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2
Support economic
competitiveness
Protect our
economy and
society
Collect and
protect revenue
Our mandate for Customs & Excise
First-line of control over the movement of goods across our
country’s borders
3
Customs and excise value drivers and strategic focus
Risk Goods control prior to arrival /
departure
Audit
Facilitation of low-risk goods:
Fast, predictable service to
support RSA economy
Revenue coverage of known
commercial traders
Protect economy from P&R and
unfair competition
Protect society from safety and
security threats
Inspection
Critical Success factors
5. Quality Inspection of documents
6. Physical Inspection
• Professional staff
• Enabling tools, Dogs, scanners
7. Investigations and Sanctions
8. Audit capability
4. Customs Risk Management
• What to release vs. Stop?
• Feedback loop to improve risk
1. Client management
• Registration & Licensing
• Permits for P&R
2. Control goods at borders
• Control of cargo & supply chain
• Right cargo, 3rd party, OGA,
information for verification matching
3. Right information to collect revenue and
protect key industrial sectors:
- Customs Declaration:
Mandatary Value
Revenue coverage of unknown /
high risk trade
Investigations
4
Customs manages risks by overseeing the whole supply
chain, before the border, at the border, and post border
Customs Exit Port
Transit Custom
Entry Port
Customs Economic Operators
Economic Operators
ORIGIN DESTINATION
TRANSIT LEG EXPORT LEG IMPORT LEG
Risk evaluation of pre-arrival cargo information from supply chain
Management of registrants / licensees
Management of Permits
Customs Mutual Assistance agreements
Border control and anti-smuggling
Risk evaluation of Goods Declaration
Documentary and physical inspection
Coordinated border inspection with Government agencies
Targeted Inspections on specific P&R / goods
Post Clearance Audit & inspections
Integrated & complex audits
Investigations
5
Border
Mgt
Goods Control
Declaration
Processing
Documentary
Inspection
Physical Inspection
Enforcement
teams Audit Investigate
Risk and Intelligence Management
Customs mechanisms controlling borders and protecting
industry
Strategic Stakeholder Management
1. Industry engagement
2. IPR registration
3. Permits for P&R
7. Stakeholder Forum
8. Outreach & education
9. Customs Mutual Administrative Assistance
10. Border Cooperation & Coordination with Govt.
4. Registration
5. Licensing
6. Accreditation
Customs Operations
11. Customs Risk Engine
12. Manifest Processing, Matching, acquittal
13. Reference Pricing
13. Data and analytics (including 3rd party)
14. Case Selection
15. Customs Command and targeting Centre
23 16 17 18 19 20 21 22
6
SARS Compliance vision
• Make the Tax and Customs process less
labour intensive and cumbersome;
Risk Assessment
Effective Segmentation
Environmental Knowledge &
Understanding
Stakeholder Awareness
Education
• Make it simpler, quicker and
hassle free for clients;
• Improve the service offered to clients;
• But, ensure maximum compliance.
7
VOLUNTARY COMPLIANCE IS BASED ON TWO FUNDAMENTAL PRINCIPLES
Expedited Service
for legitimate Taxpayer & Traders
Interdict illegitimate
Taxpayer & Traders
Make it as easy as possible
for those trying to comply
1 Make it very hard for those
trying to avoid paying their fair share
2
Voluntary Compliance
Some taxpayers/traders will
always try to comply
whether effective
enforcement exists or not -
people who believe in doing
the right thing
The goal of voluntary compliance
is to influence the undecided
majority who will choose one way
or the other based upon how well
they are served and how easy it
is to comply
Some taxpayers/traders will
not comply whether
effective enforcement exists
or not – the criminals
Key to this approach is ensuring that taxpayers/traders understand their obligations!
8
SARS Compliance Programme
• The aim is to grow compliance with tax and customs legislation;
• Compliance refers to the degree to which taxpayers and traders, along
with intermediaries meet their legal obligation;
• Taxpayers and traders need to;
-Know what they have to do;
-Have the ability to do it; and
-Have the right motivation to take action.
• SARS acts to manage and measure compliance by:
-Working with trade to achieve demonstrated voluntary compliance;
-Reviewing international trends and good practice treatment options;
-Identifying specific cases for intervention;
-Conducting random audits to deepen understanding of industry practices;
-Tracing flow of funds around the world through a multi-agency approach;
• SARS uses enforcement action against incorrigibles, through focused
integrated multi-tax audits, investigations, and through seizures and
destruction of goods. Note: Compliance program initiated 2012/13, running in 2016/17
9
Prohibited and Restricted Goods
• Customs assist other government agencies and parastatals with the
enforcement of legislation administered by them prohibiting or restricting
the import, export or transit of goods through RSA;
• Custom legislation (Section 113) provides for the detention or seizure of
goods which do not comply with the legislative requirements;
• Various Customs Systems interphases with the Customs Declaration
Process to indicate such requirements captured thereon, such as the
Tariff Master and import permit system;
• Prohibitions and restrictions are captured in a list which is posted on the
SARS website and is available for both internal and external use;
• Most of these P&R requirements are administered electronically via the
SARS systems – a few permits or certificates are manually presented in
for verification or to be written off.
10
Prohibited and Restricted Goods
• Customs also identify contraventions of other legislation whilst enforcing
the requirements of the Customs and Excise Act, where they detain
specific goods and notify the relevant authority.
• Examples of such enforcement actions are:-
-second hand vehicles imported without the necessary permits from the
International Trade Administration Commission;
-medicaments imported out of regulatory control ;
-habit forming drugs which are not declared;
-counterfeit goods;
- and goods imported or exported in contravention of CITES restrictions or
prohibitions.
• Sometimes such detentions made by Customs can create problems of
their own in the sense that the relative authorities does not take the
actions required by them which leaves Customs with the decision
whether to detain or lease such goods.
11
Engagement: Customs proactively partners with industry
to support its mandate to protect the economy
Key Industries Relationship
• Clothing Textiles, leather and footwear industries
• Tyre industry • Tobacco industry • Alcoholic industries • Poultry industry • Scrap Metal industry • Plastics industry • Other
Confectionary
• Formal Industry forum with Terms of Reference including: manufacturers, industry groups, Government (DTI, ITAC, Econ Devt.), trade unions, retail stakeholders
• Sub-working groups / task teams tackle specific issues
• Peer review mechanism to address trade anomalies
• Clear SARS working instructions • Memorandum of cooperation with
individuals acting as experts
Coordinated strategy to optimise protection of Industry Expert industry assistance on reference prices, tariff & valuation. Tip-offs
12
Reference Pricing mechanism
• Reference pricing is a scientific approach to understanding the
underlying costs of key products within industries that are protected;
• Reference price provides a platform to consider the risk parameters
within the automated Customs risk engine rules;
• Customs Risk engine identifies high risk transactions of specific products
- identified by their Customs tariff code;
• Customs challenges potentially undervalued transactions and their
associated invoices through documentary inspection, physical inspection,
sample taking, and audit as required;
• Industry supports Customs with expert knowledge to verify product
classification, valuation and origin;
• Reference pricing is a guideline to detect possible valuation fraud, It is
not minimum pricing.
13
Reference Price formulation
• The Reference price is based on the absolute cheapest price that can
be found in the international market – price excludes: -The costs of labour,
-Trimmings,
-Overheads,
-Transport costs,
-Royalties.
• For goods where classification is based on kilograms (kg) the
reference price is based on the international price of the constituent
material (excluding: costs of labour, trimmings, overheads, transport
cost, royalties etc.)
14
Customs response to non-Compliant behaviour
Attitude to
Compliance
Behaviour Manifested Compliance
Action
Category
Trying to
comply, but
doesn't
always
succeed
0.01% – 25% difference of
value from reference price
Case dealt
with by
Processing
Hubs
1
Don’t want to
comply
25.01% to 60% difference of
value from reference price
Post
Clearance
Audit
2
Have
decided not
to comply
60.01% and above in
difference of value from
reference price
Hard
Enforcement
action
3
15
Clothing and textile Case study: Introducing reference prices
into risk rules yielded immediate changes in behaviour
Clothing Blankets Terry Toweling Bed Linen Textiles
Average Unit Prices Apr-12 R 3.31 R 6.51 R 12.49 R 9.20 R 14.08
Average Unit Prices May-12 R 3.93 R 6.50 R 13.26 R 9.32 R 24.96
Average Unit Prices Jun-12 R 5.68 R 15.56 R 17.94 R 17.06 R 19.79
R 0.00
R 5.00
R 10.00
R 15.00
R 20.00
R 25.00U
nit
Pri
ces
Average Clothing and Textile Unit Prices
Note: June 2012 average prices compared to April 2012 baseline, Source: Customs Risk engine analysis
Ave prices rise: 72% 44% 85% : 41%
16
Clothing and textile case study: Number of tariff headings
subject to Reference Pricing, 2011 - 2016
Nov-11 April &
May 2012
June &
July 2012
Sept.
2012 to
Jan. 2013
Feb. to
April 2013
Sept.
2013
Oct. and
Nov. 2013
Dec 2013
to April
2014
May - Oct
14
Nov 2014
to Feb
2015
March-
April 2015
May -
Sept 2015
Oct - Dec
2015
Jan -
March
2016
Number of active High Risk rules 17 32 86 95 104 115 116 117 126 130 99 99 100 103
Number of active Medium Risk Rules 31 31 34
0
20
40
60
80
100
120
140
Number of Tariff Headings under Reference pricing
Change in risk
based strategy
17
Clothing and textile Case study: Average Prices declared
BabyClothing
Bed linen Blankets Clothing Curtains TextilesToilet &kitchen
linen
Underwear& socks
2014/2015 R 153.92 R 86.54 R 36.46 R 44.58 R 74.65 R 56.93 R 77.73 R 166.71
2015/2016 R 193.76 R 90.78 R 52.86 R 50.86 R 81.70 R 70.54 R 82.01 R 202.85
% Increase 25.9% 2.8% 10.7% 4.1% 4.6% 8.8% 2.8% 23.5%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
R 0.00
R 50.00
R 100.00
R 150.00
R 200.00
R 250.00
Average prices during and percentage increase
19
Clothing and textile Case study: Achievements to-date
• With the introduction of the reference pricing tool in November 2011, there has
been an improvement in the declaration of clothing and textile imports.
• The modernisation of the Customs systems has enabled Customs detect those
importers who are shifting their ports of entry in order to avoid their under-declared
consignments being detected by our risk systems. The tighter controls have also
prompted unscrupulous traders to miss-declare their clothing and textile imports as
other products. Our systems again are able to detect this.
• Customs in collaboration with Industry requested the creation of additional Tariff
Subheadings to “ring fence” problematic products.
-There are now two specific tariff headings for denim jeans (women / men’s) which
allow customs to deal with the undervaluation of these commodities more effectively.
-The same was also done for bedding, curtains and towels where additional
subheading were created for embellished and embroidered goods.
• With the new high-tech scanners in Durban, Cape Town and Beit Bridge SARS is
doing end-to-end integrated cargo scanning on selected containers.
• Our risk engine‚ case management system and scanner software is now integrated
into one solution that is automated and real-time‚ with the whole process recorded
on the SARS system from beginning to end
20
Customs results in Counterfeit, clothing and textiles, illicit
alcohol and tobacco
Type
Quantity
FY15-16
Value ZAR
FY15-16
Quantity
YTD 2016-17
(up to 07 Aug)
Value ZAR
YTD 2016-17
(Up to 07 Aug)
Counterfeit
Clothing 88 584 items R 161 222 163 38 358 items R 48 527 055
Counterfeit
Footwear 70 529 items R 230 960 482 21 378 items R 41 715 455
Counterfeit (Other) N/A R 801 161 449 N/A R 378 602 773
Alcohol 45 500 litres R 321 945 1 621 litres R 165 440
Cigarettes
49 759 095
sticks R 48 453 507
25 978 837
sticks R 25 256 729
Clothing & textiles 156 891 items R 3 999 031
TOTAL R 1 242 119 546 R 472 302 844
Source: Customs operations and TIU dashboard 2016
21
Customs Seizure results 2016/17 Year to date
YTD 31 July 2016 YTD 31 July 2015
TYPE No. Of Busts Weight / Quantity No. Of Busts Weight / Quantity
Narcotics 511 2920 kg 191 1 431 kg
Viagra / Viagra
Generics 120 68 102 pills 106 504 269 pills
CITES 30 128 kg 25 467 kg
Currency 4 ZAR 7 969 200 and
USD 296 200 1 19 100 USD
Precious Metals 2 23.136 kg 0 0
Total 733 422
Note: Customs seizures are up 47% YTD in comparison to 2015/16 same period
Source: Customs operations and TIU dashboard 2016
22
Making use of an Industry Experts
The assistance of an industry experts are also called upon
to assist officers with tariff determinations, valuation as
well as other aspects
23
IPR and Counterfeit: Area of Operation
• Customs is empowered to seize and detain counterfeit or suspected counterfeit
goods whilst performing their duties under provisions of Sections (6) and (7) of
Section 15 of the CGA.
-This limits Customs operations to the time of importation / exportation / removal in transit
and on goods that are under Customs Control in a Customs and Excise Warehouse.
-Should Customs Officers become aware of, or detect any suspected counterfeit goods
outside of these defined Customs areas, Customs may detain such goods and inform a DTI
or SAPS.
• Customs Officers must apply for a warrant, as contemplated in Section 6 CGA
-If no warrant is applied for prior to the acts performed by an inspector, such acts must be
confirmed by a Judge or Magistrate within 10 days from the day on which those acts were
performed, or the officer must return all goods and make good all damages caused.
• In order for Customs Officers to perform the functions of an inspector in any other
manner under the CGA they must be appointed or designated in terms of Section 22
thereof.
24
Counterfeit Goods Act, Section 15 provides Customs power
to sanction counterfeit goods and protect IPR holders
• Section 15(1) provides for the owner of an intellectual popery right (IRP) to apply
to the Commissioner of SARS to seize and detain all goods that are suspected to
be counterfeit and which are imported;
• Section 15(2) provides for an applicant to furnish the Commissioner with
specimens of the protected goods, sufficient information and particulars as to the
substance and extent of the IRP and the title to that right;
• Section 15(3) provides for the Commissioner to approve applications if satisfied
that the goods are prima facie protected goods, that the prima facie subsist, and
the applicant is prima facie the owner of the IRP;
• Section 15(4) provides for Customs to seize and detain counterfeit goods, or
suspect counterfeit goods;
• Section 15(5) provides for the Commissioner to notify the (IPR) applicant in writing
of the approval of their application and the period for which the provisions of
Section 15(4) will be applied, or if refused, give the reasons the refusal.
• Section 15(7) provides for the owner of the IPR to furnish the Commissioner with
an indemnity against claims arising from the seizure or detention of goods in terms
of this Section and to cover expenses incurred in effecting the seizure or detention.
25
Customs and Excise Act 91 of 1964 supports execution of
CGA to protect IPR holders
• Section 18(1A) provides that goods in transit through RSA are included;
• Section 43(5) (a) excludes the disposal of goods detained under Section 113A for
the purposes of the CGA from the provisions of that Section;
• Section 43(6) provides for the disposal of goods seized and detained under the
CGA where the importer is not known, or cannot despite reasonable efforts be
located and where no proceedings are instituted or where no instruction for the
release of the goods is received;
• Section 88(1)(a) provides for the detention of goods for the purposes of the Act;
• Section 89(4) provides for goods seized for the purposes of the Act to be
condemned and forfeited in certain circumstances;
• Section 90 provides for the disposal of goods seized for the purposes of the Act;
• Section 113A(1) provides for officers to detain and seize goods for CGA purposes;
• Section 113A(2) provides for a Customs Officer to refuse a request for detention if it
is not in compliance with the CGA and the Commissioner has not been indemnified;
• Section 113A(5) provides for the Commissioner to make rules for procedures to be
followed by Officers, the forms that may be required to be completed and any other
matter for the purpose of administering the provisions of this Section.
26
Strategic initiatives to Strengthen mechanisms
Register Cargo Control
Declare Assess Inspect Enforce Release Audit
New Customs Act
-Manifest processing, and
-Reporting & Control of
Goods
-Provisional payments
-Registration and Licensing
-Declaration Processing
Professional
Organisation
- Customs competency
- Customs uniforms
- Reporting & performance
- CTL training
- Modernise & align Excise
Risk and Intelligence Management
Customs Risk
Management
- Risk strategy & SOPs
- Inspection quality
- Workflow tools
- Customs Risk Engine
- 3rd Party data sources
Goods
Control
- Goods control Pilots
- Command centre
- Goods tracking system
- State Warehouses
- National Drug Plan
Commercial
Compliance
- Preferred Trader
- Audit capacity
- Revenue projects
Governance
-Stakeholder Forum
-Reporting and
performance improvement
-Internal audit
Infrastructure
-Facilities plan
-Detector Dog expansion
-Scanner procurement
-State warehouse
upgrade
Excise
- Tobacco Marker
- Audit capacity