INTERNATIONAL LOGISTICS MARKETS AND PORTS CORE POLICIES AND LEGISLATION

1. INTERNATIONAL LOGISTICS MARKETS AND PORTS CORE POLICIES AND LEGISLATION JACK DYER AUGUST 2018 DURBAN UNIVERSITY OF TECHNOLOGY

2. CUSTOMS LEGISLATION IN SOUTH AFRICA • 1964 CUSTOMS AND EXCISE ACT • 2013 CUSTOMS CONTROLL BILL • 2013 CUSTOMS DUTY BILL • GATT • HARMONISED SYSTEM OF COMMODITY CLASSIFICATION • SAFE • World Customs Organisation Agreements on Rules of Origin/Valuation • ARUSHA DECLARATION OF CUSTOMS INTEGRITY

3. THE HISTORIC PURPOSE FOR CUSTOMS –AND THE WAY FORWARD… • Historically, customs has prioritised taxation revenue from customs duties and controlling the movement of cargo and people –as South Africa demonstrates through the 1964 Customs and Excise Act 91. • The end of apartheid trade sanctions and restrictions,– • the impact of globalisation upon liberalising and enhancing trade, • the impacts of containerisation; • Authorised Economic Operators (AEO’s,) • Computerisation, automation, technology and other instruments of trade facilitation and securitisation that the current act doesn’t consider; the replacement 2013 Customs Control and Duty Bills were proposed. • The 2013 Bills will be compared and contrasted with the 1964 Act in terms of greater trade facilitation, collection of customs duties and enforcing security via greater customs control; improving integrated supply chain management efficiency

4. THE STRUCTURE OF THE 1964 VERSUS THE 2013 ACTS • To a certain extent; both the 2013 Customs Control and Customs Duty Bills follow the structure and content of their 1964 Act predecessor –in terms of chapters, schedules, definitions and territorial jurisdiction. • Previously, the 1964 Customs and Excise Act contained 240 pages, 14 Chapters and 120 Sections including legislative framework for excise duties–-provided for in a separate unexamined Customs Excise Bill. The 2013 Customs Control Bill has 40 Chapters and 858 sections, while the Duty Bill has 12 Chapters and 228 Sections. Both total 580 pages. • In contrast to the 1964 Act, the territorial jurisdiction has been redefined -incorporating SACU countries specifically for customs control purposes under Part 2 Section 4 of both new Bills. For trade and duty purposes, customs jurisdiction now extends to the continental shelf, sovereign waters and any installation within those boundaries (the Maritime Zones Act, 1994 section 8).

5. THE 1964 CUSTOMS AND EXCISE ACT, the 2013 Customs Control and Duty Bills and Trade Facilitation • The simplification and harmonisation of customs procedures. • SARS now requires advanced notification of cargo arrival/ departure (ISCM Guidelines Standard 3.13) (compared to none in1964 Act). Imports will be cleared in 3 days under 2013 legislation; contrasting with 7 days (1964 Act Section 38) • These and others create potential trade benefits including expedited processes, diminishing transit time, reducing transport and storage costs. • The 1964 Act concentrated on manual procedures for its import/ export cargo manifest, (whereas the 2013 Control Bill Section 69/ Chapter 7 provides for electronic processes) simplifying it with the Convention on the Facilitation of International Maritime Traffic –FAL –reducing the number of necessary declarations, with a standard, specific general/ cargo declaration and list of restricted goods (FAL 1 -7); correlating with the SAFE Framework of Standards (SAFE) First Element, via automated data submission and control over all cargo processes. • For example, it exempts goods not offloaded; from clearance requirements under section 109 and trade samples in accordance with the Istanbul Convention.

6. Therefore this is imperative for the importer or buyer as well as the seller; to determine the landed cost (price) recovers cost with sufficient profit to be economically viable and competitive to avoid the opportunity and fiscal costs of failing to satisfy Customs. • In order to establish customs compliance under the 1964 Act; South Africa follows the internationally endorsed World Customs Organisation recommended trilogy, for ensuring customs control and compliance of origin, classification and value in completing the customs import and export declarations. • The fact that ownership will never change does not affect the liability for submitting a Customs declaration and paying applicable customs duty liable under 1964 Act Sections 39 and 44 for paying all Customs related duties. (as defined by clause A: An importer; “as any person who at the time of import; owns the goods and is directly responsible for them.” • Under Section 46; the origin or location source from which each of these imports is located from (as defined under the GATT Agreement Article IX Marks of Origin); must be noted on the import/ export declaration and include a separate Chamber of Commerce certified; statistical (trade agreement based preferential tariff treatment) or destination inspection certificate of origin from each different imported country of origin,() which may enhance, lower or exempt the quantity of customs duty for which the client is ultimately responsible for. • 1964 Customs Act Section 47 requirements for the client needing to acquire a certificate of origin to complete customs clearance procedures: include the exporter/ importer’s name/ physical contact details, consignee details, mode of transport (multimodal); the voyage number; the cargo description and shipment date, exporter remarks (including import licence numbers); physical packaging marks and descriptions; the quantity and the invoice price rather than value.

7. 1B: HARMONISED COMMODITY DESCRIPTION AND CODING SYSTEM • A uniform customs classification and information procedure for all goods through this System to simplify trade; prescribe documents; improve information and statistics while reducing data transmission and other regulatory costs upgrading technology • 6 DIGITS FOR CLASSIFICATION –ACCORDING TO THEIR BASE OR RAW MATERIALS • Prioritising these by creating global uniform data requirements; could facilitate greater globalisation through uniform trade and customs procedures, averting trade disruption and enhancing productivity via abolishing cultural/ language/ trade barriers currently inhibiting commerce; while providing logistical security.

8. IV A: GLOBAL CUSTOMS SECURITY • Customs Alert Network – on identified elements/ participants in the global supply chain –shippers; • electronic methods (6.9) ratifies Articles 5 -7 for the provision of advanced information exchange electronically and 6.4 (risk analysis). • Mutual recognition of digital signatures • ISPS (International Ship and Port Facility Security) and FAL requirements; extends to transit procedures and adds cross border data streamlined from regulatory agency information standards on agriculture; food hygiene and hazardous waste disposal. • Cargo Community System –UNIFY CARGO HUBS

9. ARUSHA DECLARATION OF CUSTOMS INTEGRITY • 1. Leadership and Commitment • 2. Regulatory Framework • 3. Transparency • 4. Automation • 5. Reform and Modernization • 6. Audit and Investigation • 7. Code of Conduct • A key element of any effective integrity programme is the development, issue and acceptance of a comprehensive code of conduct which sets out in very practical and unambiguous terms the behaviour expected of all Customs personnel. Penalties for non-compliance should be articulated in the code, calibrated to correspond to the seriousness of the violation and supported by appropriate administrative and legislative provisions. • 8. Human Resource Management • • providing sufficient salary, other remuneration and conditions to ensure Customs personnel are able to maintain a decent standard of living; • • recruiting and retaining personnel who have, and are likely to maintain, high standards of integrity; • • ensuring staff selection and promotion procedures are free of bias and favouritism and based on the principle of merit; • • ensuring that decisions on the deployment, rotation and relocation of staff take account of the need to remove opportunities for Customs personnel to hold vulnerable positions for long periods of time; • • providing adequate training and professional development to Customs personnel upon recruitment and throughout their careers to continually promote and reinforce the importance of maintaining high ethical and professional standards; and • 9. Morale and Organizational Culture • 10. Relationship with the Private Sector

10. SAFE -CONTINUED • SAFE Customs to Business Standard IV: -Technology modernisation (Electronic Interchange/ Data Model ) and Standard V: - to continuously update security standards • Customs; Standard V: High Risk Cargo or Container requires a certified declaration of origin/ value/ certificate of origin; plus anomaly analysis to for authenticity and protection; • Standard VII: Target and Communication –security incorporates 7.4 WCO Handbook for Customs Officers on Risk Indicators; 7.2 –WCO Standardised Risk Assessments document • Standard VIII: -Performance Measures; advocates statistical reports distinguishing surveillance means of inspection enabling technology utilised. • Standard IX: Security Assessments are recommended to identify potential globalised commercial network security risks.

11. 1B: HARMONISED COMMODITY DESCRIPTION AND CODING SYSTEM • Preferential Trusted Traders -AEO concept facilitates and homogenise global trade though mutual recognition of standards and cooperation via common quality validation and authorisation procedures under SAFE Standard 5.4; (registration ) • Incentive mechanism to cooperate:- • ensures swift processing and instant cargo release (ISCM Guideline 1.9), avoiding trade disturbance costs; once all procedures are complied with all duties assessed and paid and clearance “goods in free circulation” is granted; • ISCM Guideline 1.4 on AEO’s and SAFE Customs to Customs standard III: Authorisation) minimises inspections; transit time and inventory storage costs and expedite process efficiency and other advantages outlined in Section 5.3 SAFE –AEO Benefits • SELF REGULATORY COMPLIANCE –POST INSPECTION AUDITS

12. In order to avoid customs administrative penalties being incurred to undermine the economic; time and other opportunity costs of customs forestalling cargo consignments and to facilitate the free flow of trade in the global supply chain network; utilise the World Customs Organisation, Harmonised Commodity Description and Coding System that South Africa has ratified and incorporated into its own national 1964 Customs and Excise Act legislation; • This satisfes Section 47’s mandatory customs trilogy requirement of classification –separately for each item imported and exported that is declared for Customs compliance purposes. • These would include the chapter; the tariff heading and subheading; item number and purpose of import or export; in order to determine the economic identity of the cargo and the payable duty whilst reducing international trade and customs regulatory process costs through streamlining processes to maximise potential efficiency and simplicity . • The Harmonised System 6 digit classification for the drilling derrick is 8426.40 and 8421.23 when importing oil or petrol-filters for internal combustion engines. Interchangeable tools under the Harmonised System for customs tariff classification purposes; can be categorised by 8207.90

13. CUSTOM DECLARATIONS • It is also advised to the client that the transaction value upon which customs valuations are based to determine the landed cost or price for customs compliance; can have the cost of packing materials/ containers added to each of the potential imports; any assists (provided below actual monetary value or free ) under the 1964 Customs Act Section 67. • However; under the same valuation the client will be able to reduce potential landed costs as customs allow tax deductions of transport, loading; unloading, handling and insurance of cargo, to determine the final dutiable rate paid from the point of exportation to that of importation and even within South Africa. • Provided the owner indicates construction; erection, assembly or technical assistance costs for the customs cargo declaration separately; these costs in addition to interest, depreciation and any export duty paid can be subtracted from the transaction value to reduce potential customs duty and subsequent landed cost in order to facilitate price competitiveness and economic sustainability. • The client should be clear to show all value breakdowns on the Customs declaration as this customs value may differ from the incoterm value.

14. PORT TARIFFS IN SOUTH AFRICA • Set by Port Regulator for Transnet • Published Yearly –involves Stakeholder Consultation

15. PORT TARIFFS IN SOUTH AFRICA

16. Other Port Pricing Examples

17. TARGETING STRATEGIC PORT USERS Strategically, containers offer higher revenue potential and greater efficiency –it makes sense to lower the threshold to 100

18. TARGETING STRATEGIC PORT USERS Strategically, containers offer higher revenue potential and greater efficiency –a 12 m does not cost twice as much as a 6m

19. STRATEGIC PORT CALLERS • Vessel tracking , pilotage; moorage charges and light dues are inefficient priced on a per tonnage basis – e.g. it does not cost overwhelmingly more to safely navigate a heavier vessel than a lighter one in grt –use metres. • Consider coastal cargo traffic –pricing discount incentives for liners traditionally going to Walvis Bay, Luderitz, Maputo… Suez canal… • As in Sydney; a 50% discount might encourage those involved in promotional visits , yachting and recreation–marketing/ photography etc… • To endorse Sydney’s Environmental Service Charge penalising liquid bulk/ others that are more polluting • Cabotage –Preferential treatment and flags of registry

20. STRATEGIC PORT USER TARGETING • Transit and bunkerage callers are footloose – • greater value related economic activity in port dues; given the high degree of inter port competition –offer percentage discounts • To encourage greater frequency of occasional visits • Two part tariffs -“specific percentage discounts” over greater usage thresholds –offer a small percentage per frequency threshold • Port of Rotterdam imposes a 10% surcharge to docking fees for operators using fuel with sulphur levels near the upper limit • the Environmental Ship Index. Shipping companies can register their ships for this index on a website. On the basis of the data entered, such as fuel consumption and emissions, each ship is a given a score from 0 to 100 (from highly-polluting to emission-free). The ports themselves decide what advantages to offer participating ships as a clear example of incentive pricing at the level of port dues. Seagoing ships with a score of 31 or more will be a granted a discount of 10% on tonnage dues in Antwerp guaranteeing this discount for a period of at least three years, so offering continuity for shipping companies that invest in improving the ESI score for more efficient vessels

21. ENVIRONMENTAL PRICING INCENTIVES • Burning clean fuels with low Sulphur content beyond MARPOL requirements within SIN could enjoy a % reduction on port dues payable • As for Antwerp, in addition to fines on marine oil spill, the port also provides financial incentive for companies and concession-holders that carry out energy audits, conservation and pollution control measures –for vessels; cargo operators, terminals, port users for sustainable development • Despite beneficiation incentives, cargo automotive exports are still penalized; in paying for bulk exports ranging between 3 -8.43 times international port pricing comparisons whereas vessels are 47% below the average revenue. • Lower value bulk commodities receive preferential tariff structure reductions/ port dues e.g. Richards Bay coal at 43% and Saldana Bay iron ore at 19%; below global tariff averages, despite our competitive, comparative advantage in resource endowment

22. CARRIAGE OF GOODS IN SOUTH AFRICA • 1924: Hague Rules • 1968: Hague-Visby Rules • 1974: Hamburg Rules • Rotterdam Rules • SEA TRANSPORT DOCUMENTS ACT • BILL OF LADING

23. CARRIAGE OF GOODS IN SOUTH AFRICA

25. CARRIAGE OF GOODS IN SOUTH AFRICA • To a considerable degree the Rotterdam Rules(Articles 5 -7) advance the evolutionary progress of the international carriage of goods by sea, indicating a more harmonised attempt to coordinate a set of legislation that unifies and simplifies the global transportation of cargo, by codifying previous efforts. This creates international mercantile law uniformity, to regulate international contracts and documentary requirements for cargo, eliminating enforcement; transaction and communication costs for the shipper and carrier; facilitating the flow of global commerce • the Rotterdam Rules enhance international business activity; by establishing a universally acceptable, commercial contract between carrier and cargo owner (or representative) for transporting cargo from the port or point of receipt/ loading to that of delivery/ discharge compatible with other international conventions. These resolve the documentary risks and costs incurred within current international transportation transactions arising from mistakes, omissions; translation and legal ambiguities along with those arising from cultural, language and etiquette differences. • The Rotterdam Rules represent advancement in modernising the international carriage of goods by sea for the challenges of the twenty first century, compared to preceding examples such as the Hamburg Rules focussing merely on physical transport documents; It does so by regulating electronic commerce through Chapter 3 Article 8 and Chapter 8 providing electronic transport records (by the carrier from the shipper) for both negotiable and non-negotiable (Article 35), provided that they possess the same use, effect, ownership, control and transfer rights (Article 57) as manual record equivalents; as formalized under negotiable electronic transport records usage procedure (Article 9) and replacement (Article 10).

26. CONCLUSIONS • To some extent however; the Rotterdam Rules represent a continuation of existing international carriage of goods by sea conventions (with only slight improvements) in terms of: • providing for the risks of deck cargo and live animals • with the flexibility and freedom of jurisdiction and arbitration with the same notice and time of suit requirements. • The absence of these Rules; would though complicate international trade and magnify uncertainty/risk, requiring proliferating yet diverse domestic legislation related to the transportation of cargo, with the merit of substituting myriad contracts for one regulated and established between the carrier and the consignor –especially for multimodal transportation.

27. CONCLUSIONS • Rotterdam Rules represent a regression rather than progression of the international carriage of goods with the potential to conflict with other conventions; • enhancing complexity; lacking maritime terminology and with flawed definitions i.e. exempting charterparties and allowing derivations for volume contracts. • While protecting the rights of one contracting party (shipper or carrier), through raising limits of liability and specific obligations; it increases the potential regulatory compliance costs for the other. • Overall however, they represent a credible globally coordinated attempt, modernised electronically with provisions considering volume contracts and multi-modal transport opportunities… and hence they do indicate an advancement in the international carriage of goods by sea…

28. ADMIRALTY LAW AND JURISDICTION IN SA • Note MLASA, SAMSA; • 1983 ADMIRALITY JURISDICTION AND REGULATORY ACT • 1952 CONVENTION ON SHIP ARRESTS • 1998 Ship Registration Act • Admiralty Jurisdiction can be defined as the Law of the Sea concerning itself over maritime affairs, taking legal precedence over commercial issues over foreign vessels on the high seas or within admiralty jurisdiction –including territorial waters where the vessel/ cargo is in court/ physical reach. Courts have the power of inquiry into shipping concerns –even suspend or remove qualifications of professed competency in seamanship. –a report is mandatory in the case of death/ or injury inflicted. • Legal Powers of Ship Captains -

29. ADMIRALTY LAW AND JURISDICTION IN SA • SA Limitation of Liability • SA is not a signatory of any international conventions –the owner is entitled to limit liability to those vessels built/ registered in SA under the 1951 Merchant Shipping Act. It extends liability to owners/ charterers/ managers/mortgage holders etc –but exempts the master and crew from legal liability. • SA has no maritime liability statute • SA limits liability under Roman Dutch Law to: • I: Loss of life/ injury to any person • II: Loss of damage/ property of any kind –whether movable or immovable. • SA lacks reference to claims on the basis of poor navigation/ mismanagement of a vessel

30. INTERNATIONAL CONVENTIONS • MARPOL • SOLAS • STCW • ISPS • IMO • IAPH • UNCTAD • MLASA

31. CUSTOMS CONVENTIONS • Section I: REVISED KYOTO CONVENTION -A: Trade Facilitation • B: The Harmonised Commodity Description and Coding System • C: Establishing Authorised Economic Operators • Section II: Transit Efficiency Facilitation • Section III: Enhancing Customs Control through IT Modernisation • Section IV: A: Ensuring Global Customs Security incorporating the SAFE Framework • C: The Johannesburg Convention • D: Customs Powers and Information Requirements • E: The Arusha Declaration • F: Seal Integrity Requirements and other Measures • A SINGLE ELECTRONIC UN DECLARATION FOR IMPORTS AND EXPORTS PLUS ADVANCED ELECTRONIC ARRIVAL NOTIFICATION • A UNIQUE CONSIGNMENT REFERENCE NUMBER • FAL –GUIDELINES –Minimize/ Standardize Documents

32. INTERNATIONAL BUSINESS TRANSACTIONS • UNICITRAL • UNCITRAL’s historic contribution to aiding business law and international commerce; through the unification, simplification and standardisation of existing and future international commercial legislation; was pioneered by a 1964 UN decision, on Hungary’s initiative (I); and ratified in the UN General Assembly Resolution 2205/ XII of 17 December 1966. • It emerged after the world failure of UNIDROIT’S 1964 Hague Convention on ULFIS (Uniform Law on the Formation of International Sales) and ULIS (Uniform Law on International Sales); ratified only by those nine European countries involved in drafting it. • (II) Throughout; UNICITRAL’s development, it has prioritised the objectives of global participation in drafting international trade specific guidelines; (ignored in most domestic legislation), model laws and conventions; in cooperation with governments and businesses; providing legal certainty while reducing ambiguities; to enhance commercial relations; trade and economic development.

33. INTERNATIONAL BUSINESS TRANSACTIONS • . in 1974 it drafted the New York Convention Limitation Period in the Sale of International Goods; creating a non binding minimal period for transactions to avert business delay; inventory and storage costs (III). • It created the 1980 Vienna Convention, which concentrated on standardising contract formations on the international sale of goods (CISG); safeguarding the rights; and responsibilities of all contracting parties in global business interactions (IV) and was ratified by the eleventh country in 1988. • Draft Conventions on International Bills of Exchange/ Promissory Notes and on International Cheques created a universal standard of account and means of payment of a foreign contracting party to any commercial activity; further aiding international business law. • UNICITRAL has further codified and simplified trade/ business law through its Convention on the Letters of Credit and 1992 Model Law on International Credit Transfers; regulating international payments and documentary requirements; and produced a Guide to Secured Transactions. • Uniform Rules on Liquidated Damages introduced a clause protecting international business parties against currency fluctuations, to ensure security and authenticity of commercial transactions for international business law. (VII) I • UNICITRAL formulated a Convention on the Use of Agents in CISG; plus a Model Law on International Contract Practises which clarified the 1958 United Nations (UN) Convention on the Recognition and Enforcement of Foreign Arbital Awards.

34. INTERNATIONAL BUSINESS TRANSACTIONS • (UNCITRAL Model Law on Cross- Border Insolvency (1997) and Legislative Guide on Insolvency Law (2004). • UNCITRAL has revised guidelines (VIII) defending businesses involved in public procurement and infrastructure development: • UNCITRAL Legal Guide on Drawing Up International Contracts for the Construction of Industrial Works (1988) ,UNCITRAL Model Law on Procurement of Goods, Construction and Services (1994),UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects (2001) and Model Provisions (2003), and regulated international transactions • (UN Convention on Independent Guarantees and Standby Letters of Credit (1995) and UN Convention on the Assignment of Receivables in International Trade (2001); to resolve credit and financier’s security risks. • INCOTERMS –DDP, • CISG –VIENNA CONVENTION

35. ? ? ?Any questions THANK YOU FOR YOUR ATTENTION Feel free to contact me on Jack.Dyer@utas.edu.au