COVID-19: Customs Considerations for Exports and Imports

About the Authors:

Jeanne du Buisson

Director at Deloitte
Jeanne is an Indirect Tax Specialist at Deloitte with over 20 years’ experience and co-leads the national indirect tax team. Jeanne works closely with a range of corporate and private New Zealand businesses in all industries.

Jonathan Doraisamy

Senior Consultant at Deloitte
Jonathan is a Senior Consultant with over 6 years of experience in indirect tax advisory. His experience in New Zealand include GST/customs advisory and liaising with tax and customs authorities.

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The current unprecedented times have forced many businesses to reconsider their supply chain, including rethinking their import and export strategy to meet customer demands.

Businesses who are familiar with the tariff concessions available under many free trade agreements are benefiting from the duty-saving opportunities when switching between manufacturing countries or changing shipping routes.

However, changes to the supply chain can create additional complexities for trade compliance, particularly the valuation of products.

For exporters

Inland Revenue has provided an extension to the standard period for zero-rating of exported goods. Generally, a supply of goods is only zero-rated for GST if the goods are exported by the supplier within 28 days of the time of supply. However, businesses affected by COVID-19 will have a three month extension to the 28-day period for export without needing to make an application to Inland Revenue. The three month extension starts on the day the 28-day period expires, and applies to a supply of goods up to and including 31 July 2020.

NZTE also has a dedicated website, https://covid19.nzte.govt.nz/, that provides information to help exporters mitigate the impacts of the COVID-19 pandemic.

For importers

The Government has approved two tariff concessions for products critical in the fight against COVID-19 (soap and COVID-19 testing kits). Also, if importers are unable to pay customs duty and/or GST on time due to the impact of COVID-19, there may be some relief available. Customs will consider options for importers on a case-by-case basis.

Where an importer is altering or considering altering its supply chain, consideration should be given to the changes introduced by the New Zealand Customs and Excise Act (CEA) that were effective 1 October 2018. Some of those more notable changes include which sale should be valued for customs purposes (where there are multiple transactions in a supply chain), and how to treat changes to the value of imported goods.

Changes to the ‘price paid or payable’ used for valuation purposes can change due to a number of reasons, including:

• Royalties paid in relation to the imported goods before or after the import of goods;

• Details of freight and warehousing costs not being available at the time of import;

• Additional commissions paid or rebates received in relation to the imported goods after the import of goods;

• Transfer pricing adjustments that would adjust the value of the imported goods.

Provisional Value Scheme (PVS)

The PVS applies to importers who operated under the previous uplift programme or to importers who cannot determine the customs value of imported goods at the time of importation or expect that the customs value will change after importation.

If an importer is not enrolled in the PVS, and later discloses a revised customs value (whether voluntarily or not), the importer may be at risk of being exposed to penalties and compensatory interest (even if only GST applies).

PVS registration

Importers need to determine if the provisional value scheme is appropriate for their circumstances. If so, importers will need to determine if they automatically qualify and therefore only need to notify customs, or whether the importer needs to apply in order to use the scheme.

PVS compliance

If you are enrolled in the PVS, you must provide customs with a “final value” within 12 months of the end of the financial year in which your provisional values were made. For example, if you have a year-end of 31 March 2020, you have up to 31 March 2021 to declare your final customs value for all of your imports made for that income year. The duty balance is then paid or refunded and no compensatory interest is charged on the difference between provisional duty and the final duty.

What to do if you think you need to register for the PVS?

If you are an importer and you make post-importation adjustments to your customs values or you cannot accurately determine the customs value of your goods at the time of import, you will likely need to enrol in the PVS.

If you have any questions about the PVS enrolment, please get in touch with the authors or your usual Deloitte advisor.

Jeanne du Buisson Jonathan Doraisamy

Director – Tax Director – Tax

Deloitte

Phone: 09 303 0700 l Web: www.deloitte.co.nz

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