RESTRICTED
WORLD TRADE G/SCM/N/2/ZAF
21May1995
ORGANIZATION(95-1333)
Original: English Committee onSubsidies andCountervailing Measures
NOTIFICATION PURSUANT TOARTICLE 28.1(A)
OFSUBSIDIES INCONSISTENT WITH THE AGREEMENT
SOUTH AFRICA
Thefollowing communication, dated 30March 1995, hasbeenreceived fromthePermanent
Mission ofSouth Africa.
_______________
Pursuant toArticle 28.1 oftheAgreement onSubsidies andCountervailing Measures,
South Africa hereby notifies thefollowing measure intheagreed format (PC/IPL/11).
1. Theexisting subsidy programme istheGeneral Export Incentive Scheme (GEIS).
2. Thepolicy objective ofthescheme isthepromotion ofexport ofSouth African goods andto
overcome theexisting anti-export bias.
3. Thescheme wasestablished on1April 1990 andwillterminate on31December 1997.
4. ThelatestsetofguidelinesontheGEIStotakeeffecton1April1995,isattached(AnnexureA).
5. Central government isresponsible foradministering thescheme through theDepartment of
Trade andIndustry.
6. Thescheme isfinanced through thebudget ofCentral Government.
7. TheGEIS isbeing scaled down witheffect from 1April 1995 andwillbeterminated after
2years and9months on31December 1997. Details ofthescaling down areattached
(Annexure B).
8. Theprivate sector hasbeeninformed accordingly andnofurther budgetary provision hasbeen
made forthecontinuation ofthescheme.G/SCM/N/2/ZAF
Page2
GUIDELINES FOR THE
GENERAL EXPORT INCENTIVE SCHEME
(GEIS)
REVISION NO4:1995-04-01G/SCM/N/2/ZAF
Page3
CONTENTS
A. GUIDELINES INRESPECT OFGEIS
1. Introduction ........................................................................ 5
2. Terminology ........................................................................ 6
3. General ............................................................................... 8
4. Claim Procedure ................................................................... 10
5. Claim Forms ......................................................................... 11
B. GENERAL NOTES ONTHE GUIDELINES FOR THE GEIS
1. TheFormula ........................................................................ 16
2. Terminology ......................................................................... 18
C. ANNEXURES
ANNEXURE 1 General Export Incentive claim form
ANNEXURE 2 Basic information about claimants
ANNEXURE 3A Declaration byChief Executive forcompensation claimed
ANNEXURE 3B Declaration byauthorized representative
ANNEXURE 4 Exports onconsignment basis
ANNEXURE 5 Schedule forexports onconsignment
ANNEXURE 6A Independent Auditor 'sReport
ANNEXURE 6B Independent Auditor 'sReport
ANNEXURE 6C Audit procedures tobeincluded inanaudit ofanexport incentive
claim
ANNEXURE 7 Customs ExitPoint Code Numbers
ANNEXURE 8 Value added analysis insupport ofclaims forprecious metal
products andjewellery
ANNEXURE 9 Certain exemptions from benefits under theGeneral Export
Incentive Scheme
ANNEXURE 10 Tariff classification certificateG/SCM/N/2/ZAF
Page4
THE GENERAL EXPORT INCENTIVE SCHEME (GEIS)
TheGEIS wasoriginally introduced on1April 1990foraninitial period offiveyears which
ended on31March 1995. Itwasintended tocounteract theanti-export biasintheSouth African
economy. Among other things thescheme wasintended toencourage higher levels ofbeneficiation
ofproducts before export andtheexport ofproducts withahighSouth African content. After extensive
deliberations intheNational Economic Forum (now NEDLAC), arevised General Export Incentive
Scheme wasdeveloped which entails adownward adjustment oftheGEIS benefit levels, theelimination
ofcertain structural imbalances (eliminating ofrelative primary products frombenefits), andtheeventual
termination oftheScheme on31December 1997incompliance withSouth Africa 'scommitments under
theWorld Trade Organization. These guidelines supersede allprevious Guidelines, circulars, and
correspondence.
Given thelimited financial resources oftheGovernment, aswellasthecommitment ofthe
Department ofTrade andIndustry towards financial discipline andtheobjectives oftheRDP, itis
theDepartment'sintentionto,assoonaspossible,developareturntobecompletedbyallGEISclaimants
andtobesubmitted withGEIS claims. Onthisreturn claimants willhavetoinsert theirperformance
onRDP objectives such ashuman resource development andwork organization, research and
development etc.ItistheDepartment 'sintention toimplement WTO friendly supply-side measures
asGEIS isphased out.Forthisreason theDepartment will,incollaboration withNEDLAC, investigate
waystoreserve asmall portion ofGEIS payments duetoclaimants, which willbepaidouttoclaimants
upon receipt ofdocumentary evidence thatsuchclaimants haveadhered tocertain targets inrespect
ofhuman resource development, work organization, research anddevelopment etc.G/SCM/N/2/ZAF
Page5
A. GUIDELINES INRESPECT OFGEIS
(Revision No.4:1995.04.01)
1. INTRODUCTION
1.1 General
Assistance toqualifying exporters under theGEIS willbegranted andcalculated interms of
these guidelines.
1.2 TheFormula
GEIS benefits willbecalculated according tothefollowing formula:
Z=Ux(M+or-E)xP
Where
Z = Theassistance provided totheexporter forexports toavalue ofU.
U = Export salesvalue.
M = Manufacturing levelfactor.
E = Exchange ratefactor bywhich Misadjusted forinflation andexchange rate
fluctuations.
P = Local content factor.
However, iftheapplication of(M+or-E)results inhigher percentages thanthose listed below, the
listed percentages willapply:
Period Category 4products Category 3products
01.04.95 -31.03.96 14% 3%
01.04.96 -31.03.97 12% 2%
01.04.97 -31.12.97 10% 0%G/SCM/N/2/ZAF
Page6
Iftheapplication of(M+or-E)isequal toavalue lower than2percent, noincentive willbe
payable. Product classification under therevised GEIS differs fromthose under theformer GEIS in
thatrelative primary products previously classified under category 3werere-classified under category 2.
Onlyproducts which remain incategory 3,aswellasproducts incategory 4,canqualify forbenefits
asfrom 1April 1995. Acategory listisavailable from theDepartment. Products areclassified as
follows:
Category 1 - Primary Products (e.g.logs, fibres, etc.)M-factor =0
Category 2 - Beneficiated Primary Products (e.g.sawntimber, threads, etc.)M-factor =0
Category 3 - Material Intensive Products (e.g. planed planks, woven textiles, etc.)M-
factor =12.5percent(or0.125)
Category 4 - Manufactured Products (e.g. furniture, ready towear clothing, etc.) M-
factor =25percent(or0.25)
2. TERMINOLOGY
2.1 "Claimant" means anyexporter dulyregistered withandapproved bytheDepartment to
participate intheGeneral Export Incentive Scheme. NoGEIS claim willbeconsidered for
exports which tookplace before themonth inwhich theclaimant 'sapplication forregistration
asexporter hasbeenreceived (i.e.datestamped) bytheDepartment.
Exporters whotrade under atrade name orinthename ofadivision (provided suchdivision
isnotaseparate legalperson) shallbeallowed toregister andclaim inthename ofsuchdivision
orunder suchtrade name, provided thatallexport documentation shallbeinthename ofsuch
division ortrade name andfurther provided thattheexporter shallatalltimes remain liable
forallmonies, damages andliabilities duetotheDepartment bysuchdivision orunder such
trade names.
2.2 "Claim period" means aperiod ofsixortwelve months which mustcoincide withtheclaimant 's
financial year, or,inthecaseofanatural person, thefinancial yearforincome taxpurposes.
2.3 "Date ofExport" shallbethedateoftheCustoms andExcise datestamp ontheoriginal Bill
ofEntry forExport (DA550, orDA25 orDA28) andinthecaseofpostal exports, theoriginal
PostOffice datestamped onthepostal slip. Inthecaseofexports onaconsignment basis,
thedateoftheinvoice tothepurchaser willberegarded asthedateofexport. Claims procedures
forconsignment exports areoutlined inAnnexures 4and5.
2.4 "Department" inthese guidelines means theDepartment ofTrade andIndustry.
2.5 "Director-General" inthese guidelines means theDirector-General ofTrade andIndustry.
2.6 "Eligiblecountries"meansallcountrieswiththeexclusionofcountriesfallingundertheSouthern
African Customs Union Agreement (Botswana, Lesotho, Swaziland, Namibia).
2.7 "Expiry date" means adatethree months aftertheendoftheclaim period unless suchadate
fallsonaSaturday, Sunday orpublic holiday, inwhich casetheexpiry datewillbethefirst
business daythereafter.G/SCM/N/2/ZAF
Page7
2.8 "Export sales" means salesofqualifying products produced intheRepublic ofSouth Africa,
tobonafideimporter ineligible countries. Itisessential thatthese salesproduce theinflow
ofthetotalexport salesvalue inforeign exchange intotheRepublic ofSouth Africa within
twelve months afterthedateofactual export, notwithstanding anyauthorization ofpayment
forsuchexport sales overalonger period thantwelve months bytheExchange Control
Authorities. Only goods which physically leftSouth Africa qualify under theGEIS. Ifthe
price foranysuchexport saleispaidinSouth African currency, suchsalemayqualify for
assistance under theGEIS ifproof, tothesatisfaction oftheDirector-General, isfurnished
thatthepayment ofsuchprice inSouth African currency emanated from adirect inflow of
foreign exchange tothesame value.
However, inthecaseofasupplier 'scredit oracapital project, theDirector-General may, within his
discretion, approve alonger payment period, provided written application setting outthecircumstances
ofthetransaction ismade prior tothesubmission ofclaims. Noclaim willbeallowed inrespect of
interest oranyother finance charges orcosts added tothef.o.b. export sales value. Only sales of
goods which haveactually lefttheRepublic ofSouth Africa shallbeconsidered tohavebeen"export
sales".
2.9 "Export salesvalue" means thefreecarrier value {i.e.free-on-board (f.o.b.) and,inthecase
ofoverland transport through exitpoints intheareaoftheSouthern African Customs Union,
free-on-rail (f.o.r.), orfree-on-truck (f.o.t.) attheborder} ofexport sales. Forthepurposes
ofthedefinition thefollowing shallnotform partofexport salesvalue, namely -
(a) Freightandinsurancecostsforthetransportandinsuranceofqualifyingproductsoutside
theareaofSouthern African Customs Union, regardless whether ornotthese costs
havebeenpaidforintheRepublic ofSouth Africa;
(b) Anyexpenditure orcosts, ofwhatever nature, incurred byanexporter orclaimant
foranyactivity, including services performed, ortobeperformed, outside theRepublic
ofSouth Africa foranyexport sale,including, butwithout limiting itto:
(i) commission paidtoanoverseas representative;
(ii) costsincurredinthemarketing,advertising,positioning,warehousing,repairing
andclearance ofproducts soldinterms ofanexport sale;
(iii) anytaxes, import andexcise duties.
Thisisregardless ofwhether, ornot,suchexpenditure orcosts havebeenpaid, or
arepayable, intheRepublic ofSouth Africa, provided that,intheevent ofanydispute
arising astothedetermination ofexport salesvalue, theDirector-General may,within
hissolediscretion, determine anotional export salesvalue andsuchdetermination shall
befinalandconclusive.
Indetermining export salesvalue, theforeign currency reflected ontheCommercial
InvoicemustbeconvertedintoRandattheexporter'sbank'sspotbuyingrateforforeign
currencies (asat11:00 or15:00) applicable onthedateoftheexport clearance, i.e.
thedateoftheoriginal DA550 (Customs datestamp). There should beaclear link
between thevalue thusdetermined inRand andthevalues reflected inRand onthe
DA550 andF178.G/SCM/N/2/ZAF
Page8
2.10 "Exporter" forthepurpose oftheScheme, means anylegalornatural person dulyregistered
withtheDepartment asbeing actively engaged intheexport ofgoods.
2.11 "Invoice value ofimported inputs" means c.i.f.value plusimport duties actually paidforsuch
inputs irrespective ofwhether itwasimported directly orbythirdparties. Onlyclaims which
reflect therequired particulars incolumn 9oftheclaim form(Annexure 1)willbeprocessed.
2.12 "Local content" means theexport salesvalue (U)ofaproduct minus theinvoice value ofall
imported inputs (I).
2.13 "Manufacturer" means alegalornatural person engaged inproduction asdefined.
2.14 "Production" means amanufacturing process whereby additional value iscreated oradded
tothevalue ofproducts andshould beinterpreted asthephysical processing ofproducts during
which some degree oftransformation oftheproducts takesplace, adding value totheproducts.
Imported inputs willnotberegarded ashaving undergone aprocess ofproduction iftheyhave
onlybeenpackaged orrepackaged.
2.15 "Qualifying claimant" means
2.15.1 manufacturers whoaretheowners oftheexported goods andwhoexport directly;
2.15.2 export trading houses ortraders whoaretheowners oftheexported goods andwhoexport
forownaccount.
Itfollows fromabove thatcommission agents andforwarding agents donotqualify asclaimants.
Only exporters whoare/were thebona fideowners oftheexported goods mayclaim GEIS
benefits. Theprescribed export documentation must becompleted inthename oftheGEIS
claimant. (Seeparagraph 3.8)
2.16 "Qualifying Exports" means salestobonafideforeign buyers ineligible countries, ofgoods
which haveundergone aproduction process intheRepublic ofSouth Africa andwhich have
notbeenexcluded fromtheScheme (refer toAnnexure No.9).Goods leased toforeign parties
orsoldunder hirepurchase agreement arenotregarded asqualifying exports. Sales totourists
whovisitorhavevisited South Africa arealsonotregarded asqualifying exports.
3. GENERAL
3.1 Claims canbemade onlyforproducts exported onorafter1April 1995, thatis,soldand
dispatched toabonafideforeign buyer atanaddress inaneligible country.
Claim Form Annexure 1mustbeused. Theexpiry dates forthesubmission ofclaims should
benoted (vide par.3.3and4.3).
3.2 Claimants mustsupply therequired basicinformation onForm Annexure 2totheDepartment
eachtimetheysubmit aclaim under thisScheme.
3.3 Approved claimants can,according totheirparticular needs, select tohavetheirclaims paid
outatsixortwelve monthly intervals. Claim periods must correspond withtheclaimant 's
financial year, i.e.halfyearandyearendsandclaimants mustindicate theirchoice onForm
Annexure 2(seeparagraph 3.2). Theclaim period chosen byaclaimant, willonlybereviewedG/SCM/N/2/ZAF
Page9
inexceptional circumstances andmust befullymotivated bytheclaimant before theexpiry
dateoftheselected claim period.
3.4 Theexport incentive assistance under thisScheme shallbetaxable.
3.5 Theproducts which appear inAnnexure 9areexcluded from allbenefits under theGeneral
Export Incentive Scheme.
3.6 Asfarastheexport ofmanufactured precious metal jewellery andother products containing
precious metals (including compounds andderivatives) isconcerned, theexport incentive will
becalculated onthevalue added totheprecious metals usedinthemanufacturing process only.
Value added isdefined asexport salesvalue, asdefined inparagraph 2.9above, lesstheinput
value oftheprecious metal(s).
Thecostofanyprecious and/or semi-precious stones including cutandpolished precious and
semi-precious stones incorporated intojewellery orother articles, shallberegarded asinputs
when calculating value added. Form Annexure 8must beusedinthecompletion ofclaims
inthisregard.
3.7 Adeclaration, signed bythemanaging director/chief executive ofacompany orthesenior
member/person withmanagement responsibility ofaclose corporation, partnership orsole
proprietor must accompany eachclaim.
Form Annexure 3Ashould beusedforthispurpose. Intheevent ofathird party being
designated andauthorized bythecompany, firmorperson mentioned above toprepare and
submit claims onbehalf oftheclaimant, adeclaration signed bythedesignated andauthorized
thirdparty mustaccompany eachclaim. Form Annexure 3Bshould beusedforthispurpose.
Such anappointment must, furthermore, comply withtheproforma letter ofappointment
specified intheattachment toAnnexure 3B.
3.8 Export documentation required insupport ofGEIS claims, include thefollowing: BillofEntry
forExport (DA550 orDA25 orDA28 asthecasemaydictate), Declaration inRegard toForeign
Exchange Proceeds (F178), BillofLading (orAirWaybill) andCommercial Invoice. Ofthese
documents, certified copies oftheDA550 (orDA25 orDA28) andtheF178 mustbesubmitted
withclaims. Theoriginal copies ofalltheabove-mentioned documents should bekeptavailable,
sorted andbeeasily accessible forDepartmental inspection foraperiod ofatleastfiveyears,
following thedateofsubmission oftheclaim. TheDepartment may, however, request the
submission ofanyadditional export documents suchastheCommercial Invoice and/or the
BillofLading (AirWaybill) atanytime, ifitsorequires. TheDepartment mayalsorequest
insight intoallbooks ofaccount specified intheCompanies Act,whether theconcern isa
company ornot,plusallproduction records.
Should aclaimant notmake allrelevant documentation available onrequest within aperiod
of30days, theDepartment shalltreatthese exports asnotqualifying forGEIS purposes and
shallreclaim allpayments relating tosuchexports plusinterest from theclaimant.
3.9 TheDepartment willcheck allclaims anddetermine theamount oftheclaim, butallpayments
aresubject tofinalverification.G/SCM/N/2/ZAF
Page10
3.10 TheDirector-General can,within hisabsolute discretion, devise andimplement rules and
guidelines pertaining tothepractical implementation andoperation ofthisscheme.
Hewillalsobethesolearbitrator inthedetermination oftheclassification ofproducts under
thefourcategories listed inparagraph 1.2above andhisdecision isfinalandconclusive. To
thisend,theDirector-General willcontinue torefine theScheme. Thiscould result inthe
summarily withdrawal ofbenefits under theScheme foranyproduct ininstances where he
issatisfied thatcontinued GEIS support foraproduct orproduct group isunjustified,
administratively cumbersome, ornotintheinterest ofthecountry.
3.11 TheDirector-General 'sdecision ontheeligibility ofanyproduct forbenefits under theGeneral
Export Incentive Scheme, aswellasthedetermination oftheamounts oftheincentives will
befinalandconclusive. Nothing inthisdocument shall beconstrued asanoffer open to
acceptance constituting acontractual orother obligation orenforceable right against the
Department. TheDirector-General mayatanytimeconduct afull-scale investigation toverify
anyinformation furnished byaclaimant. IftheDirector-General issatisfied theclaim was
based onfalseinformation, ortheclaimant furnished misleading information, ortheclaimant
isunable tobackhisclaim bydocumentary proof, hemaydisallow theclaim andrecover the
fullamount paidtotheclaimant. Interest onpayments notduetoaclaimant shallbelevied
attherateprescribed interms ofsection 1(2)ofActNo.55of1975 asfrom theissue dates
ofwarrant vouchers orpromissory notes.
IftheDirector-General regards more drastic action necessary, hemay decide onthe
deregistration ofaclaimant under thisScheme and/or theinstitution ofcriminal proceedings
against theclaimant. TheDirector-General willnotconsider thereregistration oftheclaimant
unless good cause isshown bytheclaimant andatleastoneyearhaspassed fromthedateon
which theclaimant wasderegistered.
3.12 TheGeneral Export Incentive Scheme willendon31December 1997.
4. CLAIMS PROCEDURE
4.1 Prospective claimants mustensure thattheyareregistered under theGeneral Export Incentive
Scheme before submitting theirclaims. Claim forms willbereturned toapplicants whofailed
toregister withtheDepartment asexporters andclaimants under theScheme.
4.2 Theonusisontheclaimant toensure thatallrelevant information isincluded intheclaim
form(s). Incomplete forms willbereturned toclaimants.
4.3 Claims must beclearly addressed andcaneither behanded ininperson totheDepartment
ofTrade andIndustry, House ofTrade andIndustry, CnrofPrinsloo andPretorius Streets,
Pretoria orattheRegional Representatives 'offices inCape Town, Durban orPortElizabeth,
beposted byregistered mailtotheDirector-General: Trade andIndustry, Private BagX84,
Pretoria, 0001.
4.3.1 Claims mustbeprepared andsubmitted timeously asonlyclaims received within threemonths
aftertheclaim period expires willbeconsidered. TheCustoms datestamp ontheoriginal
BillofEntry forExport willdetermine whether aspecific claim timefallsinaparticular claim
period.G/SCM/N/2/ZAF
Page11
4.3.2 Thetermwithin inparagraph 4.3.1 above mustbeconstrued tomean adateon/before three
months aftertheclaim period chosen bytheclaimant, i.e.either sixmonths ortwelve months,
expires. When thelastdateforthesubmission ofaclaim fallsonapublic holiday, overa
weekend oranyother dayonwhich theDepartment isclosed, theclaim maybedelivered to
theDepartment oritsregional offices onthefirstfollowing working day.
4.3.3 Claims posted before theexpiry datebutreceived aftertheexpiry datewill, however, be
considered ifproof canbefurnished thattheyweredispatched byregistered orcertified mail
before theexpiry date.
4.3.4 Allclaims willbedate-stamped onthedateofreceipt andthisdatewillbeconsidered asthe
actual dateofreceipt. Seetheproviso inparagraph 4.3.3 above.
4.4 Anaudit opinion byapractising Accountant andAuditor Registered interms ofSection 15
ofthePublic Accountants 'andAuditors 'Act,1991 must accompany allclaims. Noclaims
willbeprocessed without these audit certificates.
4.5 Itistheresponsibility oftheclaimant andhisauditor toimmediately inform theDepartment
ofalladjustments toclaims forthelatest claim period andallprevious claim periods (e.g.credit
notes passed, cancelled sales, CGIC claims i.r.o. lostrevenue, etc.). SeeAnnexures 6A,6B
and6C.
4.6 Commission, salaries etc.paidinSouth Africa andtransferred abroad atalaterstage, may
notbeincluded intheexport salesvalue (U)intheformula.
4.7 Copies ofclaims andoftheprescribed annuexures willnotbeaccepted unless otherwise
authorized.
4.8 Analteration onanoriginal claim formmustbedulyinitialled bytheperson whosigned the
Annexure 1.
4.9 Theclaimant shallatalltimes carry theburden ofproving onabalance ofprobabilities, the
quantum ofhisclaim, theexistence andauthenticity oftheexport documentation oranyother
documentation which hemayrelyupon, andhiscompliance withtheprovisions ofthisscheme.
5. CLAIM FORMS
5.1 Thefollowing documents ofwhich copies areattached, relate tothecompilation ofclaims:
5.1.1 Annexure 1:General Export Incentive Claim Form.
5.1.2 Annexure 2:Basic Information reClaimant.
5.1.3 Annexure 3A:Declaration byChief Executive forCompensation Claimed.
Annexure 3BDeclaration byauthorized representative.
Annexure 4:Exports onconsignment basis.
Annexure 5:Claim form forexports onconsignment.G/SCM/N/2/ZAF
Page12
5.1.4 Annexures 6A,6Band6C: Independent Auditors Report andaudit procedures tobe
included inanaudit ofanexport incentive claim.
5.1.5 Annexure 7:Customs ExitPoint Code Numbers.
5.1.6 Annexure 8:Value added analysis insupport ofclaims forprecious metal products and
jewellery.
5.1.7 Annexure 9:Certain exemptions frombenefits under theGeneral Export Incentive Scheme.
5.1.8 Annexure 10:Tariff classification certificate.
5.2 Notes onthecompletion ofAnnexure 1:
Claimants arerequired toprovide allthedetails regarding theclaimant inthetoppartofthe
form. Special careshould betaken toprovide thecorrect taxnumber andtaxassessment office.
5.2.1 Column 1:
Thedescriptioninthiscolumnmustcorrespondwiththedescriptionappearingintheharmonized
customs tariff. Ifthedescription should be"Other", themain heading andsub-heading
describing theparticular group or"family" ofproducts mustbeusedtoidentify theproduct
(ashortened, concise description willnormally suffice). Where descriptions aretoovague
todescribe theproducts exported, additional descriptions should begiven. Please alsoindicate
thecommercial invoice number forverification purposes.
5.2.2 Column 2:
Ensure thatthecustoms tariff heading orapplicable GEIS tariff heading (seecategory list)
corresponds withthedescription oftheproduct inColumn 1andthatreflected ontheform
DA550, DA25, orDA28. Thetariff sub-heading should, where possible, bebroken down
toeightdigits. Ininstances where products wererecategorized andallocated aspecific GEIS
HSCode, thecodemustbespecified incolumn 2.TheHSCode usedontheDA550, DA25
orDA28 should beusedincolumn 1-following theproduct description. IftheHSCode on
theDAdocument isincorrect aVOC (voucher ofcorrection) must beobtained.
5.2.3 Column 3:
TheM-factor islinked tothetariffheading inColumn 2andmustbeinserted bytheclaimant.
TheDepartment maybeapproached fortheM-factor foraspecific product. Acomplete
category listisobtainable from theDepartment onrequest.
5.2.4 Column 4&5:
Asfrom 1April 1995 theE-factor applicable toexport clearances willbecalculated forsix-
monthly inadvance, sixweeks before commencement ofeachsix-monthly period.G/SCM/N/2/ZAF
Page13
However, iftheapplication of(M+or-E)results inhigher percentages thanthose listed
below, thelisted percentages shallapply:
Period Category 4products Category 3products
01.04.95-31.03.95 14% 3%
01.04.96-31.03.97 12% 2%
01.04.97-31.12.97 10% 0%
Iftheapplication of(M+or-E)equals alower value than2percent,noincentive ispayable.
5.2.5 Column 6:
Theserial number allocated byCustoms andExcise ontheBillofEntry forExport (DA550
orDA25 orDA28 asthecasemaybe)isrequired forcontrol purposes andmustbeinserted
bytheclaimant. Theserial number must bepreceded bythemonth andyearinwhich the
serial number wasallocated, aswellastheCustoms exitpoint codenumber usedforGEIS
purposes (seeNote hereunder), e.g.04/95/50/ 3456 which indicates thatthenumber was
allocated inApril 1995 inDurban (code 50).
Entries forexport transactions where avoucher ofcorrection (amended DA550 or25or28)
wasissued toamend original BillsofEntry forExport should bedealtwithasfollows: The
dateandserial number ontheoriginal BillofEntry, coupled withtheinformation ontheVOC,
should beusedontheclaim form. Careshould betaken toensure thatthetransaction isentered
inthecorrect claim period. Thenumber anddateoftheVOC should beinserted inbrackets
afterthenumber oftheoriginal BillofEntry ontheclaim form. AcopyoftheVOC document,
andacopyoftheoriginal BillofEntry forExport, should besubmitted totheDepartment.
Inthecaseofmultiple exports ofthesame product, export values must belisted separately
foreachexport transaction covered byaDA550. Claimants mustensure thatonlyoneDA550
perCommercial Invoice iscompleted andviceversa. Ifmultiple Commercial Invoices for
homogeneous products arecovered byoneDA550 itshould beconsolidated intooneentry
ontheclaim form.
Note:
Itisimperative thattheCustoms existcodenumber (seeAnnexure 7e.g.Durban code50)
required tocompile theDA550 control number (column ofclaim form) should correspond
withtheCustoms office code (vide Annexure 7)where theBillofEntry forExport was
numbered anddatestamped. Noother number should beused, evenifthegoods areshipped
through adifferent customs existpoint.
ExportsthroughthePostOfficeforwhichnoDA550'sarerequiredandwhichhaveanindividual
parcel value ofR2,000 ormore, must bedealwithasfollows: thedispatch sliporlistof
goods dispatched, dulydatestamped bythePostOffice willbeaccepted asproof ofexport
intheplace oftheDA550 andshould accompany theclaim together withtheF178. Particulars
ofthemonth, year, exitnumber 80(Code forthePostOffice) mustbeinserted inthiscolumn,
e.g.08/95/80 which indicates thattheexport relates toAugust 1995.
5.2.6 Column 7:
Seedefinition of"export salesvalue" inparagraph 2.9.G/SCM/N/2/ZAF
Page14
5.2.7 Column 8: Seethedefinition of"invoice value ofimported inputs" inparagraph 2.11.
5.2.8 Column 9:
Thecalculation oftheP-factor (local content) should bemade bytheclaimant byusing the
formula
U-I
U
where
U=Export salesvalue asperColumn 7.
I=Value ofimported inputs asperColumn 8(seeparagraph 2.11).
IfPislessthan35percentthefactor s0.
IfPis60percentormore thefactor is1.
IfPis35percentormore butlessthan60percenttheactual percentage must beusedin
thecalculation.
However, inthecaseofprojects ofacapital nature where theE-factor hadbeenfixed prior
to1April 1995, Pshallbe75percenttoattain afactor of1.
5.2.9 Note No.1:
Claimants whofailtoprovide therequired information called forincolumns 8and9ofthe
claim form, willforfeit theirbenefit fortherelevant exports. Therulewillbestrictly enforced
fortraderspurchasinggoodsforexportfrommanufacturersand/orothertradersandaretherefore
dependent onthemanufacturers fortherequired information tocalculate thecorrect P-factor.
Inthelatter instance theDepartment willbeprepared toaccept acertificate bythemanufacturer
which reflects thepercentage oflocalcontent onlywithout divulging tothetrade theactual
monetary inputs usedinsuchcalculations. Nevertheless, theDepartment reserves theright
toverify thefactsonthebasisoftheinformation furnished bythemanufacturer either through
personal inspection ofthemanufacturer 'sbooks orthrough arequest tothemanufacturer to
furnish therequired information. Tothisend,theDepartment mayrequest details ofthe
manufacturer involved, before theclaim isprocessed.
5.2.10 Note No.2:
Theinformation requested incolumns 1to10oftheclaim form must becompleted byall
claimants. Ifaschedule accompanies aclaim, allinformation required ontheactual claim
form (Annexure 1),should alsobelisted ontheschedule andshould beinthesame order as
itappears ontheclaim form.
5.2.11 Note No.3:Presentation ofclaims
Certain factors make theprocessing ofclaims extremely cumbersome, timeconsuming and,
sometimes, evenimpossible. Theposition isoften aggravated by:
- Theclaimant 'sfailure tofullycomplete allpartsoftheclaim formandtheprescribed
annexures thereto;G/SCM/N/2/ZAF
Page15
- Theclaimant 'sfailure tosign/certify hisclaim where indicates onAnnexure 1(claim
form) and/or tosubmit theprescribed declarations;
- thesubmission ofclaims inbadly handwritten orvirtually illegible form. Allclaims
mustbesubmitted intypewritten orcomputer-printed formtoavoid uncertainties and
unnecessary enquiries about thedetails ofclaims; and
- thesubmission ofclaims in"fine print" or"condensed print" computer printout.G/SCM/N/2/ZAF
Page16
B. GENERAL NOTES ONTHE GUIDELINES INRESPECT OFTHE GEIS
1. THE FORMULA
Z=Ux(Mplusorminus E)xP
"Z"isthevalue ofthebenefit payable under theScheme. Itisataxable concession paidout
tobone fideclaimants either incash, orbypromissory notes, withredemption periods ofbetween
three and15months. Theredemption period depends onavailable funds atanygiven timeduring
thefinancial yearandcan,therefore, notbeestablished before individual claims areprocessed and
approved. Promissory notes currently earninterest (taxable) atarateof11percentperannum which
rateisadjusted periodically.
"U"istheexport sales value oftheexported product. "Export sales value" isdefined in
paragraph 2.9andreflects thevalue oftheexport onafree-on-board (i.e.FreeCarrier) basis. Inthe
event ofoverland transport toaport, airport orborder exitpoint, thefreight andinsurance costs up
totheportorpoint ofexitfrom theSouthern African Customs Union canbeincluded in"U".
Nevertheless, itshould beclearly understood thatnofreight orinsurance costs beyond theSouthern
African Customs Union borders maybeincluded in"U". Norcanother costsincurred bytheexporter
outside theRepublic ofSouth Africa 'sborders, such ascommission, overheads, labour costs,
warehousing, etc.,beincluded in"U". Commission paidtoaSouth African company orindividual
andwhich isnotremitted from theRepublic ofSouth Africa, maybeincluded in"U".
"M"isthemanufacturing levelfactor oftheproduct exported andislinked tothecategory
theDepartment allocated toaproduct based onitsHSCustoms Tariff number. Acustoms tariffnumber
canbeallocated toevery product. TheCustoms authorities maybeapproached foradvice intheevent
ofuncertainty about theHSCustoms Tariff number foraspecific product. Clearing andforwarding
agents mayalsobeconsulted toestablish aspecific HSCustoms Tariff number. TheDepartment can
advise exporters onthecategories oftheirproducts. There areonlyfourcategories intheScheme
ofwhich theequivalent M-factor values areasfollows:
Category M-factor
1 0%
2 0%
3 12.5% (or0.125)
4 25%(or0.25)
These values arebased ontheparity position oftheRandagainst thecurrencies ofSouth Africa 's
eight main trading partners onatrade weighted basis asin1979 (i.e.1979 =100).
"E"istheexchange ratefactor andreflects thevalue oftheRand relative toits1979 position
vis-à-vis thebasket ofcurrencies ofSouth Africa 'seight main trading partners, onatrade weighted
basis.
The"E"factor isdetermined andfixed forsixmonth periods atatime. The"E"factor is
calculated byincreasing ordecreasing itbyonly0.5percentforevery 1percentwhich theRand
depreciates orappreciates against theabove basket ofcurrencies andisrounded offtothenearest half
percent. The"E"factor iscalculated sixweeks before thecommencement ofeachE-factor period.G/SCM/N/2/ZAF
Page17
TheE-factors forthevarious periods since theimplementation oftheprevious GEIS on
1April 1990, areasfollows:
Period No. Period covered E-factor
1 01.04.90 to30.09.90 -6%
2 01.10.90 to31.03.91 -6.5%
3 01.04.91 to30.09.91 -6.5%
4 01.10.91 to31.03.92 -5.5%
5 01.04.92 to30.09.92 -6%
6 01.10.92 to31.03.93 -5.5%
7 01.04.93 to30.09.93 -5.5%
8 01.10.93 to31.03.94 -7%
9 01.04.94 to30.09.94 -6.5%
10 01.10.94 to31.03.95 -9.5%
11 01.04.95 to30.09.95 -8%
N.B. Asfrom 1April 1995 theE-factor willonlyaffect thebenefit levels payable ifthe
application of(M+or-E)leads tolower percentages thanthefollowing:
Period Category 4products Category 3products
01.04.95-31.03.96 14% 3%
01.04.96-31.03.97 12% 2%
01.04.97-31.12.97 10% 0%
Iftheapplication of(M+or-E)equals orleads tohigher percentages thanarelisted below,
thelisted percentages shallapply:
Period Category 4products Category 3products
01.04.95-31.03.96 14% 3%
01.04.96-31.03.97 12% 2%
01.04.97-31.12.97 10% 0%
Iftheapplication of(M+or-E)equals alower value than2percent,noincentive ispayable.
"P"isthelocalcontent factor. Tocalculate "P",thelocallanded cost(i.e.c.i.f. dutypaid
cost)ofallimported inputs ("I")usedintheproduction oftheexported product, must bededucted
from theexport salesvalue ("U" intheformula). Tocalculate thepercentage of"P"thefollowing
formula should beused:
U-I
U
Thefollowing should beborne inmind asfarasthecalculation oftheP-factor isconcerned:
(a) Manufacturers andtraders should endeavour todetermine thevalue of"P"accurately.
Manufacturers willobviously haveabetter ideaofimported inputs usedintheirproduction
processes thantraders. Toensure equitable treatment ofallclaimants under theScheme, the
Department requests thefullcooperation ofallparties involved intheproduction, saleand
export ofgoods toestablish the"P"factor asaccurately aspossible.G/SCM/N/2/ZAF
Page18
(b) Even ininstances where theP-factor isclearly above 60percent(or0.60) andwill,therefore,
berounded offto100percent(or1),claimants must furnish thevalue of"I"incolumn 8
oftheclaim form.
2. TERMINOLOGY
Thefollowing definitions seemtohavecreated some doubt astowhatisrequired byclaimants:
Paragraph 2.6: "Eligible Countries"
Exports toallcountries worldwide except countries whoaremembers oftheSouthern African
Customs Union, qualify forGEIS benefits. Even ifsalestoSouthern African Customs Union
countries arepaidforinaforeign currency, suchsalesdonotqualify forGEIS benefits. All
salestoSouthern African Customs Union countries areregarded aslocalsalesforthepurposes
oftheGEIS. Products ofBotswana, Lesotho, Swaziland, andNamibia donotqualify forGEIS
benefits. Sales toSouth African foreign missions aswellastoforeign missions inSouth Africa
donotqualify under theGEIS.
Paragraph 2.8: "Export Sales"
Intheinstance where payments forexports aremade inRand, theonusisontheclaimant to
provethattheRandpaymentsreceivedwereconvertedfromforeignexchangeandinfactresulted
intheinflow offoreign currency intoSouth Africa. Itisvitally important thattheexporter
should approach hisbanktoestablish andconfirm bywayofForm Ethesource oftheRand
insuchcases. TheDepartment maysometimes insist onthesubmission ofacopyofForm E
(oracertificate signed bytheclaimant 'sbank manager personally thattherequirements of
Form Ehavebeen met)before oraftertheGEIS claim hasbeenprocessed andapproved for
payment. Normally, however, acopyofForm Eshould beretained withtheother relevant
export documentation, forverification purposes, foraperiod ofatleastfiveyears afterthe
claim hasbeensubmitted. Thedocumentation insubstantiation ofanexport salestransaction,
forGEIS purposes, would normally comprise thefollowing: Commercial Invoice, Billof
Lading, DA550, F178, books ofaccount, aswellasproduction records.
Paragraph 2.9: "Export Sales Value"
Theterms"free-on-rail"(f.o.r.)and"free-on-truck"(f.o.t.)havebeendroppedfromtheIncoterm
terminology. Instead, theterm"Free Carrier" hasbeenexpanded toinclude rail,air,road
andseatransport modes. However, itisimportant tonotethatasfarastheGEIS isconcerned,
thebenefit iscalculated onthebasisoftransport andinsurance costswhich relate totheSouthern
African Customs Union sideoftheexport transaction only. Allothercostssuchascommission
andoverheads, incurred beyond theRepublic ofSouth Africa 'sborders willnotbeeligible
forGEIS benefits andmust beexcluded from claims.
Some exporters seem tohave difficulty indetermining theexport sales value inRand by
converting theforeign currency earned, asreflected ontheCommercial Invoice, attheirbank's
spotbuying rateforforeign currencies applicable onthedateoftheexport clearance (customs
datestampedonDA550).AsaspecialconcessiontotheseexporterstheDepartmentalsopermits
theuseoftheCustoms andExcise dailycurrency conversion schedule published byJacobsons
forthispurpose. However, theconversion mustbedoneonthedateoftheexport clearance
(i.e.customs datestamp onDA550 orDA25 orDA28). Itshould bepossible toestablish
alinkbetween theamount ontheclaim formasconverted intoRand bytheprescribed methods
andtheRand values ontheappropriate DA550 and/or F178.G/SCM/N/2/ZAF
Page19
Paragraph 2.11: "Invoice value ofimported inputs"
Oneofthemajor problems concerning theGEIS appears tobetheuseofimported inputs in
theproduction ofexported goods. Although thisisobviously acomplex issue, exporters should
keepinmind thefollowing:
(a) Forimported inputs, theDepartment permits agenerous 40percentimported content ofthe
production ofgoods toqualify as100percentlocally manufactured forGEIS purposes (a"P"-
factor of60percentormore qualifies forthefullGEIS benefit).
(b) Most exporters know thatiftheproducts exported contain imported materials, theyshould
enquire about thelevelandvalue ofsuchimported inputs. Investing timeandeffort inresearch
beforehand isbetter thanrefund monies received fromtheDepartment andhaving tofacethe
possibility ofbeing deregistered.
(c) Claimants under GEIS cannormally spread imported inputs overarange ofsimilar products
asperHSCustoms Tariff subheading, thatis,determine anaverage P-factor perhomogeneous
group ofproducts which fallsunder exactly thesame Customs tariff subheading. However,
inviewofthespecial circumstances surrounding someproducts, theimported inputs fromwhich
finalproducts aremanufactured, should bekeptapartfromlocalinputs toestablish trueP-factors
fortheimported content. Thisisbecause theP-factor canbecome completely distorted by
the"mixing" ofimported andlocalinputs. Exporters whoareuncertain about thisstipulation,
areadvised tocontact theDepartment withtheirspecific problems togetaclear ruling.
Paragraph 2.15: "Qualifying Claimant"
Toqualify asaclaimant under theGEIS, theclaimant must beregistered assuchwiththe
Department.
Paragraph 2.16: "Qualifying Exports"
Itshould benoted thatpackaging material isincidental totheproduct which isexported and
thattheM-factor applicable totheproduct applies totheexport transaction asawhole, i.e.
including thepackaging material, regardless ofthecategory applicable tothelatter.G/SCM/N/2/ZAF
Page20
15September 1994
MEDIA RELEASE
ANNOUNCEMENT BYMR. G.J.J. BREYL, ACTING
DIRECTOR-GENERAL: DEPARTMENT OFTRADE AND INDUSTRY
REVISEDGENERALEXPORTINCENTIVESCHEME(GEIS)FROM1APRIL1995
1. TheDepartment hasnow, aftermonths ofdeliberation withtheTrade andIndustry Working
Group oftheNEF, developed arevised export incentive scheme which entails adownward adjustment
oftheGEIS benefits, elimination ofcertain structural imbalances intheexisting scheme, areduction
inthepressure onthefiscus andtheeventual termination ofthescheme duetothefactthattheGEIS
constitutes acountervailable subsidy formanufactured goods under theGATT.
2. TheGeneral Export Incentive Scheme (GEIS) wasintroduced on1April 1990 foraninitial
period offiveyears. Thisperiod willcome toanendon31March 1995. Interms ofSouth Africa 's
commitment under theGATT, theGEIS hastobephased outbytheendof1997. GEIS wasintroduced
asageneral export promotion scheme andistherefore notselective, which means thatissubsidizes
exporters regardless oftheneedforasubsidy. Itisanexpensive scheme which isplacing considerable
pressure onthefiscus. Forthesereasons itisnecessary toterminate GEIS benefits onrelatively primary
products andtophase outGEIS benefits onmanufactured products.
3. Thisisalsoanopportune timetoaddress structural imbalances intheGEIS. Onesuchan
imbalance isthefactthatonly30exporters receive more than50percentoftotalGEIS benefits.
Another imbalance isthefactthatcertain products wereincluded incategory 3attheinception ofthe
scheme, orwereupgraded tocategory 3based onthevalue added principle, without dueconsideration
totheprimary nature oftheproducts involved. Examples include primary metal products, chilled
meat, chilled fruit, chemical wood pulp, etcetera. Itwasdecided therefore torestructure thefuture
GEIS byrecategorizing these products, which arecurrently incategory 3,down tocategory 2.
4. There arealsoimportant factors which justify thecontinuation ofarestructured GEIS until
31December 1997. Forexample, ananalysis ofexport performance overthepastfewyears reveals
thatGEIS contributed towards asignificant increase intheexport ofnon-traditional manufactured goods.
Inorder tosupport thistrend ithasbeen decided tocontinue withGEIS benefits inrespect of
manufactured products including processed agricultural products suchascanned fruits, bottled wine
anddried fruitpackaged fortheretail trade, i.e.category 4exports, (aswellascategory 3products
foraslongastheE-factor keeps thenetbenefit at2percentorhigher), andinthemeantime todevelop
other industrial andexport support measures suchasexport financing andsupply sidemeasures which
aretargeted andcandirectly berelated totheimprovement ofcompetitiveness andexport performance.
5. Some positive developments since 1990 which canjustify ascaling down oftheGEIS andits
termination by31December 1997 are:
Lower corporate taxrates;
Lower andstable inflation rate;
Lower nominal andrealinterest rates;G/SCM/N/2/ZAF
Page21
Remove ofsurcharge oncapital equipment andintermediates;
Exchange ratemovement totheadvantage ofexporters;
Endofsanctions witharesultant saving onmarketing costs;
Market access through theopening ofoverseas markets, preferential market access andGSP's;
and
Developmentofafreetraderegimeforexportersincludingdutydrawbacks,dutyrebates,scaling
down oftariffs andsimplification oftariffs.
Thecurrent GEIS benefit levels areasfollows:
Category 4 Category 3 Category 2
Gross benefit atparity
(i.e.1979 realexchange rate)
25% 12.5% 7.5%
E-factor16.5% 6.5% 6.5%
Netbenefit 18.5% 6% 2.5%2
7. Asharp downward adjustment inthevalue oftheRand overthepastfewmonths brought about
anE-factor ofminus 9.5percentasfrom 1October 1994. Thenetbenefit levels fortheperiod
1October 1994 to31March 1995 would thusbe:
Category 4 Category 3 Category 2
Gross benefit atparity
(i.e.1979 realexchange rate)
25% 12.5% 7.5%
E-factor39.5% 9.5% 9.5%
Netbenefit 15.5% 3.0% 2.5%
(guaranteed
minimum)
1TheE-factor intheGEIS formula isbased upon therealeffective exchange rateoftheRand
measured against abasket ofcurrencies ofeightmajor trading partners oftheRepublic ofSouth Africa
using 1979 astheindex year.
2Guaranteed minimum.
3Theadjustment totheE-factor isautomatic interms ofthecurrent GEIS formula.G/SCM/N/2/ZAF
Page22
8. After careful evaluation andconsultation between theDepartment andtheNational Economic
Forum (NEF), theCabinet hasapproved thefollowing maximum netGEIS benefit levels from
1April 1995:
Category 4=14%
Category 3=3%
Category 2=0%
9. Itisclearthattheminimum barrier inrespect ofcategory 2exports must beremoved since
thiscategory would infacthavebeenminus 2percenton1April 1995 ifthere wasnoguaranteed
minimum.
10. TheE-factor willremain partoftheformula. However theE-factor willonlyeffect thenet
benefit levels iftheapplication thereof giverisetolower netvalues, inwhich casethelower benefit
levelwillapply. On1April 1995 theE-factor fortheperiod 1.10.1994 to31.3.1995 shallfirstbe
applied, whereafter theadjustments asindicated above willbemade.
11. TheDepartment announced before thatitwasgoing torestructure theGEIS toaddress the
imbalances mentioned above. Asummary oftheaffected products/HS codes isattached hereto
(Annexure A).These products willbecategorized fromcategory 3down tocategory 2on1April 1995
which means thattheywillattract noGEIS benefits from 1April 1995.
12. Categories 4and3maximum netbenefit levels willbephased down onthefollowing basis:
12.1 Themaximum netpayout levels ofcategory 4willbereduced instepsbytwopercentage points
asisindicated inthetablebelow.
12.2 Themaximum netpayout levels ofcategory 3willbereduced instepsbyonepercentage point
asisindicated inthetablebelow.
Period Category 4 Category 3
01.04.95-31.03.96 14% 3%
01.04.96-31.03.97 12% 2%4
01.04.97-31.12.97 10% 0%
TheGEIS scheme terminates on31December 1997.
13. Inorder toincrease competitiveness, thecut-off pointforqualifying forthefullincentive under
eachcategory willbereduced from 75percentto60percentlocalcontent (P-factor informula).
14. Further discussions willbeheldwiththemanufacturing andagricultural sectors onthe
development ofalternative measures aimed atimproving competitiveness onamore targeted basisthan
isthecasewiththeGEIS.
4IftheE-factor causes thesubsidy tofallbelow 2percent,category 3benefits willbesuspended.G/SCM/N/2/ZAF
Page23
Enquiries should beaddressed totheActing Director-General: Department ofTrade and
Industry, Private BagX84, Pretoria, 0001.
Tel: (012) 3109791 Extension 22490 Mr.A.A. Pienaar
Extension 22582 Mr.E.Matthee