Your Guide to Customs and Excise Manufacturing and Storage Warehouses
With large volumes of imports, or manufactured excisable products, come equally large taxes. Companies save on unit costs when they import or produce in bulk, but the resulting tax outlay can seriously cripple their cashflow.
If an importer is unable to pay the full extent of import taxes on a shipment within the designated period of clearing, Customs may keep the shipment in a state warehouse.
What is a state warehouse?
Clearing an import can be delayed when import duties and VAT have not been paid, when the goods have been abandoned, seized by customs due to a tariff dispute, or if a required permit has not been issued. To keep the goods safe for the duration of the delay, Customs may store it in a state warehouse.
Once the importer or owner of the goods has met all customs requirements, the goods are released. There is however a high cost to the importer in the form of state warehouse rent, which accumulates for the duration of the delay. If the goods are not cleared within an allotted time, it is auctioned off so SARS may redeem the loss of duties and VAT.
The Customs and Excise Act offers traders an option to attain large volumes of dutiable (taxable) imports and production at once, but declare the goods in increments. Doing so allows companies to manage their tax expenses over a period of time as the goods are required. This solution is called Customs and Excise Warehousing.
What is a Customs and Excise warehouse?
For ease of explanation, we can think of a Customs and Excise warehouse as a “private” state warehouse situated on a company’s commercial premises.
To function as a Customs and Excise warehouse, a designated area within in the company’s premises must be cordoned off, approved according to regulations, and registered with SARS. Customs officials have full access to this area and may monitor goods that enter and leave it at any time, but because goods can be stored there at the company’s risk and expense for a predetermined time, no storage fees are payable.
The type of Customs and Excise warehouse a company requires depends on whether they are importing or manufacturing dutiable goods, as well as the nature of the goods in in question.
Customs storage warehouses
These are premises licensed for the storage of imported goods that are intended for local commerce, local use in production, or solely for export. Duty and tax-free shops are also considered to be customs storage warehouses since no tax has been paid on the goods they sell.
When the importer requires the goods, either for local re-sale or to use it in production, an ex-warehouse declaration needs to be processed before it may be removed. This also means the outstanding import duties and VAT must be paid. If the goods are intended exclusively for export a declaration must be processed, but no taxes are payable.
The type of Customs storage warehouse an importer must register for depends on the commodities they intend to keep in storage, and for what purpose.
Storage warehouse (OS)
These facilities are used for storage of dutiable imported goods. You may have heard of a bond store or a rebate store, both of which are just another term for a storage warehouse. A storage warehouse can act as one of the following:
- Bond store – A storage warehouse for the safekeeping of uncleared imports, or imports intended for export.
- Rebate store – A storage warehouse assigned to a registered rebate user for the safekeeping of goods that have been granted a rebate (non-payment) of import tax providing the goods are used in production and not sold as-is.
- Stockist bond store – A storage warehouse that acts a a distribution centre for the purpose of storing rebate items on behalf of multiple clients. This type of bond facility is ideal for rebate users with limited space and where a 3rd party helps with distribution.
Storage Warehouse (CCA Enterprise)
South Africa has nine Special Economic Zones approved by the Minister of Trade and Industry and Customs to promote national economic growth and export. These areas benefit from support measures to attract foreign and domestic investments and are afforded preferential regulations by Customs.
- Saldanha Bay, Western Cape – An oil, gas and marine repair engineering and logistics services complex, servicing various companies operating in the oil and gas fields off Sub-Saharan Africa.
- Coega, Eastern Cape – An area in the Nelson Mandela Bay Metropolitan Municipality which has attracted investment in the agro-processing, automotive, aquaculture, energy, metals logistics and business process services sectors.
- East London IDZ, Eastern Cape – An industrial park, renowned for its customised solutions for various industries, including automotive, agro-processing and aquaculture.
- Maluti-A-Phofung SEZ, Free State – A zone in Harrismith, at the mid-point of the crucial Durban-Johannesburg route, offering access to the port of Durban as well as logistics for the transfer of freight between road and rail.
- Musina-Makhado LED, Limpopo – A strategically located zone along the N1 North-South route into the Southern African Development Community (SADC), near the South Africa-Zimbabwe border.
- Dube TradePort, KwaZulu Natal – Located 30 km north of Durban, with a focus on automotive, electronics and fashion garment manufacturing.
- Nkomazi SEZ, Mpumalanga – A leading location for agro-processing, and logistics services within South Africa driven by investor demand.
- Richards Bay IDZ, KwaZulu Natal – This industrial estate along the N2 business corridor which links the province’s two major ports of Durban and Richards Bay.
- NW Development Corp, Platinum Valley SEZ, North West – A developing industrial park located near the town of Mogwase in the Bojanala Platinum District of the North West Province.
A Special Economic Zones, or any dedicated area(s) within, may be declared a CCA (Customs Controlled Area). Companies that fall withing a CCA are known as CCA Enterprises and have specific requirements for registering and maintaining a storage warehouse.
Special Storage Warehouse (SOS)
These are facilities specifically licensed for the storage of:
- Dutiable imported goods, including second-hand motor vehicles intended for export.
- Duty free goods for export in terms of Section 21(3) of the Customs Act.
- Imported goods for an operation of a duty and tax-free shop.
Note: An SOS used for safekeeping of motor vehicles must have valid police clearance.
Excise manufacturing warehouses
Commodities that are considered harmful to the consumer or to the environment, or that have been listed as “luxury goods” incurs excise tax. This tax is payable by the manufacturer to SARS if the goods are locally consumed, but may be waved if the goods are exported and consumed outside of SACU (the Southern African Customs Union).
The onus of declaring production of excisable goods and paying the correct amount of tax lies with the manufacturer, but is monitored by SARS. It is therefore required that any entity who intends to manufacture an excisable commodity must be registered as an excise manufacturing warehouse before production may begin. The type of excise manufacturing warehouse registration a company needs depends on the commodity produced.
Manufacturing warehouse (VM)
A manufacturing warehouse registration is specific to the type of excise incurred by the manufactured commodity as each adheres to very stringent and unique regulations. In some cases, as with the manufacturing of spirits, the manufacturer must register as a primary or secondary manufacturing warehouse.
- Primary manufacturing warehouse (VMP) – Where non-excisable raw materials are used to manufacture an excisable base product not intended for consumption.
- Secondary manufacturing warehouse (VMS) – Where excisable raw materials are used to manufacture an excisable product ready for consumption. (For example, blending and/or packing bulk spirits into a final product.)
Special manufacturing warehouse (SVM)
SARS may require the registration of a special manufacturing warehouse based on specific circumstances applicable to the manufacturing of an excisable commodity. The circumstances under which a special manufacturing warehouse registration is required varies with each type of excise and are subject to conditions the Customs commissioner may impose.
Although there are benefits to operating a Customs and Excise warehouse, strict recordkeeping, and control of what enters and leaves the facility is paramount to enjoying these benefits. It is therefore worth considering EDI (Electronic Data Interchange) registration for the management of declarations.
Thinking of registering a Customs and Excise warehouse for your company?