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.

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 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.

Knowledge of Customs Affairs

          I was asked at a conference in Durban in recently whether Customs clients will in the future have to write a Customs exam as proof of knowledge. While this is true for clients wanting to attain the SARS Customs PTA (Preferred Trader Accreditation), it is not true for all Customs clients. Well, not at this stage anyway.

          But it does not mean that if you are not participating in the SARS PTA that you do not need to know more. SARS is increasingly contacting traders, importers and exporters directly. This may be part of a concept known as the Customs-to-Business Partnership. More about this can be found on the WCO (World Customs Organisation) website The concept requires a lot more interaction between Customs and business going forward. It may also have to do with the greater level of accountability that the new Customs legislation places onto traders.

          When Customs do contact you directly, officials expect you to have an understanding of what they are talking about. The Customs Clearing Agent is no longer the sole provider of information to the authorities. This is most prevalent when SARS conducts post-clearance inspections of your books. SARS generally goes two years back in your records. However, in the new Customs legislation SARS audits will go back three years.

          The consequences of not having Customs knowledge may result into incorrect duty assessments. It can cause a lot of pain and financial heartache to resolve issues which arise. A lack of knowledge also causes frustration on the part of Customs officials who find themselves going in circles between the Trader and the Customs Clearing Agent. By the time payment is demanded, very short lead times are provided. Leniency in this regard is also harder to come by.

          So, what do you need to know and where will you find the information? We can take a leaf from the SARS Customs External Guide on Accreditation (SC-CF-07 dated 22 November 2012, which can be found at under “Find Publication”, section 7.3 of the document). SARS requires Traders to have knowledge in the following areas of business:

1)      General issues;

2)      Accreditation legislation and audit (for PT clients);

3)      Tariff Classification;

4)      Valuation;

5)      Rules of Origin;

6)      Prohibited and Restricted Goods and Import Control;

7)      Penalty Provisions and Risk;

8)      Appeals process;

9)      Internal Controls; and

10)    Integrity (also covered);

These are the minimum areas of Customs knowledge that you should have today. The 9 or 10 pages of summaries are a good start to increase your Customs knowledge. We will in any event be discussing these in the blogs which follow.

            Finally, there are a number of Customs Training Providers which offer various forms of Customs training to Traders and Clearing Agents alike.

Elements of Self-Compliance

            Compliance is not about one or two things which if done correctly, assure you a pass. It is also not something that you do in isolation from your LSP (Logistics Service Provider). It is also not something that is simply passed onto a third party LSP believing that they are the sole providers of the respective legislative compliances.

            One of my former colleagues in SARS Customs, a National Customs Consultant would ask me a very basic question time and again. He would ask… “Who is the only person who knows exactly what is in the container at time of arrival in South Africa?” My initial response was… “The importer”. He always clarified the question with another… “Who actually saw the goods being packed?” He explained… “Not the transporter, not the clearing agent, not Customs and not even the importer. It is the supplier”. To add, even if the transporter packed the goods, only the supplier will know the exact nature and characteristics of the goods which were packed.

The importer has a material interest in knowing exactly what is being received for a multitude of reasons. Core to these reasons is so that all parties can be advised on how to meet various commercial and legislative requirements. This makes compliance a joint effort between you and your Logistics Service Providers. The more they know about your product, the better off you are.

            There are a number of elements, or layers if you like, which may be applied to ensure that you consistently achieve the highest level of compliance. While the following is a non-exhaustive list, they include:

1)      Knowledge of Customs affairs.

2)      Advance research of import & export requirements.

3)      Business implementation with your LSP.

4)      Product implementation with your LSP.

5)      Customs Clearance Instructions.

6)      Supporting documents.

7)      Customs licenses, registrations and rulings.

8)      Post audits and re-alignment.

9)      Knowing your rights.

These elements will be discussed in the blogs which follow.