Which entity can be held liable for customs duty?

A NUMBER of persons are involved in the import and export cycle, sellers, buyers, transporters, clearing agents and bankers, to name but a few.

In respect of the import of goods to South Africa, the Customs and Excise Act stipulates that “importers” are liable for customs duty.

The act defines “importer” as: “Importer” includes any person who at the time of importation:

(a) Owns any goods imported.

(b) Carries the risk of any goods imported.

(c) Represents that or acts as if he/ she is the importer or owner of any goods imported.

(d) Actually brings any goods into the Republic.

(e) Is beneficially interested in any way whatever in any goods imported.

(f) acts on behalf of any person referred to in paragraph (a), (b), (c), (d) or (e).

On the reading of the definition of “importer”, it is apparent that the net is cast rather wide by the SA Revenue Service (Sars).

This is so especially in light of the fact that persons with a beneficial interest in the goods can be deemed an importer.

Persons involved in the exportimport cycle should therefore be aware that they could be held liable for customs duty even though they fall outside the definition of an importer in the normal sense of the word. If they can be deemed an importer, it is paramount that they take the necessary precautionary actions to minimise this risk.

The far-reaching effect of the definition of importer in the act was clearly illustrated in the matter of

EBN Trading v Commissioner for Customs and Excise. EBN was party to an arrangement to import VCRS from Korea to South Africa. EBN’S principal function was to act as financier.

It was also ENB’S main argument that it was not the importer but the financier, but this did not stop Sars from holding EBN liable for duty as the importer in terms of the act, that is, “importer includes any person who, at the time of importation is beneficially interested in any way whatever in the goods” .

The facts of the matter were: two buyers wanted to import the VCRS from Daewoo (Korean manufacturer) and sell them in South Africa.

Hong Kong firm Dragon, an importer in the normal sense of the word, had to procure the goods from Daewoo and pay for them.

Dragon then had to arrange for the shipping of the goods, insurance and that the goods arrived in South Africa and the customs duty was paid.

Because Dragon insisted on being provided with the funds to pay

Daewoo for the VCRS and reimburse itself for its expenses, while retaining a profit, the buyers approached EBN.

EBN would provide the finance needed between the shipment of goods from Daewoo in Korea until they were delivered to the buyers in South Africa. EBN would do this by procuring letters of credit.

Daewoo would be paid after shipment and Dragon upon delivery of the goods in South Africa. As soon as the goods were delivered to the buyers, they would pay EBN the agreed purchase price, from which EBN would meet its commitments and take its fee.

However, Dragon did not pay the customs duty and Sars then set its eyes on EBN for the customs duty, due to the impossibility of pursuing a revenue claim in a foreign jurisdiction.

Sars based its claim on the extended definition of importer

“as any person who, at the time of importation is beneficially interested in any way whatever in the goods”.

The court concluded that EBN was a financier in the normal sense of the word, but that this did not necessarily mean it could not have a “beneficial interest” in the goods.

The court said EBN had a beneficial interest in the goods due to the following:

EBN would take into its possession one of the original bills of lading at the time that Daewoo was paid (at the time of shipment in Korea).

The bill of lading, being a document of title, would give EBN the right to take possession of the VCRS upon arrival in South Africa in order to deliver them to the buyers.

In addition, the amount that was paid to Daewoo was paid before the buyers paid EBN. Therefore, if the VCRS did not arrive in South Africa, EBN would not receive any money from the buyers. The receipt of the goods and the bill of lading, therefore, relieved EBN of its burden of collecting money in Hong Kong from Dragon.

It was further held by the court that receipt of the VCRS served as security for EBN being reimbursed for its outlays.

The court concluded that even though EBN was not an importer in the normal sense of the word, they were liable for customs duty on the VCRS. EBN had a “lively interest” in the goods that was both advantageous and profitable to it and that satisfied the definition of importer as envisaged in the act.

Berning Robertson is a senior associate at Bowmans.