What is clear is that SARS’ customs has been talking about the modernisation of its systems for quite some time, and that modernising refers not only to the manner of processing entries, but also to how it approaches enforcement and the servicing of traders according to their level of compliance. The idea is to achieve a scenario in the long run where traders, who have elected to make application to SARS to follow a voluntary process of assessing their compliance , will ultimately attain some form of superior status; enjoy a better relationship with and service from customs authorities; and will thereby reduce costs and become more efficient.
However, it is also a general goal of SARS, customs included, to improve its collections and increase incidents of identifying non-compliance.The question then is when a client decides to voluntarily disclose their known indiscretions, what are they letting themselves in for? What process are they following and what outcome can be expected?
Some anxiety and confusion around these issues can be reduced by traders becoming aware of the legislation in which these concepts are laid out, and the status of that legislation.
Customs accreditation: Accredited client status or preferred trader status
Customs accreditation is a familiar concept from around the turn of the millennium with the addition of Section 64 read with Section 120 of the Customs and Excise Act and the relevant rules.After a degree of hype, both SARA and the public began to realise that SARS just did not have the capacity to meet the administrative load of processing applications for accreditation by clients wishing to demonstrate their compliance.
The more recent reference by SARS in correspondence to preferred trader status arises from a renewed programme of accreditation by SARS; which has been coupled with an amendment/addition to the existing Rule 64E (which became effective in July 2011, and now provides for second level or level 2 accreditation), a more exacting level with higher standards than the existing or old status which will now be referred or deemed to be level 1.
As an illustration, for a trader to succeed in an application for level 2 accreditation, the requirements include (as for level 1 accreditation):
1.That the importer or exporter is registered in terms of the Customs and Excise Act.
2.That the trader meets the criteria which include an appropriate record of compliance, computer, accounting and logistical systems; sufficient knowledge; and sufficient financial resources.
The new rules for level 2 accreditation provide that to be eligible for consideration, the appropriate record of compliance means that the relevant persons applying have not been convicted of an offence involving fraud or dishonesty; nor of any offence in terms of the Customs and Excise Act; nor have they incurred an administrative penalty over a period of three years immediately preceding the application in respect of any offence in terms of Section 80-84 (non-declarations, irregular dealings with goods; false documents or declarations) and 86 (specified offences) of the Act; and have not been convicted of any offence in terms of the VAT or Income Tax Act.
This is rather an exacting standard compared with the level 1 accreditation where a margin of 5% error was allowed for and an examination to establish a level of compliance was appropriate. Either way, it is difficult to imagine why a trader who is approached by SARS to engage with it and to open their books with a view to assisting to establish their level of compliance might hope from the exercise to achieve preferred trader status without incurring any outstanding liabilities and penalties and interest to boot.
Remembering that the term ‘preferred trader’ is not a legislated concept but refers merely to being successful in a voluntary application to become accredited. Furthermore, level 2 accreditation may include the following benefits (as legislated):
•The appointment of a customs relationship manager tasked with facilitating the relationship between a client and customs.
•Reduction of the amount of any security required for compliance with a customs procedure.
•Fewer routine documentary and physical inspections.
•Prioritising a request for tariff and value determinations.
•Prioritising access to non-inclusive inspection techniques when goods are stopped or detained for inspection.
Apart from having a visible relationship manager, none of the other benefits listed above are truly measurable.
However, that is not to say it is not desirable to become accredited by SARS or to be referred to as one of its preferred traders. It should just be clear to traders that the process is one that by the wording of the legislation envisages a voluntary process whereby a trader makes application to SARS to prove that it meets the criteria, and not one where SARS approaching the trader changes this fact or the fact that the client does not enjoy any sort of amnesty from penalties, as was envisaged in the temporary Voluntary Disclosure Programme (VDP) applicable to most taxes (including customs) and which ran for a year ending October 2011. The latter programme was created by way of its own piece of legislation, being the Voluntary Disclosure Programme and taxation Laws Second Amendment Act, No 8, 2010.
Bring in the muddying fact that the Customs and Excise Act is in the process of being rewritten (also in keeping with the customs modernisation programme) and in the new Customs Duty Bill – the second draft released for comment in the second half of this year (note: bills are not effective law yet) – a whole new chapter is proposed which deals with voluntary disclosure relief. The Bill envisages enabling persons to voluntarily disclose faulty declarations (whereby there are effectively underpayments of duty)
prior to knowledge of any impending SARS audit. In exchange the Commissioner undertakes not to institute criminal proceedings to impose administrative penalties.
Traders who are aware of their own discretions should seek to achieve a level of compliance which will move them forward into the SARS customs modernisation agenda – put more plainly they should aim to clean up their act. However, they should not be so naïve as to assume that any action on their part to get there by making voluntary disclosures to SARS will necessarily protect them or imply any type of amnesty against incurring penalties. The law simply does not require this to be so.
Source: By Alison Wood (TaxTALK)