On 25 June 2021, the South African Revenue Service (SARS) announced the insertion of new Notes and Rebate Item 317.04, to provide for APDP Phase II through the amendment to Part 1 of Schedule No.3 to the Customs and Excise Act, 1964.
The reasoning is contained in the International Trade Administration Commission of South Africa (ITAC) Minutes M10/2021, which is effective from 01 July 2021.
By the insertion of the following:
Rebate Item 317.04
INDUSTRY: SPECIFIED MOTOR VEHICLES (PHASE II)
NOTES:
This item and the Notes thereto provide for the implementation of the Automotive Production and Development Programme Phase II (APDP Phase II) introduced by the International Trade Administration Commission of South Africa (ITAC).
1. Acronyms and definitions
For the purpose of this item, the following acronyms and definitions will have the meaning assigned to them in this note:
1.1 Acronyms
APDP - Automotive Production and Development Programme
CSP - Company Specific Percentage
ITAC - The International Trade Administration Commission of South Africa
OEM – Light motor vehicle manufacturer registered in terms of Note 1 to Chapter 98 of Schedule No.1 to the Customs Act
PRC - Production Rebate Certificate
PRCC – Production Rebate Credit Certificate
SACU - Southern African Customs Union
SARS - South African Revenue Service
VAA – Volume Assembly Allowance
VALA - Volume Assembly Localisation Allowance
VAT - Value-Added-Tax
1.2 Definitions
"automotive tooling" means-
(a) dyes for drawing or extruding metal, of subheading 8207.20;
(b) tools for pressing, stamping or punching, of subheading 8207.30;
(c) work holders of subheading 8466.20;
(d) assembly jigs and assembly lines, of subheading 8479.89; and
(e) injection moulds, moulding patterns and moulds of heading 84.80, where the principal use is for the manufacture of specified motor vehicles, heavy vehicles as defined in Note 1 to rebate item 317.07 and automotive components for such motor vehicles.
"Form C2" means a Form C2 as defined in the ITAC Regulations.
"imported component and imported raw materials value" means the value for customs duty purposes of any imported original equipment components and raw materials imported by the registrant or imported by or received from any person in SACU and used in the manufacture or assembly of original equipment components or specified motor vehicles.
"guidelines" means the guidelines issued by ITAC.
"original equipment components" means components classifiable in Chapter 98 of Schedule No. 1.
“raw materials” means materials not cut to size or shape and not made up suitable for use.
"registrant" means a person registered under this item.
"regulation" means regulations made in terms of section 59 of the International Trade Administration Act, No. 71 of 2002.
"specified motor vehicles" means -
(a) road tractors or semi-trailers of subheading 8701.20 of a vehicle mass not exceeding 1 600 kg;
(b) motor vehicles for the transport of ten or more persons, including the driver, of heading 87.02, of a vehicle mass not exceeding 2 000 kg (excluding those of subheading 8702.10.10);
(c) motor cars (including station wagons) of heading 8703;
(d) motor vehicles for the transport of goods of heading 87.04 of a vehicle mass not exceeding 2 000 kg or a G.V.M. not exceeding 3 500 kg or of a mass not exceeding 1 600 kg or of a G.V.M. not exceeding 3 500 kg per chassis fitted with a cab (excluding shuttle cars and low construction flame-proof vehicles for use in underground mines and off-the-road logging trucks); and
(e) chassis fitted with engines of heading 87.06, of a mass not exceeding 1 600 kg or of a G.V.M. not exceeding 3 500 kg (excluding those for shuttle cars and low construction flame- proof vehicles, for use in underground mines and off-the-road logging trucks).
"the Act" means "this Act" as defined in section 1 of the Customs and Excise Act, No. 91 of 1964.
"VALA" means the following percentages of the value for VALA purposes:
From 2026 will be set at 35% of local content for OEM volumes above 10 000 units annually over four rolling quarters
Transition set at -
(a) 40 per cent in 2021;
(b) 39 per cent in 2022;
(c) 38 per cent in 2023;
(d) 37 per cent in 2024;
(e) 36 per cent in 2025; and
(f) 35 per cent in 2026
"value for VALA purposes" means the value, determined on the basis prescribed in Note 7.1, of all specified motor vehicles produced in terms of this item during four rolling quarters and ready for sale.
2. Registration
2.1 Applicants under this rebate item shall submit a letter of approval from ITAC confirming qualification for participation together with the application.
3. Submission of accounts
3.1 Registrants under this rebate item shall submit accounts in the following manner:
(a) A quarterly account (DA 199) to the SARS customs office in which area of control of the premises is registered and bring any customs duty and additional VAT to account at that office within 30 days from the closing date of the accounting period, but not later than the penultimate official working day following the period of three months during which the closing date of the account occurs.
(b) For the purposes of this item the accounting periods shall be for four periods of three months each commencing on 1 January each year.
(c) The registrant shall not be entitled to the deferment of additional VAT, other than the 30 days provided for in (a) above.
3.2 When the registrant becomes aware of an error in the account submitted, the registrant must amend the account as soon as reasonably possible by -(a) completing a form (DA 199A) for the quarter affected by the amendment;
(b) adjusting all forms affected by the amendment;
(c) submitting form (DA 199A), adjusted forms and payment of any customs duty and additional VAT together with an explanation of the reasons for the amendment to the SARS customs office referred to in Note 3.1(a).
4. Original equipment components imported by the registrant
4.1 The registrant shall clear all original equipment components for the manufacture of specified motor vehicles, under Chapter 98 of Schedule No. 1.
4.2 All such original equipment components shall -
(a) on importation be cleared under procedure code "Placement of goods under the 'Processing for Home Use' procedure"; or
(b) if cleared on importation for storage and stored in a licensed customs and excise storage warehouse, be cleared before removal for use under procedure code
"Processing for Home Use" of goods, previously placed under "Warehousing" procedure; and
(c) when cleared as contemplated in paragraphs (a) or (b), pay VAT on the value for customs duty purposes as if a "full duty" extent of rebate applies.
4.2 The value for customs duty purposes of all original equipment components shall be included in the quarter during which such components were cleared under the procedure code 'Processing for Home Use'.
5. Original equipment components supplied to the registrant
5.1 A registrant must ensure and produce proof if required that the Form C2 completed by the supplier of original equipment components correctly declares the imported component value.
(a) The imported component value on the Form C2 completed by a SACU supplier and received by the registrant during a quarter shall be recorded in the ensuing quarter irrespective of whether it has been used in production as yet or paid for; and
(b) The imported component value on the Form C2 shall be deducted by the registrant in the quarter when the original equipment components are –
(i) incorporated into original equipment components and exported;
(ii) used in the manufacture of specified motor vehicles and exported;
(iii) transferred to parts and accessories; or
(iv) destroyed under customs supervision.
5.2 (a) Registrants shall be liable for any customs duty and additional VAT underpaid resulting from the underdeclaration of the imported component value on Form C2.
(b) If ITAC reports any amendments to Form C2, the quarterly account to which it relates must be amended as may be necessary to give effect to the amendment reported, including payment of any customs duty and additional VAT due.
(c) If Form C2 is not obtained or duly completed, the price at which the original equipment components were purchased by the registrant shall be deemed to be the imported component value in respect of the original equipment components.
(d) Any incorrect information supplied on Form C2 can render the whole document null and void and may result in the purchase price of all items in such document being regarded as imported component value.
6. Determination of value for duty and additional VAT
6.1 Determination of the value for the calculation of customs duty and additional VAT on original equipment components imported by the registrant:
(a) The value for customs duty purposes of original equipment components cleared under Chapter 98 during a quarter, less the value for customs duty purposes of the original equipment components-
(i) in unopened containers or unit load devices, provided that the value for customs duty purposes of such components in containers or unit load devices not opened shall be carried forward as an opening balance to the ensuing quarter;
(ii) used in the manufacture of original equipment components and supplied to other registrants in terms of this rebate item;(iii) used in the manufacture of specified motor vehicles and exported;
(iv) used in the manufacture of original equipment components and exported;
(v) returned to the overseas suppliers;
(vi) transferred to the parts and accessories division;
(vii) destroyed under customs supervision.
(b) If the deductions specified in subparagraphs (i) to (vii) exceed the value for customs duty purposes of imported original equipment components the value must be reduced to nil.
(c) For the purposes of Notes 6.1(a)(iii) and (iv) registrants may carry forward any excess value for customs duty purposes of original equipment components imported and used in exports during a quarter to -
(i) the ensuing quarter; and
(ii) such further quarters as the Commissioner may allow in exceptional circumstances.
6.2 Determination of the value for the calculation of the customs duty and additional VAT on original equipment components received by the registrant:
(a) The imported component value of original equipment components received from any person in SACU during the previous quarter less the imported component value of original equipment components-
(i) used in the manufacture of original equipment components and exported during the current quarter;
(ii) used in the manufacture of specified motor vehicles and exported during the current quarter;
(iii) transferred to the parts and accessories division during the current quarter; and
(iv) destroyed under customs supervision during the current quarter.
(b) If the deductions specified in subparagraphs (i) to (iv) exceed the imported component value of original equipment components received the value must be reduced to nil.
(c) For the purposes of Notes 6.2(a)(i) and (ii) registrants may carry forward any excess value for customs duty purposes of original equipment components imported and used in exports during a quarter to -
(i) the ensuing quarter; and
(ii) such further quarters as the Commissioner may allow in exceptional circumstances.
7. Deductions
7.1 The value for VALA purposes for any quarter shall be -
(a) in the case of specified motor vehicles manufactured for the SACU market, the recommended retail list price (including options), (exclusive of VAT, excise duty in terms of Section B of Part 2 of Schedule No. 1 and environmental levy in terms of Sections D and E in Part 3 of Schedule No. 1) applicable to such motor vehicle(s) at the time of production thereof and ready for sale; or
(b) in the case of specified motor vehicles exported outside the SACU, the "price free on board" as contemplated in section 72 of the Act;
(c) less in respect of each of paragraphs (a) and (b), a CSP(s) on a quarterly basis.
(d) less all imported contents.
7.2 A registrant shall not receive or be entitled to utilise VALA for the quarter for which the account is submitted, unless a CSP has been determined by ITAC.
7.3 The VALA of specified motor vehicles shall be declared -
(a) when designated for export, but not exported at the end of a quarter, as the recommended retail list price on form DA 199.04A for that quarter; and
(b) when exported-
(i) as the "price free on board value" in the quarterly account during which the export took place on form DA199.04B; and
(ii) the recommended retail list price mentioned in (a) on form DA199.02.
7.4 ITAC will inform the Commissioner of any amendments to a CSP as a result of which the quarterly accounts must be amended.
By the insertion of the following:
7.5 The Commissioner may, in the case of any model for which a recommended retail list price contemplated in paragraph 7.1 is not available, determine a value in terms of section 69(3) of the Act
7.6 The VALA in any quarter shall firstly be utilized, if applicable, to reduce the value as calculated in terms of Notes 6.1 and 6.2
7.7 “Excess VALA" shall be calculated as follows:
(a) The balance of any excess VALA brought forward from the previous quarter;
(b) less any excess VALA utilised under rebate item 460.17 for this quarter;
(c) plus the VALA for this quarter;
(d) less the VALA utilised to offset the duty liability calculated in terms of Note 8.1(d) for this quarter.
7.8 Any excess VALA may be utilised to reduce the value for customs duty purposes of specified motor vehicles imported under rebate item 460.17 in the next quarter, provided that-
(a) prior written approval for the utilisation of such excess VALA shall be obtained from the Commissioner;
(b the value of the excess VALA shall be reduced by 20 per cent if used on imported fully built-up motor vehicles; and
(c) the remaining balance of any excess VALA shall be the opening balance in the next quarter.
7.9 The VALA or any excess VALA is not tradable or transferable
7.10 A PRC may only be used-
(a) by the registrant or other importers in whose name the certificate is issued to apply for rebate in terms of section 75 or a refund provided for in section 76 of the Act.
7.11 The person in whose name a PRC is issued shall be liable for any discrepancies in the application for the PRC for whatever reason, which may result in the issue of an incorrect certificate and shall remain liable for the customs duty as if no rebate had been allowed.
8. Extent of rebate
8.1 The calculation of the value to determine the extent of rebate shall be -
(a) the value for customs duty purposes of imported original equipment components calculated in terms of Note 6.1;
(b) plus the imported component value of original equipment components received from any person in SACU calculated in terms of Note 6.2;
(c) plus the VALA calculated in terms of Note 7.3(b) (Form DA 199.02);
(d) less the VALA utilised in terms of Note 7.1 for this quarter; and if any liability remains
8.2 The extent of rebate provided for in this rebate item shall not exceed the customs duty payable on the entry of imported goods under Chapter 98 of Schedule No. 1.
8.3 If any liability remains after the calculation in terms of Note 8.1, the customs duty and additional VAT must be brought to account.
9. Compliance
9.1 The registrant or component supplier must, as applicable, comply with-
(a) this rebate item, rebate items 317.06 and 317.07 of Schedule No. 3, rebate item 460.17 of Schedule No. 4 and refund items 536.00, 537.00 and 538.00 of Schedule No. 5 and the Notes thereto; By the insertion of the following: (continued)
Rebate Item Tariff
Heading
Rebate Code CD Description Extent of Rebate
(b) section 75 and any other provisions of the Act;
(b) the regulations;
(c) the guidelines; and
(d) any directives issued by the Commissioner and ITAC.
10. Transitional Notes
10.1 The value for customs duty purposes of any imported original equipment components in unopened containers and unit load devices carried over from the APDP Phase I second quarter shall be declared in the third quarter of the 2021 APDP Phase II account as an opening balance on form DA 199.10.
10.2 The registrant's calculation of the foreign currency usage of original equipment components and foreign currency usage in terms of the 2021 APDP Phase II of vehicles and form C1 shall be available for inspection by the Commissioner.
10.3 In instances where components cannot be linked to a form C1 by means of a unique identification number or mark, the principle of "first-in-first-out" will apply in determining the foreign currency usage in terms of 2021 APDP Phase II per quarter.
10.4 Any excess VAA carried over from quarter 2 of APDP Account may be used to reduce the value for customs duty purposes of original equipment components imported and imported component value of original equipment components received from any person in SACU as an opening balance in quarter 3 of the APDP Phase 2 account on form DA199.03.
10.5 Any excess VAA carried forward from the quarter 2 of APDP accounts used for the importation of vehicles in terms of rebate item 460.17 shall be deducted on form DA 199.03 in quarter 3 of APDP Phase 2 account.
10.6 PRCC may be used on form DA199.06 B to reduce the value for customs duty purposes of original equipment components imported and imported component value of original equipment components received from any person in SACU calculated in terms of Notes 6.1 and 6.2 respectively, after any excess VAA and VALA have been used.
10.7 ITAC may published additional transitional Notes through a Notice in the Government Gazette.
By the insertion of the following:
Rebate Item Tariff
Heading
Rebate Code CD Description Extent of Rebate
317.04 98.01 01.04 40 Original equipment components, for the manufacture of road tractors for semi-trailers of subheading 8701.20, of a vehicle Full duty less the duty mass not exceeding 1 600 kg payable on the value calculated in terms of Note 8.1
317.04 98.01 02.04 44 Original equipment components, for the manufacture of motor vehicles for the transport of ten or more persons, including the Full duty less the duty driver, of heading 87.02 of a vehicle mass not exceeding 2 000 kg (excluding those of subheading 8702.10.10) payable on the value
calculated in terms of Note 8.1
317.04 98.01 03.04 49 Original equipment components, for the manufacture of motor cars (including station wagons) of heading 87.03 Full duty less the duty payable on the value calculated in terms of Note 8.1
317.04 98.01 04.04 43 Original equipment components, for the manufacture of motor vehicles for the transport of goods of heading 87.04 of a vehicle Full duty less the duty mass not exceeding 2 000 kg or a G.V.M. not exceeding 3 500 kg or a mass not exceeding 1 600 kg or of a G.V.M. not payable on the value exceeding 3 500 kg per chassis fitted with a cab (excluding shuttle cars and low construction flame-proof vehicles, for use in calculated in terms of Note underground mines and off-the-road logging trucks) 8.1
317.04 98.01 05.04 48 Original equipment components, for the manufacture of chassis fitted with engines of heading 87.06 of a mass not exceeding 1 Full duty less the duty 600 kg or of a G.V.M. not exceeding 3 500 kg (excluding those for motor vehicles of subheading 8704.10, shuttle cars and low payable on the value construction flame-proof vehicles, for use in underground mines and off-the-road logging trucks) calculated in terms of Note 8.1
317.06 00.00 07.00 04 Automotive components for use in the manufacture of original equipment components as defined in Chapter 98 of Schedule No. 1 for supply to a specified motor vehicle manufacturer registered under rebate item 317.04 imported by component manufacturers approved by the International Trade Administration Commission.
Provided that -
(i) such component manufacturer shall submit a quarterly return to the Controller regarding all goods entered under this rebate item together with a schedule supported by copies of bills of material reflecting the actual number of automotive components used in the manufacture of a specific original equipment component and the actual number of original equipment components manufactured as well as the quantity of each original equipment component supplied to motor vehicle manufacturers;
(ii) the quarterly return shall be substantiated by statements from motor vehicle manufacturers to whom such components were supplied with specific reference to the part numbers, description and quantity received in respect of each part number during the same period; and
(iii) the statements by the motor vehicle manufacturers are certified by a customs and excise officer.
NOTE:
1. For the purposes of this item unless the context indicates otherwise, any expression to which a meaning has been assigned in item 317.04 has the meaning so assigned.:
Full duty By the substitution of the following:
Refund Item Tariff
Heading
Code CD Description Extent of Refund
317.06 00.00 06.00 07 Automotive components for use in the manufacture of original equipment components as defined in Chapter 98 of Schedule No. 1 for supply to a heavy vehicle manufacturer registered under rebate item 317.07, imported by component manufacturers approved by the International Trade Administration Commission.
Provided that-
(i) such component manufacturer shall submit a quarterly return to the Controller regarding all goods entered under this rebate item together with a schedule supported by copies of bills of material reflecting the actual number of automotive components used in the manufacture of a specific original equipment component and the actual number of original equipment components manufactured as well as the quantity of each original equipment component supplied to motor vehicle manufacturers;
(ii) the quarterly return shall be substantiated by statements from motor vehicle manufacturers to whom such components were supplied with specific reference to the part numbers, description and quantity received in respect of each part number during the same period; and
(iii) the statements by the motor vehicle manufacturers are certified by a customs and excise officer.
NOTE:
1. For the purposes of this item unless the context indicates otherwise, any expression to which a meaning has been assigned in item 317.03 for APDP I and item 317.04 for APDP II has the meaning so assigned.
The notice is accessible at:
https://www.sars.gov.za/wp-content/uploads/Embargo/Tariffs/2021/LSec-CE-TA-2021-043-Sch3P1-Specified-Motor-vehicles-Phase-II-25-June-2021.pdf
Story by: Riaan de Lange