All import and export commercial transactions require commodities on Customs declarations to be classified according to an appropriate tariff heading. The tariff classification code is directly linked to the rate of duty payable on that commodity. Classification operates as part of the international Harmonised Commodity and Coding System, under the WCO Harmonised System Convention
Tariff classification of goods is one of the more complex issues under the Customs and Excise Act. Tariff classification relates to the proper classification of goods within the Harmonized Commodity Description and Coding System (tariff book). The Tariff Book
indicates the normal customs duties (Schedule No 1, Part 1), excise duties (Schedule No 1, Part 2A), ad valorem duties (Schedule No 1, Part 2B), anti-dumping duties (Schedule No 2, Part 1) and countervailing duties (Schedule No 2, Part 2) that would be payable on importing goods into South Africa. Tariff classification of goods also determines the necessity for import control permits, the rules of origin obligations, and the applicability of any customs rebate provisions.
The World Customs Organisation (WCO) issued the general rules of interpretation that are used as a guide in the correct classification of goods. It is crucial for an importer to have sufficient knowledge of these rules to ensure the correct classification of imported goods. It is important to ensure that an importer has a proper description of goods before the goods are imported into South Africa as the tariff code identified has to be inserted on the customs declaration. The customs duties and VAT payable will be calculated based on the rate of duty dictated by the specific tariff code. Failure to correctly classify goods within the tariff book could result in either under or over payment of Customs Duties and Value-Added Tax (VAT) on importation.
In cases where the tariff classification of goods is complex, i.e. the goods could easily be classified under two tariff headings or there is no clearly identifiable appropriate tariff heading, it is the duty of the importer to approach the local SARS office and apply for a written tariff determination.
Three types of duty are provided for in the Customs Tariff. These are “free”, “rated or specific” and “ad valorem”.
- Rated or specific duties are e.g. 10 cents per square meter, 3 cents per dozen.
- Ad Valorem duties are fixed percentages of the value for duty purposes e.g. 10 per cent of the value, 25 per cent of the value etc.
- Compound duties are a combination of rated and ad valorem duties applicable to goods mentioned in the same tariff heading e.g. 20% plus 8 cent per kg or 50 cents per square metre less 20%.