Exporters have been warned that failure to comply with the Trade, Development and Cooperation Agreement (TDCA) between the European Union and South Africa would have far-reaching implications.
The TDCA will open up South Africa’s market to 86% of EU goods over a 12-year period, while opening up the 15 EU economies to 95% of South African goods over a 10-year period.
Donald MacKay director of Xikhovha Advisory, a specialist international trade consultancy, said many local exporters still did not know if they met the requirements for preferential trade and were claiming benefits for goods that did not qualify.
”The EU has woken up to this and under the administrative cooperation section of the trade agreement, the union is demanding stricter monitoring of compliance in South Africa. Sars (SA Revenue service) is duly becoming more vigilant as custodian of legitimate trade,” MacKay said.
Exporters found with goods that fail to meet trade agreement requirements would incur penalties.
MacKay said that being ”caught out” at this stage could prove to be a blessing in disguise, considering the potential repercussions if the irregularity goes undetected until later.
”Exporters should not underestimate the extent to which an illegitimate claim for preferential duty rates — albeit out of ignorance — could damage, if not devastate their business,” stresses MacKay.
MacKay said ignorance on the part of a South African exporter could have dire consequences for a client in Europe.
If a European client received goods from South Africa that are cleared at a preferential duty rate of 10%, based on the declaration of origin, he would price the good according to this rate. However, if it was found that the goods did not qualify for the reduced tariff and instead must be cleared at 20% duty, the European recipient would be held accountable for extra duties.
”Depending on the volumes and the duration for which retrospective duties are to be paid, the implications for the client could be anything from considerable cost, to financial dire straits, or even bankruptcy,” MacKay said.
”South African exporters cannot afford to jeopardise business with the EU by landing additional customs and penalties at the door of trusting clients, simply through carelessness,” he said.
MacKay urged exporters to consult a tax adviser or Sars to clear up any ambiguity regarding qualification for preferential trade benefits. – Sapa