request reasons from SARS in writing. Going forward, extensions of the 30 working days within which to respond to an appeal may also be granted, upon request. A maximum of 15 calendar days may be provided.

          In the new legislation SARS will have 60 calendar days within which to respond to any appeal with a decision. The Commissioner may extend this by an additional 30 calendar days. If SARS does not respond with a decision within this timeframe, the case will automatically be won by the applicant.

          The period 16 December to 15 January (inclusive of both dates) are excluded in any periods of limitation.

          There is also provision for an Ombudsman in the new legislation.

          You are in any event advised to consult with a professional prior to attempting to appeal any matter by yourself.

          Anyone involved in the appeals process may at any time still decide to follow litigation. The period of time normally allowed for litigation following the last decision made by SARS (whether in or outside of the internal appeals process) is 12 months.

          However, there are additional time constraints involved in this process which relates to the PAJA (Promotion of Administrative Justice Act) number 3 of 2000. Traders are advised to consult with a Customs Attorney in advance. Litigation however is normally reserved as a last resort.

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Knowing your Rights: The Pre-Appeals Process

          Appeals with SARS Customs follow a logical process. The process was designed to comply with legislative requirements such as PAJA (Promotion of Administrative Justice Act) number 3 of 2000 and the Customs legislation.

          It is not frowned upon therefore to challenge the authority if you have a disagreement. You also do not need to concern yourself with any fear of reciprocity of additional audits. The days of old are long gone. On the contrary in fact, SARS Customs encourages their clients to follow the appeals process.

          The new Customs legislation makes provision for a lower order of appeals termed a “reconsideration of decision”. The process explained in the following paragraph will explain this to some degree.

          The first step after an assessment is that you will receive a notification from SARS containing an initial finding. For live shipments this will be an electronic notification received by the LSP (Logistics Service Provider).

          Disputing electronic notifications is more challenging.

          This was discussed in the former Blog (Knowing your Rights: The Customs Demand).

For post audits it will take the form of a Notice of Intent. A Notice of Intent is a notice of their (SARS) initial finding and their intention to issue a Letter of Demand. It provides the Trader with the ability to make representations to Customs. In a Notice of Intent you will generally be provided with a period of 7 or 14 days within which to respond. You do not need to pay any duties, VAT or penalties at this stage. You should assess the applicability of the Customs assessment and if in-applicable, you should write back to them with your own findings. It is extremely important to submit a well-motivated response during this early stage. It is also important to do so within the specified period of time. Failure to do so will result into a Letter of Demand being issued. You may request for an extension of the notice if you run out of time. Any win or termination of the process at this stage will result in the least intrusive consequence of the entire appeals process. If the result of the “reconsideration of decision” is not in your favour, you will then receive a Letter of Demand.

          In a Letter of Demand you will be expected to pay or alternatively to revert to litigation. In litigation you do not pay until such time as your case is formally lost in a court of law. However, it is generally advisable to engage in the SARS Customs appeals process prior to reverting to litigation.

          By choosing to appeal internally with SARS Customs you must first pay. In so doing, you are agreeing to abide by the Commissioners decision regardless of the outcome. However, there is a process of recourse for adverse decisions at every level of the appeals process. These will be discussed in the blog which follows.            

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Knowing your Rights: The Customs Demand

          Pay now, dispute later… really! Yes really. Your consignment was stopped, your production line is threatened, Customs has a finding and they want you to pay. Both sides have a material interest in the concept of “pay now, dispute later”.

          For live shipments this could present a real problem. Until such time as all outstanding issues are settled your shipment will not be released. This is where your supporting documents and literature (discussed in former blogs) become essential. There are occasions when Customs notifications for administrative action are illogical. But the illogicality thereof can only be proven upon the production of supporting documents and explanations. Your LSP (Logistics Service Provider) will want to upload supporting documents to the Customs electronic system speedily; in order to obviate the action demanded.

          But some traders whose production line is at risk can simply not wait, no matter how illogical. They would prefer to comply with any demand, especially when smaller penalty amounts are involved.

          This approach is going to present problems in terms of the new Customs legislation. Minimum first penalties will be R 2,500 (in the Control Act) and R 5,000 (in the Duty Act). Each subsequent penalty covering the same contravention will thereafter double-up. This rationale will be applied over a period of three years where after your records will be wiped clean to start afresh.

          Another consequence of accepting an illogical decision is the precedence it creates. Once accepted and paid, Customs may expect that subsequent shipments must be treated in the same illogical manner. Also, Customs Post Clearance Inspection Teams will want you to bring additional duties and VAT to account for all prior shipments going 2 years back (this will be 3 years in the new Customs legislation).

          Another big concern about simply paying now and disputing later is that winning disputes with SARS Customs is difficult. In many instances it requires real expertise to appeal a decision. Doing so may occasionally involve employing an expert and paying a consulting fee for such expertise.

          But, any win in the appeals process will help to improve your record of good standing. Therefore, if you have any inclination whatsoever that you may win a dispute with SARS, then you simply must appeal.

          If the Customs findings fall into a grey area of uncertainty, there is another course of action you can take. You can lodge a provisional payment as surety to cover the potential difference in duties and VAT and to cover any penalties, pending finalisation of the matter. These normally relate to Customs Determinations for tariff and valuations. You will still pay initially however, the amounts paid pending a firm decision vide a firm Ruling (i.e. Determination) by the Commissioner for SARS will serve as surety during which time you can appeal. Such sureties are refundable upon a favourable outcome of any Determination.

          Nowadays it is not uncommon for Traders (and even LSPs) to pay for legal and technical expertise to aid in the appeals process. The avoidance of unintended consequences is far more appealing.

          Finally, court action may be another alternative however; this is a whole new league of appeal and will not be covered here.