Your guide to saving money on your imports through rebates, drawbacks and refunds.
If you’re in the business of manufacturing, processing, or packaging goods that contain imported materials, you may be in luck. To stimulate industrial development and economic growth, the South African government incentivises businesses to manufacture goods locally. They do this by making allowance for reduced or no duties on imported goods needed for manufacture (if the goods are not available at a reasonable price in South Africa). If you import for this reason, you can apply for either a drawback or rebate on your imported goods. Additionally, in the event that you receive damaged or inadequate imported goods, customs also allows you to apply for refunds on duties and VAT paid on these goods.
In a nutshell, the purpose of rebates and drawbacks is to:
- Stimulate the local manufacturing industry by removing duty tax on specific imported raw materials used in manufacturing.
- Stimulate exports by allowing South African manufacturers, packers and processors that intend to manufacture goods for export to obtain raw materials at world prices. This is done by reducing, removing, or refunding duties on certain goods.
The Customs and Excise Act No. 91 of 1964 makes provision for VAT and duty rebates and drawbacks (hereafter referred to as the Act).
What are rebates?
A rebate is a full remission or part reduction of import duties, subject to the importer’s compliance to specific conditions set out in the Act, at the time of import. Every rebate item has its own extent of rebate. The Act lists goods that qualify for rebate under the following headings:
- Schedule 3 (industrial rebates),
- Schedule 4 (general rebates), and
- Schedule 6 (excise duties, fuel levy, and environmental levy).
To qualify for a rebate, importers must have a dedicated rebate store located within the Republic of South Africa and registered with customs, wherein the rebate items are safeguarded. The rebate store has to be separate from a bond store, complete with its own security measures (a securely locked area, with only one lockable entry point and room on the gate for a customs lock).
What are drawbacks?
A drawback is a refund of customs duty that the importer paid when acquiring certain materials that were used in manufacturing, processing, packaging, or otherwise altering goods for the purpose of export. The Act lists goods that qualify for drawback under the following headings:
- Schedule 5
The importer will pay full duty tax at the time of import. Once the imported goods become a component of a final product and are exported, the importer can claim the initial duty tax from customs. Applying for a drawback after the imported materials have been processed allows the importer to more accurately determine which percentage of their imported materials were used to manufacture goods for export. For example, sometimes the importer may only use some of the raw materials to produce goods for export, while the rest of the goods are sold locally. At other times, the importer might import the materials not knowing that they will use them in the manufacture of goods for export.
Note: Importers can only submit a drawback application once they’ve exported the final product. Applicants must attach proof of export to their application. All export declarations must reflect the correct customs procedure code (CPC) and drawback item prior to the goods being exported from South Africa. Applications must be lodged within 6 months of the date of export.
What are refunds?
Importers can apply for refunds from customs if they can prove that they paid a duty or levy for which they are not liable, or if they export goods in the same condition in which they were imported.
Customs stipulates that it is acceptable to apply for refunds under the following circumstances:
- There was an error in determining or calculating a price;
- The importer was overcharged for a duty;
- The product was imported under an incorrect tariff classification;
- The imported goods were damaged, destroyed, or lost by circumstances beyond the importer’s control before customs released them for home consumption;
- All or part of the goods were shortlanded, shortshipped, or shortpacked; or
- The substitution of any bill of entry in terms of section 40 (3) of the Act;
- The applicable duties were reduced or withdrawn.
Note: Importers must apply for refunds within 2 years of the goods being cleared for home consumption, or from the date on which the charge to which the application relates was paid.
How do I know if my goods qualify for rebates or drawbacks?
In order to qualify for rebates or drawbacks, an importer must make sure that they:
- Are importing materials that qualify for rebate or drawback under the customs schedules; and
- Are using the materials in accordance with the specific use stipulated in the customs schedules.
- Are registered with customs as a rebate user and, if necessary, have the applicable ITAC permit.
- To help you quickly look up the extent of the drawback or rebate you can claim we have a copy of Schedules 3-6 on our website under ‘Rebate, Drawback and Refund look up’. All you need is the imported product’s tariff code. Simply open or download the guide, press CTRL+F (or CMD+F for Mac users) to open the search bar in the PDF, and type your tariff code into the search bar. Check that the product description in the guide matches the tariff heading you entered, and refer to the last column to see whether your product qualifies for a rebate or drawback. Image 1 below outlines this process.
Image 1: How to use our rebate, drawback, and refund lookup guide.
Note: Customs will not issue drawbacks or rebates under the schedules outlined in the guide if the importer does not use the imported product for the purposes specified in the guide. For example, in Image 1, drawback item 501.02 is listed as “containers of printed paper or paperboard (excluding corrugated), used for packing frozen fish and frozen fish products”. Should the importer not use the paper or paperboard specifically to package frozen fish products, they will not qualify for the drawback.
What if I can’t find my goods in the schedules?
If the current customs schedules do not list the goods you would like to claim for, customs may still consider the goods for rebate if you have used them in the manufacture, processing, finishing, equipment, or packing of goods for sale. You may also qualify for a drawback if the afore mentioned goods are produced for sale in an export market. In this case, you will need to lodge an application with ITAC for a rebate or drawback permit.
Need additional assistance? If you are struggling to find your imported item on the current schedules, we can help you assess whether you qualify for a rebate, and help you apply for the relevant ITAC permit. Contact us for more information.
If you are struggling to find your imported item on the current schedules, we can help you assess whether you qualify for a rebate, and help you apply for the relevant ITAC permit. Contact us for more information.
Reasons you might not get your refund or drawback
Customs can refuse to grant refunds or drawbacks under the following circumstances:
- When the application wasn’t lodged within the specified time frame;
- When customs duties and taxes have been paid on counterfeit goods that are destroyed;
- When customs duties and taxes have been paid on goods that violate any law;
- When duties are paid on imported goods that are subsequently exported to Botswana, Namibia, Lesotho, or Eswatini.
Want to get started?
Would you like to know if you qualify for a rebate, refund or drawback? Contact our team on 087 550 1038 for assistance. Alternatively, simply fill out this short webform to let us know how we can assist, and we will contact you.
About the author
Tracy studied at Stellenbosch University and gained her initial experience in imports and exports through working for industry. After starting her own import business, and helping some friends do the same, she realised there was a need for reliable customs registration services. As a result, in 2011, Import Export License was born. Since then thousands of importers and exporters have been helped to obtain their import export licences, permits, specialised customs registrations and connect with Import Export License consultants for advice on importing, exporting, and other customs related matters.