On May 8, the South African Revenue Service (Sars) announced that, on that day, it would officially launch its Customs Preferred Trader Programme, which, it said, marked the culmination of an extensive process aimed at introducing one of the most significant trade facilitation initiatives in its customs modernisation journey.

According to the Sars announcement, 28 customs clients have been awarded preferred-trader accreditation status, following a lengthy period of audits and customs competence assessments.

The revenue authority indicated that the Preferred Trader journey began in 2011 after an extensive benchmarking exercise and consultations and that the programme was initiated under the World Trade Organisation’s internationally recognised Authorised Economic Operator (AEO) programme. It went on to state that the main objective of the programme is to move away from the traditional customs gatekeeper approach to a more risk-based approach. Compliant traders would receive the benefits stipulated by legislation for accredited clients. Sars believes that this will reduce the frustrations and costs that can be incurred by traders operating in the global market.

In broad terms, the programme entails a relationship between a customs client and Sars Customs aimed at achieving benefits for both parties, stamping out misconduct and fraudulent activities, obtaining and maintaining a high level of compliance, and promoting legitimate trade facilitation.

Some of the benefits for trade include the appointment of a customs relationship manager tasked with facilitating the relationship between the client and Sars Customs, a reduction in the amount of security required for compliance with customs procedures, fewer routine documentary and physical inspections being required, prioritising requests for tariff and valuation determinations, and prioritising access to nonintrusive inspection techniques when goods are stopped or detained for inspection.

Sars indicated that a specialised Preferred Trader team has been established to handle applications and conduct audits, while an Accreditation Review Customs Committee at Sars head office will make the final decision on all accreditation submissions. Currently, over 250 customs clients are going through the Preferred Trader accreditation process and, with a dedicated team and process now in place, it is envisaged that these applications will be processed speedily in the coming months. This concludes Sars’ May 8 notification.

So, what do you make of the notification? Here are a few observations. The programme has been described as “one of the most significant trade facilitation initiatives” – this is despite the fact that South Africa has not ratified the World Trade Organisation’s (WTO’s) Trade Facilitation Agreement (TFA) and, as a consequence, does not serve on the committee. South Africa is one of the minority member countries that did not ratify the TFA. Then there is the reference to the WTO’s AEO programme – the AEO concept is actually a World Customs Organisation (WCO) concept. It is one of the WCO’s main building blocks within its Standards to Secure and Facilitate Global Trade Framework of Standards. Further, according to the section titled ‘Preferred Traders’ in Sars’ annual report for 2011/12, the Customs Preferred Trader Modernisation Programme was successfully formalised in August 2011, and, during that financial year, the revenue authority engaged with 242 of the largest importers and exporters in South Africa, of whom 136 had completed their self-assessment processes. Sars also said in that annual report that it had completed 62 preferred trader audits and had also engaged in an audit process with 105 clients.

Let us consider the more recent numbers. According to the May 8 notification, there are 28 customs clients that have been awarded Preferred Trader accreditation and 250 are going through the audit process. Yet, in the Sars annual report for 2015/16, in the section titled ‘Implementing the Preferred Trader Programme’, Sars states that it had continued to develop the Preferred Trader Programme during the financial year, engaging 92 new clients and completing 116 audits, and that the number of clients participating in the programme had increased to 670. This begs the question: How does ‘participating’ differ from ‘accreditation’? Can a client participate without accreditation? It is all quite confusing. The 2015/16 annual report continues that Preferred Trader client volumes (where audits are completed) now represent 29.33% of the total customs volume and had increased by 3%, compared with the previous year.

Let us pause a moment before exploring the numbers further. Have you noticed something of interest or concern? The terminology used: ‘customs preferred trader programme’, ‘preferred trader accreditation status’, ‘preferred trader’, ‘preferred traders’ and ‘Preferred Trader Programme’. Why the inconsistency? Evidently, the ‘customs preferred trader programme’ and the ‘Preferred Trade Programme’ are one and the same thing.

Sars states in its annual report for 2014/15, in the section titled ‘Customs Preferred Trader programme’, that the Customs Preferred Trader accreditation programme continued to grow in terms of its engagement and coverage of trade in 2014/15. It continues that over 500 of the largest volume and value traders had been voluntarily engaged to participate in the programme, and that, during the financial year, the revenue authority had completed 144 preferred trader audits, representing 35 engagement audits and 109 follow-up audits. It concluded that the preferred trader audit programme covered clients responsible for 26.42% of trade volumes.

Then, in its annual report for 2013/14, it states that a total of 480 companies were participating in the Preferred Trader Programme and that the revenue authority had completed 77 preferred trader client audits. It concluded that a total of 2 015 importers and exporters had been audited.

How do you make sense of this: at the beginning of the 2017/18 financial year, “28 customs clients . . . have been awarded preferred trader accreditation”, but, in the 2015/16 financial year, “the total number of clients participating in the preferred trader programme” was 670?

To contextualise the number of Sars clients that have pursued the customs preferred trader accreditation, let us consider how many importers and exporters there are.
In 2014/15, the number stood at 535 061. Interestingly, both importer and exporter numbers increased by 3.1%. In 2015/16, the combined number stood at 552 084. Again, both importer and exporter numbers increased by exactly the same percentage: 3.2%. Coincidence? Strangely, the number of importers and exporters continues to grow, which brings the correctness of the numbers into question. It seems that, while new registrants are added, deregistrations are not considered – if there is even such a thing.

Since we do not have the 2016/17 numbers, the 28 clients effectively represent 0.01% of the total number of importers and exporters, and the 670 clients, in turn, represent 0.12%, with the latter supposedly representing “29.33% of the total customs volumes”.

In conclusion, quite obviously, the customs clients number – 552 084 – must surely be a significantly overstated number. It would be interesting to know just exactly how active many of the clients are. Then, considering that in the 2013/14 financial year 2015 importers and exporters were audited and that at the beginning of the 2017/18 financial year there were 28 customs clients that had been awarded preferred trader accreditation, it does not seem quite right. Is one to deduct that only 1.39% of the audited importers and exporters had succeeded in being awarded preferred trader accreditation?
It is all most confusing. But then again, if you are not confused, you simply do not have all the facts.