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Customs Licensing – Trade Agreements

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Both importers and exporters can benefit from Customs Licensing – Trade Agreements.

Importers benefit from rates of duty which are lower than the General rates of duties at time of import.

Exporters benefit by positioning themselves as preferred suppliers for goods imported at destination countries. The benefits are import duties at lower rates.

While exporters from South African need to register for a Trade Agreement, importers into South Africa can benefit without registration. Importers merely need to produce the proof of origin to qualify.

This all seems fairly simplistic. In this blog we provide clarity on the inner workings of the ROO (Rules of Origin) and Trade Agreements.

Origin of Goods

But first, SARS Customs requires that the origin of the goods must be supplied or proven.

The origin of goods in this context is a separate issue from origin for Trade Agreements.

When it comes to “Origin”, the question simply is… “where do the goods come from?

The origin is understood from the Customs Act to be as follows.

Origin in the Customs Act

What is required?

  1. 25% of the materials produced or labor performed must be in that territory
  2. The last process in the production or manufacture of those goods must have taken place in that territory, or
  3. As otherwise determined by ITAC (International Trade Administration Commission) in respect of certain goods.

Why is the Origin of Goods Important?

The Origin of Goods is Important to Determine the following aspects:

  1. MFN (Most-Favored-Nation treatment) (i.e. for duty and non-duty benefits)
  2. Anti-dumping duties
  3. Safeguard measures
  4. Origin for physical marking requirements
  5. Trade statistics
  6. Import and export restrictions from specific countries, and
  7. Countervailing duties.

Proofs of Origin

Origin is normally proven by the supplier. The supplier must endorse the Commercial Invoice with the origin of the goods on it.

Certificates of Origin may also be supplied. These are normally issued by Chambers of Commerce, Government Departments or Statutory Bodies.

Where different rates of duty apply to goods originating from different territories or the extent of rebates under Schedule No. 3 (Industrial Rebates) is affected by the origin of the goods, then a COO (Certificate of Origin) must be produced.

Trade Agreements

A Reciprocal Trade Agreement means that the benefit of duty reductions flows in both directions. I.e., an agreement between South African and the European Union means that duties may be reduced in both countries.

A Non-Reciprocal Trade Agreement means that the benefit flows in one direction only. This is most prevalent when an MFN (Most Favored Nation) statis is conferred from one country to another. This is also known as a GSP (General System of Preferences).

The SACU (Southern African Customs Union) on the other hand is a Customs Union. Duties between the BELN (South Africa, Botswana, Eswatini – better known as Lesotho, and Namibia) are Free. There are also other dispensations and co-operative arrangements between Members States.

Reciprocal Trade Agreements in South Africa

These include for example:

  1. SADC (Southern African Development Community) – including about 15 countries in Africa and some adjacent islands
  2. EU (European Union) – South Africa and the EU States
  3. SACUM-UK (United Kingdom) – Southern African Customs Union, Mozambique and the United Kingdom
  4. EFTA (European Free Trade Area) – Iceland, Liechtenstein, Norway and Switzerland
  5. MERCOSUR (Common Market for the South) – Argentina, Brazil, Paraguay and Uruguay
  6. AfCFTA (African Continental Free Trade Area) – Most African Countries with the potential of being the largest in the world.

It is not uncommon for an importer under a Trade Agreement to by as much as 20% or more.

Non-Reciprocal Trade Agreements in South Africa

These include for example the GSPs (Gernal System of Preferences) with Norway, Turkey and Russia.

The AGOA (African Growth and Opportunity Act) is a legislation created in America. It is a MFN (Most Favored Nation) status is conferred onto African territories, including South Africa. Imports into America from South Africa may attract lower rates of duties.

Customs Licensing – Trade Agreements

Any exporter of goods from South African must license as an Exporter under each Trade Agreement to which it subscribes.

An exporter who is a Manufacturer of goods must also license as a Producer of goods. To be clear, an exporter who is also a manufacturer of goods must license for both, i.e. an Exporter and a Producer under each Trade Agreement. This entails two separate license applications and hence a separate license approval for each Trade Agreement.

I have seen too many Exporters, and their Consignees penalised by Customs. One must ensure full and proper registration.

Exporters who have not on-boarded to e-Filing yet must do so urgently to avoid becoming suspended. Suspensions are anticipated to take effect in mid to late 2024. Visit our RLA (Registration, Licensing and Accreditation) page for more information.

Contact Us

Please Contact us for advice or a quotation for Customs Licensing – Trade Agreements.

We will help you with:

  1. Application Process and e-Filing Procedures
  2. Supporting Documents and Templates
  3. Overcoming any e-Filing challenges.

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Invoice as a Certificate of Origin

Posted by on in Commercial InvoicesLeave a comment

          There have being allot of rumors regarding the applicability of a COO (Certificate of Origin) form over the past few years. Some say that SARS have done away with the need to produce a DA 59 (the form traditionally used to as a COO).  

          But first, a generic COO form is different from an “origin certificate” related to trade agreements, i.e. EUR1 Form, SADC Certificate, and so forth. I have often seeing people confuse a COO form for a EUR1 certificate, thereby using it to benefit from a preferential rate of duty when not entitled to such. This is a classical mistake because the COO forms issued by some foreign Chambers of Commerce look similar to those used in trade agreements. The secret is to read what the respective form actually stands for, i.e. EUR1 versus Certificate of Origin. Do not take the look of the form for granted.

          The SARS DA 59 or COO does in fact still exist and is still in use. My understanding of what happened which led to the confusion regarding the use of the DA 59 came when SARS published a SOP (Standard Operating Procedure) containing minimum Invoice Requirements (the most recent revision is number SC-CF-30 dated 31 March 2011). The SARS SOP states that the “country of origin” must be reflected on the commercial invoice as a minimum requirement. Therefore, in industry circles it became generally accepted that the origin of goods may be specified on the invoice in lieu of a DA 59.

          In some ways, the invoice can be regarded as a certificate of origin, although SARS do still reserve the right to verify the authenticity of origins.

          In specific instances, the DA 59 Form may still be requested by SARS in order to verify such things as anti-dumping, safeguarding and countervailing duties, and import restrictions.