On 20 March 2024, the South African Revenue Service (SARS) announced the release of its 9-page “Overview of Manufacturing Rebate and Drawback Procedures”, which serves to enhance the understanding of the customs processing procedures.
To stimulate the local manufacturing industry, a rebate of customs duty and/or a Value-Added Tax (VAT) exemption is provided for on specific imported raw materials used in local manufacturing in certain specified circumstances. Provision is also made in certain circumstances for a drawback of customs duty that the importer paid when importing goods that were used in manufacturing of goods that were subsequently exported. The Customs and Excise Act, 1964 makes provision for duty rebates and drawbacks while the VAT Act,1991 makes provision for VAT exemptions.
What are rebates?
A rebate is a full remission or part reduction of customs duties conditional upon the importer’s compliance with specific conditions set out in the Act. Any imported goods, described in Schedule Nos. 3 and 4 to the Act, 1964 shall be admitted under rebate of customs duty applicable in respect of such goods at the time of entry for home consumption thereof to the extent stated in, and subject to compliance with the provisions of the rebate item in Schedule No. 3 or 4 to the Act, 1964 in which the goods are specified. Every Rebate Item has its own extent of rebate of duty. The rebated duty becomes payable upon non-compliance with the specific conditions of the Act, 1964 including the terms of the rebate item. Certain rebates of duty are conditional upon the granting of a permit from the International Trade Administration Commission of South Africa (ITAC).
What are drawbacks?
A drawback is a refund of customs duty that the importer paid when acquiring certain materials that were used in manufacturing, processing, packaging, or otherwise altering goods for the purpose of export. A drawback of customs duty paid on entry for home consumption on any imported goods described in Schedule No.5 to the Act, 1964 shall be paid to the person who paid such duties or any person indicated in the notes to the Schedule, subject to compliance with the provisions of the drawback item in which those goods are specified. Certain drawbacks of duty are conditional upon the granting of a permit from ITAC.
Importers can only submit a drawback application once they have exported the final product. Applicants must attach proof of export with their application. All export declarations must reflect the correct customs procedure code and drawback item on the clearance declaration prior to the goods being exported from South Africa. Drawback applications must be lodged within six (6) months of the date of export.