Following on from our previous blog post on trade and customs in South Africa: Part 1
The major risk exposure when it comes to trade compliance lies in the fact that existing customs legislation applies heavy penalties to a whole range of entities involved in import and export including the importer, the owner, the freight forwarder, the clearing agent and the transporter The involvement of a single entity in fraudulent activity could potentially result in sanctions by SARS for all entities.
Fraud remains a problem, particularly relating to imports from China. There have been numerous instances of divergence between the actual content of the containers, and what was ordered and paid for, despite the provision of quantity and quality certificates by reputable auditors. Reliance on established trading partners with whom there exists a relationship and against whom recourse can be taken in the event of fraud allows an importer to circumvent fraud of this nature.
South Africa, unfortunately, has a significant number of government agencies involved in trade and accordingly importers and exporters face significant compliance costs. Businesses have been lobbying against governmental red tape and bureaucracy. Until that is achieved, managing compliance costs is limited to ensuring that traders import, export and clear their cargo through recognised and experienced contractors.
The South African ports are primarily an expensive and ineffective monopoly operated by a state-owned enterprise. Until the government recognises privatisation as the most efficient solution for higher productivity and lower prices, the South African economy will remain burdened by inefficiency and high costs.
South Africa’s major trading partners include the US, Europe and China. The US and Europe have far-reaching legislation dealing with money laundering, terrorism and an extensive list of sanctioned countries and individuals. South African firms wishing to trade with the US and Europe need to understand that parallel trade with sanctioned countries or individuals, will expose them to penalties in the US and Europe. These penalties can be enforced by restricting exports to those regions, fines against subsidiaries in those areas or restrictions on transferring funds through the US Dollar and Euro banking systems. The many sophisticated, experienced and well-qualified freight forwarders and logistics operators in South Africa work with a network of trade and customs consultants, law firms and accounting firms who have a deep knowledge of the trade and customs regulations in this sector of the economy. The newer sectors of the economy and the smaller traders and officials, however, are in need of more training and education.
What needs to be done
Customs compliance needs two main things. Firstly, members of staff dealing with customs issues need education and training on the obligations under the customs regulations and the nuances of the company’s trade even if this means employing external consultants to run training programmes. Secondly, a proper and strong relationship with the relevant SARS teams dealing with that sector of the economy will ensure the quick resolution of minor infringements and the identification and resolution of potential problems before they result in non-compliance.
A training programme and the SARS relationship drive only work if there is regular review, if necessary by external consultants.