Generally, customs value (CV) is mostly queried in relation to imports. The reason being that duties and VAT on importation are based on customs value. Exports are mostly free of duty and there is no VAT consequence. As a result, CV for exports is seldom queried by SARS. The exception is export duty on waste scrap metals as provided for in Schedule 1 Part 6 of the Customs and Excise Act, 1964 (CEA).

In recent times SARS has increasingly challenged the CV for exports of waste scrap metals and potentially might extend that to all exports, if SARS sees this as an opportunity for finding non-compliance. It is thus necessary to consider how the CV for exports is calculated. The dearth of authority relates to valuation of imports and commentary on exports is thin. It is therefore necessary to consider basic principles and the wording of section 72 of the CEA, which provides for valuation of exports.

South Africa is a signatory to General Agreement on Tariff and Trade (GATT). Article VII of the GATT (Valuation Agreement) lays down the general principles for an international system of valuation. The Valuation Agreement stipulates that customs valuation shall, except in specified circumstances, be based on the actual price of the goods to be valued, which is generally shown on the invoice. The price may be adjusted as provided for in Article 8 of the Valuation Agreement which for the purposes of this article provides that in framing its legislation, South Africa as a member must provide for the inclusion in, or the exclusion from the customs value, in whole or in part, of the following:  (a) the cost of transport of the goods to the port or place of importation;   (b) loading, unloading and handling charges associated with the transport of the imported goods to the port or place of importation; and   (c)  the cost of insurance.    Additions to the price actually paid or payable shall be made under Article 8 only on the basis of objective and quantifiable data.    No additions shall be made to the price actually paid or payable in determining the customs value except as provided in Article 8.

Section 72 of the CEA provides that the point of valuation for exports is where the goods are delivered free on board onto the carrier for export (FOB). Section 72(cA)(i) provides that for the purpose of this section, FOB in relation to goods exported from the Republic, includes:

“All profits, costs, charges and expenses incidental to placing goods on board a vessel, aircraft, train or vehicle in which the goods are to be transported across the border of the Republic”.

(underline for emphasis)

Recently SARS ruled on an “ex works” invoice that the following costs were to be added to invoice price for the purpose of calculating the export CV:

• cost of transport to storage depot
• storage depot charges
• agency charges
• clearing agent charges
• shipping line charges
• port charges

Arguably this approach may be too broad, and it is important to analyze the costs. What should be included in the CV is all costs relate to placing the goods on the vessel as in consistent with the FOB term. However, costs that relate to the vessel and its stay in the port ought to be excluded.

The cautionary note for all exporters and clearing agents is to make sure for the purpose of export clearance that the CV for exports is correctly adjusted to the FOB point of valuation.