In South Africa, as with most of the rest of the world, tariff classification is the single biggest reason for a dispute with the Customs authorities.

In a recent Supreme Court of Appeal court case (SARS v Coltrade International CC, 1 April 2016), the court ruled unanimously in favour of Coltrade regarding the tariff classification of canned coconut milk with a fat content of 10-11%. Some important lessons flow out of this case.


Coltrade imports coconut milk, coconut cream and coconut powder and entered these products under tariff heading (“TH”) 2008.19.  This classification was confirmed by SARS as far back as March 2005 after a consignment was stopped and examined by officials of SARS in East London.  The East London office then released the consignment and accepted TH 2008.19 as being correct.

In early 2012 SARS officials in East London again stopped a consignment and decided that canned coconut milk (with a 10-11% fat content) fell within TH 2106.90.90 rather than TH 2008.19.  This matter was then submitted to SARS Head Office.   Subsequently, on 8 May 2012, SARS Head office issued a tariff determination that confirmed that canned coconut milk with a fat content of 10-11%, is correctly classified in TH 2106.90.90.  This TH provides for “Other food preparations not elsewhere specified or included.”

The legal status of a tariff determination (ruling)

Before discussing the meat of the case, it’s important to point out the difference between the ruling issued by SARS East London that resulted in the goods being released and the ruling issued by SARS Head Office.

A ruling issued by SARS Head Office is binding on both the client and SARS, but when goods are stopped and released by a local office, this does not automatically bind SARS. It is, of course, confusing to the client who would quite reasonably assume that the release of the product by SARS also implies that SARS concurs with the tariff subheading the goods were cleared under. The court commented as follows on this,

“As far back as March 2005, it (SARS) issued the respondent with a so-called ‘half slip determination’ to the effect that TH2008.19 was applicable to canned coconut milk with a 10-11% fat content.  On the strength of this, for some seven years the respondent had its imports of coconut milk (of varying fat contents and not solely that of 10-11%), coconut cream and coconut powder, duly cleared by SARS officials under TH2008.19.”  The court continued regarding this as follows, “Before us it is accepted, however, that a determination may be varied or amended and that the half-slip determination is not binding upon SARS”.

A demand for payment

SARS then issued a letter of demand for the outstanding duty.  Coltrade refused to pay and SARS took Coltrade to the Gauteng Division of the High Court, Pretoria.  The court upheld Coltrade’s contention that TH 2008.19 was the applicable tariff heading.

TH 20.08 provides for

“… fruit, nuts and other edible parts of plants, whether whole, in pieces or crushed”.

SARS argued that the canned coconut milk, coconut cream and coconut powder was further worked than what the scope of TH 20.08 provides for and can thus no longer be seen to be “whole, in pieces or crushed”.

The Customs and Excise Act is an Act of general application.  This means that where no definition exists in the Act, the general dictionary meaning of the word will prevail.  Judge Leach referred to The Shorter Oxford English Dictionary that has various meanings of the verb “crush”.  These included, “reduce to powder, pulp etc. by pressure”.  He found that all the products fit within the meaning of the dictionary meaning and confirmed TH2008.19 as the correct tariff heading.  SARS’ appeal was then dismissed with costs.

SARS changing their story

Judge Leach also took a swipe at SARS’ admission in its answering affidavit that they accept, for classification purposes that the milk, cream and powder are essentially the same and can therefore be treated the same.  However in this appellate case, SARS contended that coconut powder is not the same as the other products.  In Judge Leach’s words,

“it does not redound to SARS’ credit to now attempt to allege that coconut powder should not be treated the same as coconut milk and coconut cream for purposes of these proceedings.”

A polite way of say that the facts need to remain the same from the initial court case to the appeal. You don’t get to change your story because you lost the first case.



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