Understanding Advance Rulings

Section 34D as read with 4th Schedule of the Revenue Authority Act [CAP 23:11] empowers the Commissioner General to issue Advance Rulings. This is in line with Article 3 of the WTO Trade Facilitation Agreement.

What is an advance ruling?

An advance ruling is a written decision provided by a Customs to the applicant prior to

the importation of a good covered by the application that sets forth the treatment that

the Customs shall provide to the good at the time of importation with regard to:

Ø  the good's tariff classification;

Ø  the origin of the good’;

Ø  the appropriate value of the goods;

Ø  applicability of Customs requirements for relief or exemption from customs duties; and

Ø  any additional matters for which Customs considers it appropriate to issue an advance ruling

The advance ruling is issued free of charge.

Who Can Apply For An Advance Ruling?

Ø  An applicant can be an importer, exporter or any person with a justifiable cause or a representative thereof.

What are the key objectives of an Advance Ruling?

The key objectives of an advance ruling programme is to provide decisions on the classification, origin and valuation of commodities prior to their importation or exportation, thus adding certainty and predictability to international trade and helping traders to make informed business decisions based on legally binding rulings

Type of The Advance Rulings Issued

An advance rulings issued by Customs are binding private rulings which are binding on both Customs and the applicant that sought it.

Denial to Issue an Advance Ruling

The Commissioner may decline to issue an advance ruling in cases where:

Ø  where the question raised in the application is already pending in the applicant's case before courts

Ø  there is insufficient information to make a ruling

Ø  there is no relation or intended use of a Customs procedure

Ø  a request has already been made on behalf of the applicant using the same circumstances.

Ø  Applicant is appealing against decision made by any office within the organisation;

Ø  where the question raised in the application has already been decided by any court.

In cases where an application is denied, the Commissioner shall notify the applicant in writing, setting out the facts and the basis for denial.

Revocation/ Modification or Invalidation of an Advance Ruling

Ø  Where Customs revokes, modifies, or invalidates an advance ruling, it shall provide

written notice to the applicant setting out the relevant facts and the basis for its decision;

Ø  Customs may revoke, modify, or invalidate an advance ruling with retroactive effect,

where the ruling was based on incomplete, incorrect, false, or misleading information

Validity of Advance Ruling

Ø  An advance ruling shall be valid for three years from date of issue unless the law , facts or circumstances supporting that ruling have changed as provided for in Section 34D arw Fourth Schedule (6)(7)(8)(9)(10) of the Revenue Authority Act

Right to Appeal

Ø  An applicant has the right to appeal the decision made by Commissioner at the higher courts – i.e  Fiscal Court for Tariff Classification, Valuation and Origin at the High Court.

Categories of Advance Rulings

A.    Tariff Rulings

B.     Origin rulings

C.     Valuation Rulings

A.       Tariff Rulings

       When do you apply for an advance tariff ruling?

Ø  When applicable tariff code is difficult to determine.

Ø  When the product and product specifications are known

Ø  Before importation of goods.

Requirements for making an advance tariff ruling

Applicants are required  to provide the following:

Ø  An application for an advance tariff ruling on the prescribed form, Request for Classification Decision (RCD) stating proposed tariff code and justifications.

Ø  Detailed description of the product/ technical literature from manufacturer

Ø  Catalogues

Ø  Samples

Ø  Photographs of the product

Ø  Process of manufacture

Ø  Any other relevant  information

Procedure For Processing Of Advance Rulings At Head Office

Ø  Applicant submits application and supporting documents to Commissioner.

Ø  Head Office Technical Services on behalf of the Commissioner carry out an investigation and makes a submission to the National Tariff Committee.

Ø  The National Tariff Committee shall convene and deliberate on the issue.

Ø  A binding ruling shall be issued at National level in writing and communicated to the applicant.

Processing Time And Validity of An Advance Application

Ø  Customs will process the  requests for rulings within 90 days;

Ø  The rulings will be valid for 3 years (unless otherwise amended or revoked);

Ø  However, for complex cases that require laboratory testing, the processing time may exceed 3 months

B.     Origin Rulings

Ø  Origin advance ruling is a customs procedure applied to assess the origin of imported goods in conformity with the Agreement on Rules of Origin and in fulfilment of Article 3 of the Trade Facilitation Agreement.

Ø  Determination of the originating status of imported manufactured goods   may be difficult and different trade protocols provide rules that assist in determining the qualifying criteria for different products under different classification headings.

Ø  An application for an advance ruling for origin shall contain all necessary information reasonably required to process a request for assessment of the origin of the good, including:

(a) the name and address of the applicant;

(b) a detailed description of the goods;

(c)  the country of origin envisaged for the goods;

(d) the applicable legal basis, i.e., stating whether the advance ruling required is for preferential or non-preferential purposes;

(e) the composition of the goods and any methods of examination used to determine this, as needed;

(f) any samples, photographs, plans, catalogues, copies of technical literature, photographs, brochures, laboratory analysis results, or other documents available on the composition of the goods and their component materials which may assist in describing the manufacturing process or the processing undergone by the materials or any other documents that may assist Customs in determining the correct origin of the goods;

(g) the conditions enabling origin to be determined, the materials used and their origin, tariff classification, corresponding values and a description of the circumstances (rules on change of tariff heading, value added, description of the operation or process, or any other specific rule) enabling the conditions in question to be met; in particular the exact rule of origin applied shall be mentioned;

C.    Valuation Rulings

Ø  Customs valuation is a customs procedure applied to determine the customs value of imported goods. Generally, valuation of goods for Customs purposes is based on the transaction or invoice value. In case of doubt of the transaction value, alternative valuation methods are used such as the transaction value of identical or similar goods. This is mainly the case if buyers and sellers are related or associated in business.

Ø  It is important to note that issuance of valuation ruling though it is important in enhancing trade facilitation, is  complex in nature as the value of identical merchandise may vary for each importation based on contract terms, currency fluctuations, shipping or insurance costs, and the amount of required additions or deductions. It is important to note that advance rulings on valuation can be provided on specific aspects of a Customs value e.g.:

o   Is a particular royalty or licence fee includable under Act 113.1 (c)?

o   Is a commission paid to an agent or broker deemed to be a buying or selling commission under Act 113.1 (a)?

o   In a multiple sales situation, which transaction meets the criteria of Act 106.1 and should be used as the basis for the price actually paid or payable?

o   Where buyer and seller are related, has the relationship influenced the price?

o   Where Transaction Value (T.V) cannot be applied, which alternative method is appropriate to use?

Ø   If the value of goods is questioned by Customs, the burden of proof lies with the importer and they ultimately remain responsible for reporting the correct transaction value to Customs.

Ø  An application for advance ruling shall include a complete statement of all relevant facts relating to the transaction(s), including:

(a) the name and address of the applicant;

(b) description of the nature of the transaction(s), (contract, terms of sale, etc.);

(c) any relationship between the parties;

(d) specific information, depending on the issue in question. For example, if the issue is whether the commission paid by the buyer is a buying or selling commission (or whether an agency relationship exists), all details and documentation pertaining to the roles of the parties and the payment of the commission would need to be submitted. If the issue concerns a royalty payment potentially includable under Article 8.1 (c) of the WTO Valuation Agreement, the license/royalty agreement and sales contract should be presented along with other relevant information;

(e) if the question or questions presented in the ruling request directly relate to matters set forth in any invoice, contract, agreement, or other document, a copy of the document(s) should be submitted with the request;

Benefits  of Advance Rulings

Ø  Advance Rulings promote consistency, certainty, predictability and enables the business to make informed decisions.

Ø  Enables businesses to plan for the future

Ø  Expedition the clearance process.