VI. TRADE REGULATIONS AND STANDARDS South Africa is a contracting party to the Generalized Agreement on Tariffs and Trade (GATT), implementing a two column GATT tariff structure of general and most-favored-nation (MFN) rates. U.S. products qualify for the MFN rates; similarly, South African shipments to the United States receive U.S. MFN treatment. Presently, 90 percent of South Africa's tariff rates are GATT-bound. South Africa follows the Harmonized System (HS) of import classification. Tariffs and Import Taxes - (Budget may change some of these areas) Tariffs: Many goods enter duty free, while those subject to duty generally pay at a rate between 5 and 25 percent. However, rates of tariff protection can reach over 60 percent, with luxury goods tariff as high as 60 percent and automobiles at 100 percent. Goods not exceeding a value of R400 are not liable for customs duty and do not have to be entered on a bill of entry. Presently the Government is trying to simplify the tariff system by consolidating categories of similar goods. The Government has also stated its intention to implement a policy of tariff reductions. These moves have met with limited success to date. The move to simplify the tariff system by reducing the number of separate tariff items has met with limited success in reducing tariff barriers; although some tariffs have been reduced, others, due to the combining of formerly separate listings, have actually risen. Any South African producer may petition the Board of Tariffs and Trade for tariff protection. In practice, approval of such petitions is more likely in cases where the producer has a major share of the domestic market and can show that foreign competition is eroding the producer's market dominance. In mid-1991, the Government introduced a new three-week public comment provision for tariff protection requests in emergency situations. The norm, however, remains, a four-week public comment period followed by an undefined period of governmental decision-making time. Customs Valuation: The dutiable value of goods inported into South Africa and the Southern African Customs Union (SACU) is calculated on the f.o.b. price in the country of export, in accordance with the GATT Customs Valuation Code. According to Section 66 of the South African Customs and Excise Act, the value for customs duty purposes is the transaction value, the price actually paid or payable. In cases where the transaction value cannot be ascertained, the price actually paid for similar goods, adjusted for differences in cost and charges based on distance and mode of transport, is regarded as the transaction value. If more than one transaction value is ascertained, the lowest value applies. Alternatively, a computed value may be used based on production costs of the imported goods. In the case of related buyers and sellers, the transaction value will be accepted if, in the opinion of the Commissioner for Customs and Excise, the relationship does not influence the price, or if the importer shows that the transaction value approximates to the value of identical or similar goods imported at or about the same time. Dutiable weight for the assessment of specific duties is the legal weight of the merchandise, plus the weight of the immediate container in which the product is sold, unless specified otherwise in the tariff. Import Surcharge: The import surcharge was originally imposed as a means to restore the country's deteriorating balance of payments. The surcharge is levied on the customs value (f.o.b.) of the imported goods. The government would like to eliminate the surcharge entirely in the future when the country's balance of payments is strong enough. A break down of the rates and their product categories is below. 0% essential foods, agricultural implements and inputs, manufacturing inputs, intermediate and capital goods. 5% goods used by both consumers and manufacturers, for example, flour, yeast, medicines, paint, tires, metal pipe and tubing, computers, etc.; luxury foods, fruit, coffee, tea, spices. 15% aircraft, vehicles, earthmoving equipment, software, kitchenware, appliances, etc. 40% luxury consumer goods, for example, televisions, tape recorders, video machines, antiques, jewelry, etc. Value-Added Tax: The value-added tax (VAT) was raised to 14 percent in March 1993. VAT is payable on nearly all imports. However, goods imported for use in manufacturing or resale by registered traders may be exempt from VAT. The valuation of imported goods for VAT is based on the f.o.b. value plus 14 percent of that value, plus any non-rebated customs duty (tariff plus import surcharge). Excise Tax: Specific excise duties are levied on alcoholic and nonalcoholic beverages, tobacco and tobacco products, mineral waters, some petroleum products, and motor vehicles. Ad valorem excise duties are levied on office machinery, photographic film, and luxury consumer goods such as cosmetics, home entertainment products, and motorcycles. Tariff Rebates: Various rebates and relief of duties exist for cases in which the imported commodity will be used in a subsequent domestic manfacturing or other add-value process. The importer must consult the Import Control Act to determine whether the potential imports are eligible for rebate or relief of customs duty and surcharge. Obtaining Tariff Information: Duties, excise taxes and import surcharges levied on goods can be obtained from the Department of Commerce, South Africa Desk, telephone: (202) 482-5149; fax: (202) 482-5198. Since South Africa's tariff schedule is organized by Harmonized System Tariff (HS) numbers, the international trade classification scheme, the Desk will only provide duties if it is supplied with the appropriate HS number for the exporter's product. To obtain HS numbers, contact the Commerce Department District Office or the appropriate office in the Bureau of the Census, Foreign Trade Division, Commodity Analysis Branch: Books and other printed matter: (301) 763-5210 or 763-5211 Chemicals and sundries: (301) 763-5186 Foods: (301) 763-5201 Machinery, vehicles, electronics, and other goods: (301) 763-5200 Textiles: (301) 763-5138 Calculation of Tariff and Import Taxes: The South African importer may have to pay duties, specific excise taxes, and import surcharges to import goods into South Africa. All of these are calculated based on the f.o.b. value of the product. In addition, the importer may have to pay an ad valorem excise tax. The ad valorem excise tax is assessed on the f.o.b. value, plus 15 percent of the f.o.b. value, plus the import duty. A value-added tax is assessed on all imports and is calculated based on the f.o.b. value, plus 14 percent of that value, plus the total of all non- rebated customs duties. As an example, the cost of importing on cosmetics and haircare products containing alcohol with an f.o.b. value of $1.00 is shown below: DUTIES: import duty = 40% ad valorem excise tax = 37.5% import surcharge = 40% VAT = 14% CALCULATIONS: import duty = $0.40 (40% of f.o.b.) ad valorem excise tax = $0.58 (see calculations below) import surcharge = $0.40 (40% of f.o.b.) --------------------------------- TOTAL DUTIES = $1.38 In this example for cosmetics, the ad valorem excise tax is calculated as follows: CALCULATIONS: f.o.b. = $1.00 15 percent of f.o.b. = $0.15 import duty = $0.40 (40% of $1.00) ------------------------------ SUBTOTAL AD VAL VALUE = $1.55 This subtotal is used to calculate the ad valorem excise tax: 37.5 percent of $1.55 equals $0.58. The VAT in this example is calculated as follows: CALCULATIONS: f.o.b. = $1.00 14 percent of f.o.b. = $0.14 TOTAL DUTIES = $1.38 ------------------------------ SUBTOTAL VAT VALUE = $2.52 The value-added tax is 14 percent of $2.52, which totals $0.35. The final cost to the South African importer for these cosmetics is the f.o.b. value, plus all duties, plus the VAT. CALCULATIONS: f.o.b. = $1.00 TOTAL DUTIES = $1.38 VAT = S0.35 ------------------------------ FINAL COST TO THE IMPORTER = $2.73 Import Permits (Licenses) South Africa is signatory to the Tokyo Round Agreement on Import Licensing Procedures. Some goods imported into South Africa require an import permit which the South African importer obtains from the Directorate of Import and Export Control within the Department of Trade and Industry. Products requiring permits include consumer goods (foodstuffs, clothing, fabrics, footwear, and books), wood, paper products, motor and aviation fuels, refined petroleum products, various chemicals, raw wool, all used goods, waste and scrap. Products which do not require permits include raw materials and other products for industrial purposes, and new spare parts, assemblies and materials imported as original equipment for the manufacture of motor vehicles. The list of goods requiring import permits is specified each year in the annual Import Control Program. South Africa's import permits system is intended mainly to monitor imports of certain "sensitive" commodities. Some imports may also require permission from the Departments of Agriculture, Health or Environment Affairs. Some goods imported for export processing or under other rebate provisions require a rebate (not import) permit to benefit from duty rebates and export incentives. South Africa does not maintain any formal import quotas. The coverage of import controls varies considerably by sector. Import controls apply to 74 percent of tariff lines in agriculture, forestry and fishing. Over 90 percent of tariff lines are under import control in the beverages, tobacco and rubber sectors, and over 85 percent in the food sector. In textiles, a very low proportion of tariff lines is under import control, but almost 60 percent of clothing items are subject to control. No import controls are in force for leather, footwear, furniture, plastics, pottery, glass and other non-metallic minerals, motor vehicles and other transport equipment. According to some sources, import controls are applied in certain sectors, such as medicines, mainly for reasons of compliance with approved standards rather than for protection. Applicants for import permits must submit information on the level of existing imported stocks, balances remaining on the import permit and monthly sales figures. Applications are dealt with on the merits of each case. As a rule, permits are made available to existing importers; the amount allocated is based on past sales performance. New importers, who must register as such, receive an initial import allocation on the understanding that further locations will be made available for stock replenishment purposes. Different application forms are required for registered importers of capital goods, raw materials and manufactured goods. Permits are valid for the calendar in which they are issued and may be used for customs clearance of goods shipped before December 31 of that year. Permits cannot be extended or transferred. There are no licensing fees or import deposits. U.S. Export Controls U.S. nationals may engage in the full range of trade activities in South Africa. The United Nations repealed its arms embargo in May 1994, the United States Government followed suit one month later. Exporters should call the Bureau of Export Administration at telephone 202-482-4830 for an update on any remaining export controls. South African Export Controls A number of products are subject to export control and licenses, including strategic goods (exhaustible resources), agricultural products administered by control boards, metal waste and scrap. Diamonds for export must be registered with the Diamond Board. No price-controlled petroleum product produced at local synfuel plants may be exported. Metal scrap produced by scrap dealers must first be offered to downstream manufacturers of metal products at a discount to the price at which it can be exported. The discount is 15 percent for non-ferrous scrap and 7.5 percent for ferrous scrap. If manufacturers turn down the offer, an export permit may be issued to the dealer. Only ostriches and their fertilized eggs are subject to complete export prohibition. Export prohibitions on any product are difficult to enforce. Import/Export Documentation Import Documentation: Basic documents required for shipments to South Africa include: 1) a commercial invoice which shows the price charged to the importer in addition to the cost of placing goods on board ship for export; 2) bill of lading; 3) insurance documents; and 4) a packing list. Other special documentation may be required by the importer. At least three copies of the invoice should go forward under separate cover to the consignee prior to the arrival of the goods. The South African Declaration of Origin Form DA-59, certifying the country of origin, description of goods, weight, etc., is required for shipments of specified goods which may be subject to countervailing duties, duty rebates, or surcharge exemption. Form DA-59 is required for stainless steel tableware, kitchen items or other household articles, and mugs and cups of a diameter not exceeding 70 mm; iron or steel except stainless steel, not enamelled; motor vehicle air filters, motorcycle oil or petrol filters, and parts for motor vehicle filters; and reception apparatus for radio telephone or radio broadcasting apparatus. Generally, South African Customs will notify the importer if a Form DA59 is required for a specific product. When required, exporters or suppliers must provide at least one original signed copy attached to the original commercial invoice. A chamber of commerce certification or a U.S. customs stamp are not required. The form can be obtained from any South African consulate in the United States. Export Documentation: To benefit from export incentives, firms must be registered with and approved by the Department or Trade and Industry. Approval depends,inter alia, on the firm supplying data on exports for the past three years; anticipated exports, and their destination, for the next three years; and an accurate breakdown, by H.S. tariff line of exports and prospective exports. Firms that are service-related and agents who export on behalf of manufacturers do not qualify for incentive schemes. Warehousing South African regulations require that all goods must be landed and entered into the country within seven days after arrival of the importing ship, unless the Secretary of Customs provides an exemption. If this procedure is not followed, the Customs officials may transfer the goods to a state customs warehouse where charges are assessed at R2 per 100 kilograms each week. After three months the goods may be sold at public auction. Goods may be stored in bond without payment of customs duties, except dumping or special duties, in any bonded warehouse or in an unbonded warehouse with the approval of the Secretary of Customs. Barter/Countertrade The South African Government has no laws, regulations, or published policies regarding barter/countertrade. It views countertrade as a second-best alternative to be engaged in only when normal trade cannot be conducted. While there is no specific approval process for countertrade transactions, South African traders must obtain prior approval from the Reserve Bank before concluding a barter transaction. Further information about countertrading with South Africa can be obtained from the local association: Countertrade Association of South Africa P.O. Box 6296 Pretoria, 0001 Telephone: (27 12) 344-2926 Fax: (27 12) 344-0382 Used Goods The South African Government strictly regulates the importation of all used equipment. Importers must apply to the Department of Trade and Industry for a permit to import any used goods. There is a market for used machinery, machine tools, and computer equipment. Permits to import worn overcoats, raincoats and duffle-coats as well as all other types of clothing, are granted upon application. Imports of other secondhand clothing are only allowed as charitable donations to South African churches or welfare organizations. Most other used goods are prohibited. Exceptions may be granted under Section 2 of the Import and Export Control Act of 1963 if the goods and their intended use are fully documented. Exceptions are not granted for used clothing. Further information should be obtained from: The Used Machinery Association in South Africa Contact: Mr. Fred Thompson c/o Thompson Machine Tools (Pty) Ltd P.O. Box 1532, Benoni 1500 Telephone: (27 11) 845-2030 Fax: (27 11) 54-5217 Temporary Import of Samples The ATA Carnet ("Admissions Temporaire-Temporary Admission") is a special international customs document designed to simplify customs procedures for goods being temporarily imported into participating countries. The ATA Carnet may be used in any country which is a signatory to the Customs Convention of ATA. A carnet is valid for up to one year. The carnet eliminates the extensive customs procedures often required for temporary imports. Perishable and consumable goods are not eligible for carnets. Carnets may be used for goods intended for display or use at exhibitions, fairs, meetings, and similar events; professional equipment such as equipment for the press, cinematographic equipment, engineering, topographical, surgical, electrical, archaeological, and entertainment equipment for demonstration or temporary use; and commercial samples imported for the purpose of being shown or demonstrated in South Africa It is the obligation of the holder of the carnet to ensure that the customs authorities of South Africa will accept an ATA carnet for the import in question. Applications for a carnet should be forwarded to: U.S. Council of the International Chamber of Commerce 1212 Avenue of the Americas New York, New York 10036 Telephone: (212) 354-4480 Fax: (212) 575-0327 In South Africa carnets are issued by the South African Chamber of Business: South African Chamber of Business (Carnet Division) P.O. Box 91267 Aukland Park 2006 Johannesburg Telephone: (27 11) 482-2524 Fax: (27 11) 726-1344 If an A.T.A. Carnet is not used, South Africa does have its own regulatory provisions for the temporary importation of goods, provided the duty is covered pending reexportation. Samples of no commercial value, catalogs, price lists, and trade publications of firms or persons having no established place of business in South Africa or no representative holding stocks in South Africa may be admitted duty free. Publications and advertising matter relating to fairs, exhibitions, and travel in countries outside South Africa are also admitted duty free. Labelling, Marking Requirements All goods shipped to South Africa must conform with the metric International System of Units (S.I.). Although packages can show U.S. denominations with metric equivalents, the metric figure must come first and be conspicious on the container. Special labelling requirements apply to drugs, wine, toothpaste, powders and mouthwashes containing fluoride, foodstuffs and cosmetics; certain products require labels in both English and Afrikaans. The Merchandise Marks Act provides that imported goods not bear marks giving the impression that they originate in South Africa. The Agricultural Product Standards Act of 1990 provides the enabling legislation for regulations governing packaging and marking of commodities for local sale (including imported goods) and for exports. The country of origin must be identified on imported commodities. Cheese, butter and honey, and almost all agricultural products destined for export must be graded, marked, packed in a prescribed manner. In preparing fresh fruits and vegetables for export, South Africa conforms to EU regulations with respect to packaging and chemical treatment. Textile goods containing sheep's wool require special labels; products containing at least 35 percent wool must be labelled to show the percentage. Packaging made from natural materials and fibers must be accompanied by an official certificate stating that the material has been fumigated. Standards South Africa is not a signatory to the MTN Agreement on Technical Barriers to Trade. The South African Bureau of Standards (SABS), established in 1945, was a founding member of the International Organization for Standardization (ISO) and is a member of the International Electrotechnical Commission (IEC). The principal activities of SABS include the preparation of specifications, codes of practice and standard methods, the setting up of test facilities and the administration of quality certification systems such as the SABS mark on products, for which it charges fees. The SABS mark is voluntary and is no longer limited to domestically manufactured goods. Where the SABS mark is not applicable, the Bureau annually publishes a bulletin listing suppliers whose quality management complies with SABS-ISO 9000 requirements, identical with the ISO 9000 series. The Bureau maintains a list of accredited civil engineering test facilities whose technical competence meets South African standards. As yet, no foreign test facilities have been accredited by the SABS, but none have applied. The Minister of Trade may declare standards compulsory, for safety and health reasons, when the standards deal with commodities not dealt with under specific Acts. These standards apply to all products, irrespective of their origin. At present such compulsory standards exist for 43 categories of products, including electrical appliances, electronic products, motor vehicles, processed marine products and canned meat. The standards tend to comply with internationally accepted norms: for example, motor vehicle safety standards are equivalent to those of the IEC, and standards for processed marine products and canned meats are similar to relevant FAO Codex Alimentarius, EU and U.S. Food and Drug Administration requirements. In general, the setting of standards follows international norms, but allowance is made for geographic, social and financial differences. The public telecommunications company, TELKOM, is charged with setting standards for telephone equipment. These are reported to exceed those set in many other countries, obliging overseas manufacturers to meet special requirements. Free Trade Zones/Warehouses There are currently no legal provisions for free trade zones, although goods may be temporarily admitted, for up to six months, for processing. In November 1993, the Department of Trade and Industry circulated for public discussion a document calling for the establishment of export processing zones. Membership in Free Trade Arrangements South Africa is a member of the Southern African Customs Union with Botswana, Lesotho, Swaziland and Namibia. Members implement the South African tariff as a common external tariff and do not impose duties or quantitative restrictions on goods imported or exported within the common area. Any member of the Union, except South Africa, may, following consultation, apply additional duties for protection of new industries. The only cases invoking this provision have involved Botswana, which introduced a 100 percent duty on soap products and a 75 percent duty on wheat flour. In addition to the Customs Union, South Africa has trade agreements with Zimbabwe and Malawi. It also grants unilateral tariff concessions on certain imports from Mozambique and Turkey. In addition, tea from Mauritius is not subject to import surcharge.