Many clients are uncertain about the implications of the draft Customs Control Bill and the Customs Duty Bill for their businesses, says independent audit firm PricewaterhouseCoopers (PwC) customs senior manager Kayn Woolmer.
Until the subordinate legislation, such as the rules and regu- lations that provide for the operational considerations of the new bills, is drafted and finalised, the impact and implications of the bills cannot be fully understood, he explains.
Polity previously reported on a legal brief by Werksmans, a legal firm, which states that the draft Customs Control Bill and the Customs Duty Bill comprise the first phase of a two-phase project to rewrite the Customs and Excise Act No 91, of 1964. The aim of the bills is to implement a modernised system of customs control in accordance with current inter- national trends and best practices. Once the two customs bills become effective, a separate draft Excise Bill will be released.
The volume of the draft legis-lation bills has almost trebled in size from the current legis- lation. While the physical import process does not appear to have changed much from current legislation, the volume of the content of the draft bills requires a significant investment of time and effort from business to fully understand the content of the changes, says Woolmer. He adds that, although there is some repetition, the South African Revenue Service (Sars) has made certain areas more comprehensive.
The bills may be implemented at the end of this year once they have been approved by Parliament. Sars is currently working on the subordinate legislation; however, a release date has not as yet been confirmed.
PwC is concerned that, once the new legislation is effective, there may be insufficient time for businesses to grasp the full extent of the changes and be compliant. This might subject these businesses to a higher risk of noncompliance during the transitional period.
As the emphasis of the new customs bills is more self-assessment, rather than transactional assessment by customs, and the onus of compliance with customs and excise provisions rests with customs clients, he says that businesses should ensure that they have the capability, knowledge and tools for the required compliance.
Relying solely on third-party service providers and clearing agents for compliance is not recom- mended, as noncompliance will result in not only a monetary penalty, but also an endorsement against the company’s compliance records. This compliance history will have further implications as to how customs treat the business in the future, such as how frequently its goods are stopped or inspected, leniency with regard to the imposition of penal measures, or the amount of security required when applying for customs facilities, he says.
Businesses should ensure that those responsible for dealing with customs receive adequate training and fully understand the compliance requirements of their business. “They need to know what information is required by Sars, why it is required and what the implications of that information are,” he says.
It appears that Sars is moving from a transactional audit to a systems audit to verify compliance. To this end, he says that customs clients must ensure that, if they use technology for customs compliance, the systems are performing accurately, adding that a business may wish to consider systems that interface directly with Sars, to leverage off the benefits of direct communication with regard to their customs transactions. However, these systems may be expensive and complicated and need to be regularly updated to keep current with the frequent provision, rule and regulatory changes and amendments from customs.
New Penalty Systems
Meanwhile, Sars has developed and released the Customs Administrative Monetary Penalty System and the Excise Administrative Monetary Penalty System for comment. He says that the penalty guideline previously used by Sars carried no legislative weight and was applied inconsistently. PwC believes that these revised penalty systems will be implemented and will allow for a clearer understanding of the penal measures applied in specific circumstances.
However, Woolmer says that, in some cases, the opportunity for mitigation of penalties has been removed. Discretion in extenuating circumstances is built into the system in some areas and not in others. He says that it is important for industry to understand what the penalties for contravention are and then to decide on what resources to expend on training those responsible for customs compliance.