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The rate of customs duty on digital smart cards excluding the proximity cards and tags has been reduced from 5 % ad valorem to free of duty from the 30th June 2017.
International Trade Administration Commission of South Africa received an application from the Gemalto Southern Africa (Pty) Ltd (“Gemalto”) for the reduction in the rate of customs duty on the digital cards, classifiable under the tariff subheading 8523.52.10 from 5% ad valorem to free duty, by the way of creating a separate 8-digit tariff subheading.
The applicant cited in their application as motivation that, there are no local manufactures of the subject products in the SACU region; and the current customs duty rate of 5% has an unnecessary cost raising effect on the net ex-factory selling price of the products. In the domestic industry, the subject products are normally used in the banking and mobile communications sectors such as Tele-communication brand “Vodacom”. The subject products include smart ID cards which are used by only the South African Department of Home Affairs.
Currently there are no local manufacturers of digital smart cards with a microprocessor (contact chip) which has an on-board cryptographic processing capability in the SACU region. NamlTech and Xantium Integrated Solutions ceased manufacturing of the subject products in the SACU region. Card Technology Services (Pty) Ltd ("CTS"} only produces digital proximity cards and tags. According to the applicant, they import the subject products pre-printed and pre-branded as per the customer's specifications. The subject products are personalised according to customer's specification by embossing the required information onto the cards.
Comments supporting the application were received from the Botswana's Ministry of Investment, Trade and Industry citing that the reduction of customs duty on the subject products will improve the industry's competitiveness.
Comments objecting to the application were received from Card Technology Services (Pty) Ltd, a domestic manufacturer of proximity cards and tags, citing amongst others: the risk of possible duty circumvention on proximity cards and tags should the reduction in customs duty on the subject products be supported; and that the granting of a temporary rebate provision would be a suitable tariff instrument in this regard. The Commission considered the application in light of the information at its disposal and found that there is no local producer of digital smart cards.
The Commission found that the reduction in customs duty on the subject products may result in a possible circumvention of customs duties on digital proximity cards and tags which are currently manufactured by the domestic industry, and that the creation of a rebate provision subject to a permit issued by ITAC which could be an appropriate instrument to address the risk of possible customs duty circumvention.
The commission has recommended that, the application for the reduction in the overall rate of customs duty on the smart cards, classifiable under tariff subheading 8523.52.10, from 5% ad valorem to free of duty, by way of creating a separate 8-digit tariff subheading, is terminated. An investigation on the creation of a rebate provision on smart cards, classifiable under tariff subheading 8523.52.10, is still to be initiated.
ISSUED BY THE INTERNATIONAL TRADE ADMINISTRATION COMMISSION OF SOUTH AFRICA
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