Delays in Itac’s probes on import duties have cost SA R3bn

Delays in import duty investigations by the International Trade Administration Commission (Itac) have choked an estimated R3bn out of the SA economy, leaving some businesses in distress.  

This is according to an investigation by XA Global Trade Advisors, which has compiled its second annual report into the status of customs and duties investigations and reviews and found that some can take as long as four years.

Itac is responsible for enforcing and monitoring duties on imports and exports. 

The commission's investigations are ideally supposed to take six months or as little as four months if an affected business is in distress. XA Global Trade Advisors maintains that the time for investigations has to stay within 12 months.

According to the report, there were 42 open investigations in June2022, with 88%, or 37 of them, overdue. The index showed a decline in Itac’s performance in concluding cases, despite some cases being finalised.

CEO and founder of XA Global Trade Advisors Donald MacKay said the report’s findings showed that while trade policy on imports and customs duties was sound, it lacked a sound structure. He said XA Global Trade Advisors had been meeting government institutions over the issue.

“The fact that that process is not working properly is making it very difficult. We met Itac on Monday and officials at the department of trade, industry and competition this week. There seems to be a lot of desire to fix this problem. We are hopeful that when we have the next iteration of this report in six months, we will have some good news to report,” said MacKay.

As an example of the crushing effect of these delays, MacKay said a company called Matador Butchery in the Eastern Cape made chicken kebabs from deboned chicken quarters it imported. The import duty on these went from 12% to 42%. Matador Butchery launched an application for review in 2021.

The Itac investigation dragged on for years. In that time the business paid R16m in duties and went from hiring about 90 people to 25 for two days a week.

Overall a collective R1.4bn in duties, which are being contested, has been paid during the period of delayed customs and duties investigations.

“If the outstanding duty relief applications were granted on goods not available locally, it would put R1.4bn back into the economy, benefiting the relevant economic sectors directly. In addition, if the duty increases requested were granted and import volumes remained roughly constant, the government would collect a further R1.6bn in duties,” MacKay said.

In another case, Nature’s Garden applied for a duty increase on mixed frozen vegetables in June 2018. MacKay said the investigation was initiated by Nature’s Garden on February 22 2019, and it is still not resolved.  

“The decision taken on this investigation, which is 46 months overdue, is going to be problematic. The information is so old that there is no way for an investigator or regulator to understand what to do in a current circumstance.”

He said while the World Trade Organisation prescribes that a duties investigation expires after 18 months, some investigations can go without being concluded for up to 48 months. The XA Global Trade Advisors Report recommends a time limit of 12 months for an investigation to conclude.

“The minister should instruct the investigations that are in blue to be concluded and wrap up in three months, or at a push, in six months. That way we can clear this process rather than deal with this legacy that stands the longer that investigations remain open.

“The biggest unpredictable part of this process is the amount of time it will take for an investigation to be concluded. We propose that a 12-month deadline is put in place so that investigations are forced to conclude in that period. It is not an unreasonable amount of time.”

MacKay also recommended more clarity in the role of ministers, because while the minister of trade, industry and competition is responsible for Itac, the minister of finance has the last say on customs and duties as the minister responsible for the SA Revenue Service.

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