SO MUCH FOR SADC …

Sadc has a long way to go to realise its aim of eliminating regional trade barriers, as a recent decision by the Supreme Court of Zambia shows

Anew decision from the Supreme Court of Zambia shines the spotlight on the tax implications of importing goods into that country from SA.

Coming at the start of 2022 — almost 30 years since the Southern African Development Community (Sadc) was established — the case shows how little progress has been made towards the “ultimate aim” of the bloc: the elimination of trade barriers in the region.

The judges involved in the matter began by summarising the aims of Sadc, including its commitment to regional integration and the development of trade and investment through cross-border trade.

To achieve these objectives, Sadc members signed various protocols, including one to eliminate import duties. It sets out “rules of origin”, listing categories of goods eligible for preferential treatment when traded between member states along with the conditions that have to be met to qualify for such treatment.

The dispute before the court, involving Henred Fruehauf Zambia and the Zambia Revenue Authority (ZRA), deals with the question of how to interpret these rules on preferential treatment.

In 2019, Henred Fruehauf imported six second-hand trailers into Zambia from SA. At the border, the agent produced six Sadc certificates of origin issued from SA, and said the trailers qualified for preferential treatment because they were “partially produced” in a Sadc state. But the Zambian tax officers at the border disagreed, saying the trailers didn’t qualify for preferential treatment and were thus subject to customs duty.

The importer protested: it had a 2016 letter from the ZRA saying second-hand trailers it had imported under similar circumstances were eligible for preferential treatment. What had changed?

A series of internal challenges followed, ending with the commissioner-general of the ZRA. He had an interesting response: though he maintained that the trailers were not eligible for preferential treatment, he extended preferential treatment to the final consignment “as a gesture of goodwill”, because of the 2016 undertaking.

That wasn’t good enough for Henred Fruehauf, and it launched an appeal first to the tax tribunal

he matter?

The court said there can be no legitimate expectation based on an “unlawful act” and that, like any other entity, the ZRA is free to “correct any misinterpretation of the law and is not compelled to labour under a mistake in perpetuity”.

A letter from the ZRA of June 11 2020 was “sufficient notice” to Henred Fruehauf about what to expect in future “when it imports goods similar in nature to the trailers”, and it thus “negated any claim for legitimate expectation”.

The appeal was therefore dismissed, with costs.

The Zambia Revenue Authority is ‘not compelled to labour under a mistake in perpetuity’