The rate of customs duty on an import can make or break its profitability. To be certain you are spending the lowest required amount on import duty for your shipments, take the following precautions.

Specify the (correct) tariff code

Duties are allocated according to tariff codes. Specifying the correct tariff code for your goods for the sake of customs clearance means your duty will (most likely) be what you anticipated. Failing to do so, and having the goods land without a specified tariff code, leaves the task of assigning a classification solely to customs. The customs representative doing this can’t have the in-depth understanding of your product that you do, and may not assign the code you’d hoped for.

However, once they have assigned a tariff code, your rate of import duty is set, and your import tax has been determined. If you disagree with the amount of import duty payable, the dispute to rectify this may take months and may end up costing you even more.

To avoid owing a surprisingly high import duty, be specific about the information that should appear on your commercial invoice. Tariff codes are international up to a certain extent. Each country does however subdivide codes in line with how they want to classify and tax imports. Goods that are similar will likely have similar tariff classifications, but not necessarily the same rate of import duty.

Ask your supplier to put the full South African version of your tariff code on your invoice so that customs do not have to use their discretion. Bear in mind, that if you have an incorrect tariff classification on the invoice, customs may still reassign a code they deem to be the correct one.

For an in-depth understanding of how tariff classifications are done, we recommend signing up for training on HS codes and tariff determination.

To find the tariff code applicable to your imports, refer to our tariff code look-up.

Import from South Africa’s preferred trade partners

Buying from suppliers in countries with whom South Africa has a trade agreement means your imports may incur a preferential (significantly reduced) rate of import duty. The preferential rate can even be that the import is duty-free.

Here’s an example of rates of import duty where the general rates and preferential rates of duty on the same tariff codes make a significant difference to your bottom line.

Preferential rates of import duty apply to shipments that:

• Meet origin criteria in line with the relevant trade agreement, and
• Include the relevant certificate of origin

To learn more about South Africa’s trade agreement partners, and which certificates of origin apply to your imports, refer to our trade agreement guide.

Clearly state your FOB value

Import duty is levied on a shipment’s FOB value. To ensure you pay as little import duty as possible, make sure customs have an accurate FOB figure to work with.

A shipment’s FOB value, often referred to as its customs value, includes the value of the goods plus all costs incurred in the country of export until the goods are loaded onto a carrier. The carrier is the vessel or vehicle taking the goods out of the country of export’s jurisdiction. The FOB value would, for example, include the cost to have a truck deliver the goods to a container depot and eventually have it loaded onto a ship.

You, the importer, would pay for this transport either via an arrangement with the supplier, or a payment made directly to a freight provider. Regardless of who contracts for the goods to be brought to an export vessel (truck, plane, or ship), the FOB value of your import includes the costs incurred to do so.

Besides domestic transport (transport within the country of export), the FOB value includes documentary charges (like a PSI), pre-export storage and warehousing, port handling charges, loading, and, where applicable, export duty.

Costs that should not be included in the FOB value are cargo insurance, international carriage, and any loading or unloading fees the shipment incurred after being loaded on the initial export carrier. For example, if the country of export is landlocked, a sea freight shipment will likely leave the exporter’s country on a truck to be taken to a port in a transit (in-between) country. The cost of loading the shipment off the truck and onto the ship is part of the international carriage and therefore not included with your FOB value.

To ensure your shipment incurs import duty on the FOB value and no more, your costs must be clearly stated on the import’s commercial invoice. If your supplier is arranging the freight, they may (as standard practice) indicate transport as one line on their invoice. You may request that they break this down into costs incurred before and after loading onto the export carrier.

You can also ask that they specifically show a FOB value for customs purposes on the invoice, as shown in this template for a commercial invoice.

If you are the party arranging for the goods to be collected from the supplier’s premises (as would be the case in a sale where the Incoterm is EXW), the commercial invoice will only show the cost of the goods. In this case, you must ask your freight agent for an itemised invoice and show customs the applicable charges to add to your invoice. To do so, you’ll have to submit a customs Value Adjustment letter with your import declaration.

Only pay import duties you are liable for

Import duty only applies to goods that are imported for resale or use in the local market, and may only be levied on the same goods once.

To name just a few examples, a shipment is not liable for import duty when:

• You had previously exported the goods and it has been returned in the same condition
• The goods were temporarily sent abroad to get services or repaired.
• The goods were sent to you to replace a defective import
• It is a sample shipment in line with regulations pertaining to samples.
• It is raw material to be used in manufacturing as listed in Schedule 3 of the Customs and Excise Act.

Depending on the nature of an import, avoiding import duties you are not liable for may involve claiming a refund, rebate, or drawback. You can read more about how refunds, rebates, and drawbacks work in our guide.

Goods that are imported for the sake of getting exported at a later stage also do not have to incur import duty, providing the shipment is transported and kept in bond until it is cleared for export.

If you did pay duties on an import, and then exported those goods in the same condition at a later stage, you are entitled to claiming the duties back by logging a customs refund.

For more information on import, export, and customs compliance, keep an eye on our blog and social media. To get helpful advice and all the customs registrations you need for your import export venture, contact our consultants.