Millions of Rands lost

Export round-tripping occurs when goods are exported, VAT 'free' and then shifted back into the country for re-sale. This has become an escalating problem to the South African economy. A large number of export round-tripping incidents are discovered each year, resulting in millions of rands lost by the state. Furthermore, export pricing policies may lead to additional distortion of the local market.

Export verification service

A round-tripping task group, made up of major wholesalers and several manufacturers, has been in place for some years. As a result of the efforts of this task group, a number of services are now available to South African manufacturers in order to verify that their exports reach their target market. An export verification service (EVS) outlined below, is offered by OF&A.

1. Pre-shipment verification of exporter

This service verifies whether or not third party exporters do in fact exist in the neighbouring states, and whether they or their principals have previously been highlighted as being involved with round-tripping abuses. A graded result of such an enquiry is provided to highlight and categorise the following:

They have been positively identified but have no complaints lodged against them (Grade A).
They are not found at the given address or there are complaints regarding them on the file (Grade E).

2 Export verification at border posts

All South African land border posts, designated for commercial traffic, will utilise the service to provide companies with an independent verification on the movement of consignments through border posts. An inspection will take place, which will include a physical inspection of the goods and capturing the vehicle's details. Details of the driver and the load are recorder and supplied to the border posts electronically, allowing for the verification of goods being exported. This will also provide accurate warning to the South African Revenue Services to flag the same goods should they be re-imported.

3 Round-tripping investigations

Where investigative work is required concerning possible export round-tripping of goods, OF&A is able to co-ordinate with the authorities, of both local and neighbouring states. Through the additional services of OF&A, should assistance with law enforcement agencies be required, qualified staff are assigned to assist where necessary.

The end result of the EVS is to ensure more effective control over goods leaving and entering the country, and therefore a more effective control on illegal import and export of goods that are aimed at evading VAT and applicable duty payment on respective consignments.

Case Study

As is the case with several industries the tyre industry experiences recurring problems with export goods ending up in the local market.

An industry market was alerted when a company placed a large order to export a specific tyre size to Zaire. The fact that this type of tyre is unsuitable for Zaire, and that the limited market for this type of tyre has been flooded in South Africa, was cause for concern particularly since this specific tyre size was being sold at a suspiciously low price.

The company had previously place one order for these tyres which, according to documentation, appeared to have left the country. It was decided that the next order place by the company would be monitored to ensure that the shipment did in fact leave the country. OF&A was informed when the order was placed, and the team began the surveillance.

The container was loaded and then taken to a location about 30 kilometers away, and still within South Africa's borders, where it was parked for two days. It was moved into a warehouse, the seals were broken and the tyres off-loaded.

The exporter then submitted "properly" processed Custom's documentation to the supplier, as "proof" of the fact that the goods did leave the country. On the following day, a search warrant was obtained and the owner of the company was arrested for fraud and the outstanding VAT was scheduled for payment.

These types of incidents can be prevented through utilisation of the EVS system, allowing for industry-controlled verification to be conducted. This ensures that goods do in fact leave the country, and protects the local market from roundtripped stock.