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Establish the value of your imports

8th February 2019

By: Riaan de Lange

     

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On February 2, 2001, almost 18 years ago to the day, this column appeared in print for the very first time. That particular Friday must have been a slow news day in South Africa. South African History Online’s ‘This day in history’ offers no entry on this day. Nothing. This is most disappointing, as February 2 had tended to be a significant day in South Africa. In 1989, President PW Botha resigned; in 1990, President FW de Klerk announced the release of Nelson Mandela from prison and unbanned political organisations; and, in 1994, De Klerk announced that South Africa’s first democratic elections would be held in April of that year.

But, alas, arguably the most significant event in 2001 was the commencement of the second national census, on October 9. The next census was held in 2011; if the pattern holds, South Africa will have another census in two years.

Somehow missed in 2001 was a story concerning HIV/Aids, with the only reference in the archives of The New York Times under the unassuming headline: ‘Drug Makers Drop South Africa Suit Over Aids Medicine’ – the story was published on April 20. The Times reported: “Bowing to mounting public pressure, the pharmaceuticals industry today dropped its legal effort to prevent South Africa from importing cheaper anti-Aids drugs and other medicines. All 39 drug makers that had sued South Africa in 1998 conceded today that a South African law allowing government to purchase brand-name drugs at the lowest rates available anywhere in the world complied with international trade agreements.”

When reading it, words 19 to 22 immediately caught my eye – “importing cheaper anti-Aids drugs”. Something else of interest is that the “pharmaceuticals industry” means only one thing, multinational companies. These are companies with operations that transcend national and international borders.

Whenever I see ‘price’ and ‘importing’ in the same sentence, I am reminded of the prophetic words of Oscar Wilde in The Picture of Dorian Gray: “Nowadays people know the price of everything and the value of nothing.” And when you come across the word ‘price’ in the context of importing, it should mean only one thing – customs valuation.

The price paid or payable for the imported good is subject to an international agreement, the World Trade Organisation (WTO) Valuation Agreement, formally known as the Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade (GATT) 1994. This Agreement replaced the GATT Valuation Code as a culmination of the Uruguay round of multilateral trade negotiations, which concluded in 1994 and resulted in the creation of the WTO on January 1, 1995. What a watershed year 1994 was.

In other words, customs valuation finds application in South Africa’s legislation, through an international agreement, just as tariff classification, which I covered in this column two weeks ago. If you are a cynic, you might well point out that there might well be the concept of ‘free trade’, but one is not free to trade, as there is an international agreement and a convention that one needs to abide by. The trilogy will be completed in the next few weeks when I will write about ‘origin’.

The study of customs valuation has spawned a considerable body of research, which has found application in the courts, through various disputes and contentions. It would not be possible to do it justice by even attempting to highlight it in this column. The intention is to merely alert you to the fact that, should you be importing, and more so if you are importing from a company that is related to you (a related party), then you would need to be giving serious consideration to customs valuation – especially in instances of transfer pricing. Transfer pricing refers to the rules and methods for pricing transactions within and between enterprises which are under common ownership or control.

In parting, with all the tribulations facing South Africa and its people, when thinking of your own value, heed the wise words of Albert Einstein: “Try not to become a person of success, but rather try to become a person of value.”

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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