Picture: ISTOCK
Picture: ISTOCK

The new preferred trader programme, introduced this month by the South African Revenue Service (SARS), is regarded as an important milestone in the continued customs modernisation drive.

Customs is a strategic priority for the revenue agency and the journey to modernise the 1964 Customs and Excise Act culminated in the signing of two new customs acts in 2014 to replace the old act.

The preferred trader programme is detailed in the new legislation, which is expected to be implemented in the second half of this year.

The ultimate objective of the programme is to move away from the traditional customs "gate-keeper approach" to a more risk-based approach.

Duane Newman, joint MD of Cova Advisory & Associates, says the two big issues in an import and export supply chain are time and cost.

"The aim of the programme is to save time with fewer stops when goods are imported or exported, and to use nonintrusive inspection techniques, rather than unpacking a container (which can take ages)," says Newman, who also chairs the business incentives working group at the South African Institute of Tax Professionals.

"It will save money directly through lower security and customs bonds, which tie up a company’s banking and insurance facilities, and indirectly through fewer stops and delays, which could cost an importer penalties for late delivery to their clients."

The preferred trader programme in SA is modelled on the Authorised Economic Operator set up by the World Trade Organisation.

This is implemented in jurisdictions like the European Union, where the crossing of many borders is an issue. Customs authorities have to use technology to improve their focus by facilitating trade for "good" importers and exporters, and focusing on the "dodgy" ones that could be engaging in fraud and other criminal activities, says Newman.

Pieter du Plessis, director at XA International Trade Advisors, cautions against diving headlong into the process without doing proper homework.

"To obtain preferred trader status involves more than merely filling in a form. As soon as a trader indicates that it wants to obtain the status, SARS will issue a questionnaire which must be completed within a specific timeframe."

SARS will also visit the business to audit all internal, business, process and financial controls, and will go into the finest of details.

"Many businesses rely quite heavily on their clearing agents to complete and take responsibility for their processes. Our experience is that few companies are sufficiently prepared for the SARS audits and customs competency assessments."

Du Plessis says once the process has been completed and the trader has received the green light, they will have to maintain compliance to retain their preferred trader status.

SARS says only 28 customs clients have been awarded the status following lengthy audits.

Another 250 are still in the process and SARS expects that all the outstanding applications will be processed "speedily" in the coming months.

A trader who has been awarded preferred trader status will have a customs relationship manager appointed to them, who will assist with issues arising at clearance points.

Du Plessis says the business sector in SA lacks proper knowledge of customs issues. "Historically companies relied on clearing agents, and senior and even middle management’s knowledge of customs has been scant."

The new Customs Duty Act (dealing with monetary matters) and the Customs Control Act (dealing with processes) will change this.

"Every business dealing with the customs part of SARS will have to have someone who has passed the SARS examination."

Exactly what the SARS exam will entail is still unclear.

Du Plessis says, however, that the days of pushing the customs responsibilities onto third parties will end once the new legislation becomes effective. Knowledge of customs will become critical.

According to Newman the programme has been "eagerly awaited" by business. The initial 28 clients that have been accredited are pleased.

"We need to give it time to show its real benefits…. I believe that if SARS has the correct relationship managers assigned to the accredited clients, and they are proactive and offer great client service, importers and exporters will be happy with the results," he says.

"We really need such best practice processes in customs."

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