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Tariff determinations for alcoholic beverages to be made compulsory

Tariff determinations for alcoholic beverages to be made compulsory

3rd December 2014

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The South African Revenue Service (SARS) is amending the customs and excise laws to make it compulsory for makers of alcoholic beverages to apply for tariff determinations prior to release of a clearance upon import, and prior to removal of locally manufactured products from an excise manufacturing warehouse.

The beverages that this new requirement will apply to will be those that are classifiable into Chapter 22 of the tariff book, for example beers, wines, ciders, spirits, coolers and other fermented beverages.

Virusha Subban, Partner at pan-African corporate law firm Bowman Gilfillan explained: “Currently, tariff determinations for any locally made or imported goods may be applied for on a voluntary basis to obtain certainty on the correct tariff heading to apply to a product before the product goes into production, or prior to clearance for importation to ensure that the correct duty is paid to SARS.

“It is therefore still largely a self-declaration system, except for alcoholic beverages which are now being subjected to a compulsory tariff determination system.

“When the new law comes into effect, every manufacturer and importer will have to apply to SARS for a new tariff determination even if they have a SARS tariff determination in place.”

SARS has stipulated that it will require as part of this new application process, detailed information of the brand name, a list of the ingredients used, the process of manufacture, alcoholic strength and any other particulars SARS may specify. If applicable, a letter from the liquor licensing authority confirming that the product complies with the liquor laws may also be required.

If the brand name, process of manufacture, any ingredient or the proportion in which the ingredient is used or the alcoholic strength of the  beverage changes, a new application must be made to SARS before release for consumption in South Africa or before removal from the excise manufacturing warehouse.

In response to queries and submissions from industry, SARS has agreed that the Commissioner may specify a period within which, and the order in which, an application for a new tariff determination in respect of any kind of alcoholic beverage shall be submitted.

Said Ms Subban, “Should SARS follow this staggered approach it will hopefully provide some breathing space for the alcoholic beverages industry faced with the administrative burden of applying for new determinations for a myriad of products. Currently the turnaround time to receive a tariff determination ranges anywhere from four weeks to six months, depending on the complexity of the product.

“If the new application results in a higher rate of excise duty payable, the higher rate will only apply going forward provided that the current determination was fully complied with and the beverage did not alter in any substantive way after SARS issued the determination.”

Ms Subban added that it is not clear whether this compulsory tariff determination regime will be rolled out to other industries as well. SARS has said this intervention is a special requirement for the alcoholic beverages industry to ensure “accurate and consistent tariff treatment”.

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