Consultancy XA Global Trade Advisors says billions of rands in revenue have been lost to the fiscus as a result of long overdue customs duty decision-making, which is also having far-reaching implications for industries and trade and investment.

If all of the cases that required changes to customs duties had been finalised – and granted – on time, this would have led to the collection of R1.25-billion by now, cumulatively.

Some cases have remained unresolved for up to three years, but XA Global founder and CEO Donald MacKay says tariff investigations should take four to six months, in line with the rules of the International Trade Administration Commission (Itac), which is South Africa’s authority on goods movement across borders.

MacKay and his team conducted research into delays experienced with customs decisions at Itac and the ministries of Finance and Trade, Competition and Industry, and found that the average number of days taken for tariff investigations had increased to 320 since 2015, compared with 191 days between 2009 and 2014.

He states in the XA Open Cases Report, which can be found at https://bit.ly/XA_OpenCasesReport, that as localisation becomes more firmly driven, the behaviour around tariff policy is taking increasingly longer.

In addition to the fiscal losses of revenue, another R2-billion has been collected in duties for goods not made locally, adding a R2-billion cost to industries without actually protecting domestic industry.

South Africa collects about R55-billion a year in customs duties, so these delays are equivalent to more than 5% of the country’s total customs duty collections.

MacKay says the expectation is not for Trade, Industry and Competition Minister Ebrahim Patel to impose fewer or more duties, but to effect a quicker turnaround time for decisions on proposed duties.

He elaborates that, of the 46 cases that are currently overdue and that have averaged 16.4 months since their initiation, the bulk of the delays have been caused by the Finance and Trade, Industry and Competition ministries, with most cases leaving Itac’s desk “fairly quickly”.

Of the last three years’ cases, 58% are overdue. The rebate review and duty increase cases are most often delayed, with the average days since initiation at 834 and 771 days respectively.

For example, tyre manufacturer Sumitomo asked for duty relief on Styrene-butadiene rubber, a raw material used to make tyres, as there are currently no local manufacturers of the material in the Southern African Customs Union region, and customs duties for this item impose additional input costs in the tyre manufacturing process.

This decision has been 22 months overdue at a cost of R34-million in the meantime.

Another example is that of value-added meat products manufacturer BRM, which has asked for a rebate of duties on chicken wings, since the company cannot find a local producer willing to commit to its volume requirements. The decision has been nine months overdue at a cost of R93-million in the meantime.

MacKay says most businesses will prefer a rejected application as opposed to pending, delayed or unknown outcomes that put vital investment decisions on hold.

“These delays are enormous and, most importantly, unnecessary, because the problem can be quickly resolved. Most of these cases have been fully investigated by Itac and simply need to be signed off by the Ministers.

Meanwhile, MacKay says there is much confusion legally as to the role of the Finance Minister in customs duties. During Malusi Gigaba’s term, he defended twice in court his right to take the final decision in respect of implementing duties; however, this role is not specified in the current tariff regulations or other related pieces of regulation.

MacKay says the regulations have to be amended to make the role of the Finance Minister in this regard clear.

He also deems it necessary to have a maxiumum period of 18 months to conclude a customs duty investigation, since there can be more investment made if businesses know a decision will be made in a timely manner.

In the short term, MacKay suggests that Patel issue a trade directive stipulating that all cases which are more than 18 months overdue be finalised within the next three months, or they terminate.