The admissibility of evidence in tariff classification for customs duty

Abstract

Customs duty represents an inescapable financial obligation in international trade. Such duties are determined by valuing the imported goods according to the classification of the goods. To classify the goods under an appropriate tariff heading is notoriously difficult – despite the almost trite principles from judicial decisions amongst the jurisdictions discussed in this study, such as the European Union, Australia, Canada and the United States of America. In South Africa, the Customs and Excise Act 91 of 1964 defines the ambit of customs duties and ratifies the Harmonised System ("HS"). The HS allows for a uniform approach to tariff classification used by countries across the world accounting for in excess of 95% of the world trade. Countries that employ this system are obliged to incorporate the HS into such country's domestic legislation and to use all headings and subheadings of the HS without addition or alteration, together with the numerical codes and to apply the General Rules for Interpretation and all section, chapter and subheading notes. Classification of goods is to be done objectively at the time of presentation of the goods to the tax authorities. The intentions of the importer or the descriptions of the goods in advertisements and manuals constitute inadmissible evidence. In the recent judgment of Smith Mining Equipment (Pty) Ltd v The Commissioner: South African Revenue Service1 ("Smith Mining") the court, however, opined that it was not obliged to consider the notes referred to above, in the absence of evidence on use of the specific vehicles at the different locations allowed for in the Tariff Headings. The Court expected the importer to present evidence on use and relied on evidence from the manual, whilst it ignored the evidence that the importer presented structured along the applicable tariff notes. The court's approach clamped on the Additional Rules in the USA and the more liberal approach applied in Canada, but stands in conflict with the approach in the European Union and the trite principles from the South African case law.