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Customs Connect Issue 4 (August 2013)

Welcome to Customs Connect – your electronic newsletter that will provide you with the latest news and information on Customs Modernisation and related matters. We hope you enjoy the read and that you will find the information helpful.

To read our newsletter below, click on each heading to expand the corresponding article.

The past three years have seen a number of fundamental changes to the Customs environment under the Customs Modernisation Programme.

The first major milestone was Release 1 (in 2010) when the new CPC codes were introduced. Then came Release 2 in 2011, with the introduction of Service Manager, a new inspection process at all the “international” Customs offices and electronic submission of supporting documents. This was followed by Release 3 which saw workflow, system, as well as policy changes relating to non-South African client registration introduced at all SACU border posts.

In-between there were other modernisation initiatives, like the replacement of the Manifest Acquittal System (MAS) with a new technology solution, the introduction of a new Passenger Processing System (PPS) at all Customs offices and major changes to the Account Management System and payment process.

Most recently, Customs reached a major milestone along its journey: the introduction of Release 4, or Interfront Customs Border Solution, on the weekend of 17 August 2013. This new IT platform replaced a number of back-end legacy and paper-based systems with a fully automated and centralised processing system for all commercial trade across South Africa’s borders.

By managing Customs declarations and supporting documents in electronic format, the processing of cargo movements by land, sea and air will now be much quicker and more accurate.
The new Customs management system was successfully implemented some 24 hours ahead of SARS’s own scheduled deadline. Despite the many complexities of the conversion process, the switch-over caused no disruption to the processing of cargo or travellers at border posts.

SARS followed an extensive system of engagement with industry stakeholders before implementing the new system, with many of them involved in its development and testing over the past year. SARS is especially grateful to the service providers and traders who voluntarily assisted with test cases to ensure that the new Customs Systems’ interfaces and functionality was in good working order prior to the go-live!

Since implementing the system changes, the response from trade has been overwhelmingly positive.

The benefits to business of all of the above Modernisation changes include:
  • End-to-end paper reduction of up to 95%
  • The introduction of electronic declarations and mobile inspections (iPods)
  • Reduction of the administrative burden on traders as no supporting documents are required unless requested
  • Better security and risk detection. Customs now receives advance information about consignments from traders and can assess risk in advance using third party data verification.
Other key projects still to come this year are:
  • Excise Modernisation: The second phase of Excise Modernisation is expected to take place in October 2013. This will involve introducing eFiling to ALL Excise clients. (See article below)
  • Electronic manifests: Within the next few months, the second phase of introducing electronic manifests for sea, land and air freight will begin. Last year the first phase began for land and the previous year for sea and air, in which traders were enabled to submit electronic manifests. However, it was not a totally electronic process, with clients still having to bring in paper manifests. Another problem was that the system could not validate manifests against declarations, so SARS could not enforce electronic submission.
    However, the next phase will see a matching function built into the system, with every manifest being linked to a declaration and vice versa. The system will also decide which consignments should be stopped for inspection based on both the cargo and goods declarations, enabling further risk management of the trade supply chain and affording Customs officers an improved basis for intervention.
  • Regional IT Connectivity: SARS is currently engaging the Customs authorities in Swaziland, Mozambique, Zimbabwe and the IBSA countries on formal customs-to-customs data exchange. (See article below.)
  • Preferred Trader: Several developments have been taking place with the Preferred Trader Programme, including finalising the certificates for the first group of accredited traders, extending training assistance to SACU countries and preparing for an Excise Preferred Trader Programme. (See article below.)
  • Warehousing: In the next few months, SARS will be looking at building a new control framework for Customs Warehouses.
Earlier this year, Excise took the first steps towards greater efficiency and automation, building on the successful SARS Modernisation platform established over the past few years.
Already a number of changes have been introduced in Excise this year, aimed at benefiting both clients and SARS. These include:
 
  • Improving the accuracy of payment referencing by introducing a unique payment reference number (or “PRN”) that needs to be specified when making payment. System-generated PRNs for all account submissions and payments made at Excise offices have been introduced. Payments can no longer be made before obtaining a system-generated PRN.
  • Implementation of front-end system enhancements at Excise offices to capture Excise duty paid (ZDP), duty rebated (ZGR) and ordinary levy duty (ZOL) transactions, in addition to administrative transactions (state warehouse rent, extra-special attendance, departmental declarations and penalties/interest/forfeiture payments (DA68/DA73/DA490/DA70).)
  • Implementation of Excise Financial Account Numbers (FAN) and an Excise beneficiary (SARS-EXC) for payment at banks.

In July this year the Electronic Data Interchange (EDI) channel for submission of ZDP/ZGR and ZOL entries was shut down in readiness for the switchover to the new Customs back-end system, called Interfront. Functionality was then made available on eFiling for Excise clients to submit their local manufacturing declarations electronically.

In the next phase, which is earmarked for October 2013, eFiling functionality will be made available for the submission of ALL Excise accounts.

Other changes which are due to be implemented in the second phase include:
  • New Adobe electronic screens for the various accounts when eFiling is made available for submission of all Excise accounts. These will be partly pre-populated and partly editable. All billing transactions will be done on a CEB01 screen (eg. for specific transactional ZDP/ZGR declarations – mainly ship chandlers and duty free shops), while account submissions will be on an EXD01 return (the first two pages will be generic and the rest will be applicable to that client’s warehouses).   It must be noted that the EXD01 account represent the summary pages of the current DA159/160/260 accounts, with the following important changes:
    • No separate periodical, consolidated ZDP/ZGR/ZOL declaration will be required;
    • Products will need to be reported as specific (individual) tariff items – no more grouping of certain tariff item types;
    • Clients will need to declare price paid or payable (customs value) per specific tariff item, as well as the relevant statistical quantity code; and
    • The status of the eFiling Excise account will change to an actual declaration.
  • Also on eFiling, once clients have submitted their accounts they can make eFiling payment immediately or choose to pay later (within the prescribed time frames). They will also be able to make consolidated payments on eFiling. At the moment, clients have to pay separately for each transaction, which gets its own unique PRN. After Phase 2, they will be able to make one consolidated payment on eFiling for all transactions.
  • There will be a new dashboard and enquiry function introduced for queries at Excise offices and on eFiling. This will enable clients to establish the status of their accounts.
  • Clients will be able to open their own eAccount on eFiling to manage payments and/or credit allocations between accounts.

In the third phase, there will be further refinements and additional functionality added to eFiling.

All of these changes are aimed at creating a more efficient and timeous submission and payment process. They will also move account management away from Excise officers to clients, allowing officers to focus more attention on exception management of accounts and auditing of non-compliant licensees and registrants.
Connectivity and electronic data exchange are driving various global customs-to-customs cooperation initiatives seeking to bring about a seamless flow of information between country of departure and country of destination.
This is consistent with the World Customs Organisation’s 21st Century vision that advocates the creation of an international “e-Customs” network to ensure seamless connectivity, as well as real-time and paperless flows of information and which would include, amongst other things:
  • Internationally standardised data requirements for export, transit and import;
  • Interconnected systems to enable the electronic exchange of data between Customs administrations as early as possible in the international movement of goods;
  • Mutual recognition and co-ordination protocols between administrations to eliminate unnecessary duplication of controls in international supply chains; and
  • Rules governing the exchange of information between Customs administrations, including rules on data protection.

Over the past year, advances have been made in the area of IT connectivity and customs data exchange with our neighbouring countries, specifically Swaziland and Mozambique, as well as the India, Brazil and South Africa trading bloc (IBSA). The aim of these ongoing initiatives is to transmit export and transit declaration information between the respective countries. This work in Africa and the rest of the world is informed by the WCO’s model known as Globally Networked Customs (GNC).
In pursuing this model, the primary objectives for SARS are to:
  • Enable advance Customs risk management;
  • Enable the matching of the country of departure’s export data  with the destination country’s import or transit declaration data through the use of a common key – a unique identifier otherwise known as the Unique Consignment Reference (UCR) or alternatively the Movement Reference Number (MRN); and
  • Support the seamless movement of legitimate cargoes across borders.
SARS is particularly keen to establish data exchange with all its partners in SACU, primarily to improve paperless cross-border clearance as well as to address intra-SACU trade statistics. IT connectivity is also a prerequisite for the implementation of One Stop Border Post facilities, such as at Lebombo on the Mozambique border post, as well as along the North/South corridor as envisaged by SADCOM (a joint initiative between SADC and COMESA).

The aim is to achieve a level of matching of South African import declarations with the country of departure’s export clearance, to mitigate risk and facilitate speedier cross-border clearance and release of goods. This is a reciprocal process, whereby South Africa’s export clearance must likewise be matched with a corresponding import clearance on the other side of the border.

While GNC is currently structured for information exchanges between customs administrations only, the WCO has taken on board representations from various international trade bodies to consider future trader involvement.

SARS is also in discussion with the Zimbabwean customs authority to establish formal customs-to-customs data exchange through IT connectivity.
SARS has made good progress with regard to the Preferred Trader (PT) Programme over the past six months, said Mohamed Ally, the Customs Executive for the programme.
In July, SARS convened the inaugural sitting of the SARS Customs Accreditation Review Board, chaired by Rae Cruikshank, the Head of Customs Operations. The review process also includes collaboration with the SARS Large Business Centre’s (LBC) tax experts. The first group of Preferred Trader Accreditation Certificates is expected to be issued shortly. 
In total SARS has engaged 359 importers and exporters, who want to be part of the Preferred Trader Programme. Collectively the audited traders now represent over 23% of the total volume of trade crossing our borders.

The national Preferred Trader policies, processes and structures have been finalised, along with the publishing of a curriculum and a guide. SARS has also provided training to prospective Preferred Traders so that they are able to meet the requirements of the programme. So far, 186 client representatives have passed the new accreditation test to assess whether clients have sufficient knowledge of Customs requirements, policies and procedures.

“The Preferred Trader Programme takes us closer to a segmentation model that places reliance on achieving high compliance levels among South African traders. As we successfully complete the second phase of competency tests and verifications, I must acknowledge the willingness and continuous cooperation we have experienced from some of our largest traders and certain industry bodies.” Mohamed said.

For traders gaining accreditation, it will reward the hard work undertaken to validate and ensure the quality of their systems and record keeping, to correct errors and train their Customs team members to maintain the highest standards of compliance.  For many companies it also represents the first part of a long-term journey to partner with SARS to gain full Authorised Economic Operator status (AEO), as per the WCO standards.  Local traders are looking forward to benefiting from South Africa’s ambition to establish AEO Mutual Recognition with leading trading partners, such as SACU, SADC, BRICS, USA and the EU.  Mutual Recognition will enable South African AEO’s to gain expedited clearance on their exports in the receiving country.

Regional assistance

SARS has also supported the extension of the Preferred Trader Programme to the Southern African Customs Union (SACU) countries by helping to develop a set of policies, processes and standard operating procedures. 
“In conjunction with the World Customs Organisation and supported by SIDA (Swedish International Development Cooperation Agency),  the SARS programme is being extended into SACU as the WCO’s equivalent regional Authorised Economic Operator (AEO) compliance programme for SACU countries. This will have regional benefits for our traders in the future and we encourage all clients to apply to join the programme,” Mohamed said.
Last month SARS hosted four auditors from each SACU country for an intensive two-week training programme on performing PT audits. The next steps will be to prepare for a SACU PT Pilot Programme when SACU teams meet soon for a workshop in South Africa with WCO experts.
Focus on Excise

An Excise Preferred Trader accreditation policy and audit programme for domestic excise manufacturers is currently being developed. Draft policies, standard operating procedures and templates are in place. There have been consultations with trade stakeholders and visits to our Excise offices in preparation for a pilot prior to implementation. This will take SARS closer to an integrated compliance model. 

The Customs Bills, after having undergone an extensive consultation process, were recently submitted to Parliament. One of the major aims of the Bills is to create a balance between customs control and trade facilitation. As part of the overall policy review to achieve this aim, SARS reviewed its current policy of allowing goods to move on the basis of a manifest to inland terminals such as City Deep.

Currently, the Customs and Excise Act, 1964, allows container operators to move containers in bond from a port of entry (e.g. the port of Durban) to an inland container terminal (e.g. City Deep) without submitting a customs clearance declaration. The containers are moved on the basis of a manifest. No security is required and liability for the removal rests with the container operator. After the arrival of the goods at the inland container terminal, the importer will clear the goods for another permissible customs procedure or for home use and pay the duties.

This current position does not provide SARS with adequate information to determine any possible safety, security, fiscal and economic risk in relation to these goods before they are transported inland. No value is declared on the manifest and only a general description of the goods is provided. This lack of information on a manifest therefore does not promote the application of efficient and effective customs controls and risk management at the port of entry, potentially allowing high risk goods to move inland.

To address this deficiency, clearance at the first port of entry envisaged in the Customs Control Bill will require a declaration of the true value of the goods and duties and taxes that are to be paid. In addition the origin of the goods, as well as a clear description of the goods as per the Harmonised Commodity and Coding System (HS Code), will have to be declared. The HS Code will indicate whether the goods pose a fiscal or economic risk or a safety and security risk to society.

The inclusion of the origin, HS code and true value on the declaration would thus facilitate electronic data processing which contributes to effective risk management and customs control. A further benefit of a declaration is that the person who submits the declaration subscribes to the correctness of the information. This person will be in South Africa and action can be taken against such person if necessary.

Notwithstanding wide consultation on this matter there still remains a misunderstanding about the implementation of this policy.

Just to clarify, SARS will not mandate inspection of all goods at the port of entry and has no intention to increase inspections beyond available capacity in the port of Durban. Only high risk goods (which are a small percentage of imports) will be physically inspected in Durban, while medium to low risk goods (which represent the vast majority of imports) will continue to flow to inland terminals such as City Deep where they will be inspected.

SARS is aware of the benefits of inland terminals and is not averse to the retention and establishment of such terminals. The issue is the use of the manifest that does not contain sufficient information on which basis the goods are risk assessed. The effect of the change is that goods will still be able to move from Durban to City Deep without payment of duties and taxes. At City Deep the goods can be cleared for home use or a customs procedure at a later time. City deep will therefore not be closed.

This policy change will also have no impact on exports from City Deep.

Moves are afoot to follow in SARS’s tax office footsteps by having all calls to Customs offices routed to the Contact Centre. This is in line with SARS’s strategic objectives to improve our service to all taxpayers and traders.

An extensive process began last year to appoint a number of Customs staff members to the SARS Contact Centre in order to have additional trained Customs agents to handle Customs queries. At the moment there are only seven trained Customs agents in the Contact Centre, with very few calls being received.  In preparation for the migration of all Customs calls to the Contact Centre, an additional 18 Customs officers are being trained as Contact Centre agents, with more in the process of being recruited. 

This is the first step in a journey which will eventually see all calls to Customs offices routed to the Contact Centre – similar to what has already happened in the tax environment – in order to ensure end-to-end query resolution.

This migration of calls to the Contact Centre is expected to be piloted in the Western, Eastern and Northern Cape region before being implemented in the other regions. The pilot is earmarked for October 2013.

Calls will be resolved on a four-tier level:

  • an Interactive Voice Response (IVR) service with preset menus and prompts
  • then a general Contact Centre agent if the query is still not resolved
  • a Contact Centre Customs consultant
  • and finally to a Customs specialist

In fact, the Contact Centre promise is that “your call will always be answered” and your query, if not resolved during the call, will be actioned within a turnaround time of less than 24 hours. If calls are escalated to Tier 3 level and beyond, a consultant will phone you back to discuss and follow up on your query.

Most queries are about declaration status, licensing and registration – the majority of which can be handled by the first three tiers. However, specific queries such as rulings will be forwarded directly to head office specialists. The advantage with this new system is that these can now be monitored and audited, as opposed to in the past when calls were made directly to head office specialists and there was no way of tracking them.

Capacity has also been developed in the Contact Centre to support Customs clients between 08:00 and 22:00, 7 days a week.

Roadshows recently took place in the Western, Eastern and Northern Cape to discuss the migration plan with clients. Once dates are set for the migration of calls to the remaining offices, clients in other regions will also be informed well in advance.

Disclaimer: Customs Connect is not meant to delve into the precise technical and legal detail associated with Customs. It should, therefore, not be used as a legal reference.

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