Exporters 'robbed' of tariff-free status

Small food exporters are reeling after an inexplicable clampdown by customs and excise on their goods to Europe. In an apparently nit-picking interpretation of the trade protocol between the European Union and South Africa, customs officials are threatening food exporters with fines of thousands of rands for claiming that their products are produced locally and therefore qualify for European tariff reductions.

Exporters and freight forwarders who spoke to the Mail & Guardian said the clampdown began in Octo­ber when customs officials refused to accept EUR1 certificates for products that had been passing as South African produce for years.

The most puzzling aspect of the about-turn, which may threaten local jobs, is that the punitive, conservative interpretation of trade protocols is usually practised by receiving countries wanting to implement informal protectionism. Exporting countries tends to err on the side of leniency.

The South African Revenue Service did not respond to questions by the time of going to print, and exporters said efforts to get information from customs officials on why their EUR1 certificates were being rejected were met with terse, unhelpful and cryptic responses.

They said customs had not helped them achieve compliance, leading to claims in the industry that officials were chasing some kind of performance target or, worse, that they were fishing for bribes.
“This thing has a bad smell to it,” said a Cape Town-based freight forwarder who did not want to be named. “Customs have realised that they can make money out of this.”

The EUR1 certificates work on a disclosure system. An exporter must ensure that the product contains sufficient local content or that it has undergone a sufficiently complex value-adding process to qualify for European tariff reductions. The EUR1 certificate is essentially an affidavit by the exporter that the product does qualify. If customs disagrees, the exporter is slapped with a R5 000 fine for each rejected certificate.

The damage to local exporting businesses goes far beyond the fines. Irene Ivy, owner of spice exporter Cape Herb & Spice, was stunned by the sudden rejection of her EUR1 certificates for spice mixtures that undergo intense local value-adding.

She said, because of contractual obligations, she had to continue her export orders to a large German customer despite having lost her tariff-free status. The German client left her to pay the unbudgeted €60 000 (about R652 000) tariff, meaning she was exporting at a loss.

In an effort to save jobs in her factory, Ivy has decided to take the matter to court, skipping customs’ internal appeal process, which can take up to three months.

The disclosure system, and customs’ apparently obtuse attitude, has made exporters afraid to submit EUR1 certificates, foregoing an important advantage at a time when South African products need all the support they can get to maintain European supermarket shelf space.

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