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Navigating international shipping, customs and tax
Customs duties and other taxes applying to small-business imports can be complex.
As the owner of a small business, you might want to import goods into South Africa to resell – or to use in your own manufacturing operations. To grow your business, you may need to import other goods or services that attract customs charges or other taxes.
These can be complicated, and they will affect the cost of doing business. What do you need to know about import duties?
Understanding customs categories
Customs duties play a significant role in all international trade, applying to both the import and export of goods.
- Tariff classification
In all commercial import and export transactions, goods must be classified according to an appropriate tariff heading, which determines how much duty is payable. An international tariff book guides this classification, and specifies various categories, including normal customs duties, excise duties and anti-dumping duties. It’s essential to use the correct classification if you’re importing commercial goods, since it affects import control permits, rules of origin obligations and customs rebate provisions. If classifying your goods is too complex, you can get a written tariff determination from the South African Revenue Service.
- Customs duties
These are levied on imported goods to raise revenue and protect the local market. They are calculated as a percentage of the value of the goods, determined by the schedules in the published Customs and Excise Act.
- Value-added tax
This is collected on goods imported and cleared for home consumption and applies to both imported and domestically produced goods.
Tax-exempt imports and bonded warehouses
If you import goods with the intention of re-exporting them, they are exempt from customs duties. However, these tax-exempt goods need to be stored in a bonded warehouse. The purpose of this provision is to prevent the final importer from paying duties and taxes multiple times. This essentially means that SA is not the ultimate destination for these goods. An example would be pharmaceuticals bound for distribution in the rest of sub-Saharan Africa.
Factor in lead times for all the possible transport modes that could suit your import needs
Bonded warehouses are secure facilities where imported goods can be stored under specific conditions. Goods stored there are exempt from customs duties or tax, and as an importer you can store goods there until you decide whether to move them on, or to offer them on the local market. If you decide on the latter, duties will only be collectable on the stored goods when you decide to sell them locally. This arrangement minimises the financial burdens that you must manage as an importer and exporter, while ensuring that you can move goods smoothly across borders when you need to.
Determining your import duty
Customs must clear every single item that you import into SA, no matter by what means of transport (air, sea or land freight). There are 3 ways in which customs duties might be calculated:
- Rated or specific – for example, at 10 cents per square metre or 3 cents per dozen items.
- Ad valorem – a fixed percentage of the value of the goods.
- Compound – a combination of the 2 categories listed above.
E-commerce and customs duties
The South African e-commerce market is increasing rapidly and already involves transactions totalling more than $5 billion a year. If your business is involved in importing goods via e-commerce channels, and you import goods worth more than R10,000 more than 3 times a year, your business will need an importers code.
The Electronic Communications and Transactions Act (ECTA) is the main legislation regulating e-commerce in SA. ECTA also regulates electronic communications and transactions, and it is responsible for consumer protection against cybercrimes. E-commerce businesses must also comply with the Protection of Personal Information Act (POPIA).
Transport and customs duties
Both importers and exporters must consider the current state of SA’s port and rail network, and all modes of transport in or out of the country attract customs duties. With these facts in mind, cost and efficiency become even more important. Factors to consider include the following:
- Cost – this varies, depending on the type and quantity of goods you need to import and distribute. Road transport predominates in SA, but it is more expensive than rail. Similarly, air freight is more expensive than sea and rail when importing goods from international destinations. Things like terminal charges, insurance and finance charges will also add to your import costs.
- Reliability – especially if you’re importing consumer goods or perishable foods, getting them to the right place at the right time is crucial. Factor in lead times for all the possible transport modes that could suit your import needs.
- Your goods – what is the size and weight of the goods you’re bringing in? Are they durable or fragile? This will have an impact on whether you use road, rail, sea, or air freight, or a combination of these options.
The complex landscape of customs duties and taxation on imports for your small business can be intimidating. Get advice and guidance from our small-business team and avoid needless costs.
