A global trade policy expert has warned South Africa to ensure that it is up to date with the World Customs Organisation’s Harmonised System (HS) as any delays could result in loss of duties.
The system will be implemented on January 1 2028, with codes published this year.
GDP Global Development associate director and independent trade compliance adviser Leon Marais told Business Times that the HS was developed to standardise and simplify international merchandise classification.
The classification of goods in terms of the HS also helps customs identify restricted and prohibited goods as another important function of customs is to protect the proliferation of contraband.
Marais said updates to the HS are often published two and a half years in advance, after which there is a six-month period for comment. Once the final recommendations are published, the new review cycle begins.
“Ideally, they should be published, but unfortunately it doesn’t happen in South Africa. Maybe you will get some notification that the WTO has published a new instrument, but normally, what South Africa does is — a couple of months before the new version takes effect, much later than the two-and-a-half-year deadline — they publish a draft version for comment. Then it’s much too late.”
Any concerns about South Africa's preparedness for the update is misinformed.
— Sars
The HS entered into force in 1988 and consolidates the best systems of goods trade classification, such as the Standard International Trade Classification of the UN and the customs tariff nomenclature.
He said the HS is not used for customs only but also serves as an import and export control tool. He said all used and second-hand goods, including refurbished goods and waste and scrap, are subject to import control.
“We are sitting with a situation now where Itac’s (International Trade Administration Commission) import and export control regulation is still based on the 2017 version of the HS.
“So, then you must look at correlation tables, so it’s not updated, so obviously, importers and exporters wanting to apply for import control on a specific commodity might think the product is controlled or not without knowing how the system works.”
He said relying on internet documents may lead to importers and exporters using outdated information. He said he consults with clients and plans to hold conferences from June this year on how the new HS will affect industries.
“In trade facilitation from the perspective of the WTO agreement there has to be notice given to traders and importers well in advance in terms of trade control.”
Itac referred Business Times' questions to the South African Revenue Service (Sars). Sars said its tariff management system is updated once the amended HS is published in the Government Gazette.
It said any concerns about South Africa's preparedness for the update is misinformed as “Sars has been implementing the HS revisions since 1988 and has not experienced any challenges in this regard”.
“Sars uses the WCO HS correlation table and then expands its national codes beyond six-digit codes to make it easier for taxpayers to understand the movement of products across HS codes. This dovetails with our strategic objective 2, which is to make it easy and simple for taxpayers and traders to trade.
“There are tried and tested processes in place that Sars and other Sacu (Southern African Customs Union) member states use to migrate from one version of the HS to the next. South Africa has been implementing the HS revisions since 1988, and we have never experienced any implementation challenges.”
Trade and Industrial Policy Strategies senior economist Nokwanda Maseko told Business Times she did not think Itac not publishing the documents suggests South Africa is not being thorough as SARS publishes the documents for HS code changes.
“The last official announcement I can find from Sars is from 2022 following the global change. Otherwise, any changes made by South Africa are made available after Itac investigations.”
She said one potential issue could be a delay in publishing the amendments, which would result in Sars not collecting duties due to delays in the approval process.
“The December 2023 recommendation and announcement in June 2024 means that there were at least five months during which Sars did not collect the 10% duty on imports of these products. Shortening the recommendation and final approval process time frames could help with this.”
XA Global Trade Advisors MD Donald MacKay said the updating of the HS is a normal process for all World Customs Organisation members and South Africa has been involved for years.
“The HS allows us to compare what is traded globally without being able to read the language of the country whose data we are comparing to. Without the HS any meaningful trade policy would be close to impossible.”
He said South Africa has never had a problem implementing the changes outside of occasional problems with the software companies that connect the trader to Sars.
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