SMEs who are expanding their businesses through exports, or those that import materials, need to understand the legal requirements of cross-border sales. That’s what customs clearance is all about. It’s important because it ensures that the two countries can prove that from both sides the goods are regulatory safe, all duties and taxes are paid, illegal goods are prevented from entering a country, and the documentation is recorded accurately to prove that the goods that are being moved are in fact what it says on the customs documents.
E-commerce has enabled small businesses to reach people beyond the borders of their country. A jewellery manufacturer in Cape Town can reach a buyer in Lesotho, or an apparel brand in Johannesburg can ship clothing to a customer in Namibia.
So what do entrepreneurs need to understand about cross-border sales?
What is Customs and Clearance?
The Customs and Excise Act, 1964 (Act No. 91 of 1964) placed both customs and excise matters under one Act. The Commissioner administers it in terms of the South African Revenue Service Act, 199, which allows the Commissioner to delegate powers and duties to officials, enter into agreements and make rules for the administration of the Act.
The South African Customs Administration, the branch that is responsible for managing and executing the regulatory checks, came to be based on the Customs and Excise Act, 1964 (Act No. 91 of 1964) and is situated within the tax regulating body, SARS. The Administration, often just called Customs, exists to:
- Provide border control management, community protection and Industry protection
- Administer trade policy measures and industry schemes; and
- Collect revenue from customs duties on imported goods; excise duties on locally manufactured products like alcohol, tobacco and fuel; environmental levies; fuel levies; and Road Accident Fund levies
Any goods that are imported or excisable, or fall under the category of a levy for environmental levy goods, fuel levy goods, and RAF levy goods.
Furthermore, the legislation provides for:
- requiring import/export declarations,
- licensing manufacturers and warehouses,
- classifying goods into tariff schedules,
- determining customs values,
- imposing record-keeping obligations,
- empowering SARS officers to inspect, seize and audit goods,
- creating penalties and forfeitures for non-compliance.
When Should an SME Adhere to Customs and Excise Regulations?
Small businesses should care about the respective Act and the regulations that have been put in place through it if:
- Any goods physically cross South Africa’s borders, regardless of whether they are inbound or outbound.
- The business is responsible for buying, receiving, selling or manufacturing the above-mentioned goods.
- The goods that a business imports, exports, manufactures, stores and sells are on the excise schedules.
NOTE: This means that if you are a local distillery that manufactures alcohol, or a producer or warehouser of tobacco, fuel, sugary beverages, or luxury/high-value consumer goods, you must also register with the Customs and Excise administration.
If you are buying imported goods from a local wholesaler, you don’t need to register, because the wholesaler who was mainly responsible for importing said goods has already paid the necessary duties and gone through the clearance process.
Registering with SARS for Customs and Excise
Business owners who need to register at SARS for customs and excise clearance can do so on the eFiling page, which every registered business has access to.
- Go to the eFilling website and log in.
- If you have not done so yet, link to the organisation profile to your individual profile.
- Assign RLA user rights and roles.
- Capture the RLA client application.
- Submit the application.
Your application will be reviewed, and your profile will be updated according to the decision.
When Not to Register
In some cases, a small business might find that they don’t need to register for customs if they occasionally ship small orders to other countries, and your shipping and delivery service is an Authorised Economic Operator (AEO) that handles all the necessary paperwork, declarations, duty and clearance requirements on your behalf.
It is beneficial to work through a customs clearance agent because these professionals specialise in customs clearance. They can assist with all of the documentation and legal compliance of exporting your products. This can include understanding the various shipping codes and forms that need to accompany the different types of products to various countries.
Since exporting means that a transaction has to adhere to the rules and regulations of two countries, it can be overwhelming. As a small business, you might feel the need to do it on your own, but some businesses are built to support you – use them.
Documentation is Essential for Customs Clearance
Once you have been registered (and approved) for exporting and importing, you will need to ensure that your documentation is always in order. Here is a list of documents that you will need.
Commercial Invoice: Serving as the central financial record for your cargo, this document specifies the items’ nature, amount, monetary worth, and mass. Customs officials rely on these particulars to determine the appropriate taxes and tariffs.
Packing List: A packing list acts as a detailed inventory for your shipment, itemising the contents of every package along with the weight and dimensions of each specific item. By providing a transparent overview of what is contained within your boxes, it helps to verify that all goods are accounted for and prevents loss.
Shipping Label and Tracking Number: To ensure your shipment is easily identifiable and can be monitored throughout its entire trip, each package must feature a distinct tracking number and a securely attached, legible shipping label that includes the destination address and contact details.
Certificate of Origin: The Certificate of Origin is a vital document that confirms the manufacturing country of your goods. This data is essential for customs authorities to establish the correct import duties in the receiving nation.
Customs Declaration: The Customs Declaration is a critical form providing a comprehensive breakdown of the items in your shipment and their respective values. In the destination country, it acts as the primary record used for customs clearance purposes. The import and export declarations are two separate documents.
In some cases, you may need to acquire additional documents like permits, specific certificates, or compliance declarations, including an importer/exporter registration number, VAT number, clearing agent mandate, and insurance certificate.
There are specifications for how these documents need to be set up. It’s, for instance, not enough that the invoice only contains the destination and origin addresses and items, but also the relevant shipping codes. Depending on the mode of transport used to move these goods, the code also changes.
Should you still need guidance on becoming an exporter or importer, you can visit the Department of Trade, Industry and Competition (dtic) website.
