No Diversion, No Penalty: Glencore’s Import Entries Upheld

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CSARS v Glencore International AG (A138/2023; 34490/2021)

Background

In 2016, Glencore imported copper/lead consignments into South Africa using clearing agents. The goods were first declared as "for export" (WE – warehouse entry) and then later reclassified as "for local use" (DP – duty paid). SARS claimed Glencore misled customs, diverted goods illegally, and owed R9.2 million, including VAT, penalties, and an amount in lieu of forfeiture.

What Was Disputed?

SARS claimed that Glencore used duplicate entries to reduce VAT liability. Glencore, however, argued it corrected the entries with valid “vouchers of correction” (VOCs). SARS didn’t accept the corrections, insisted the goods were “diverted,” and sought penalties.

The Judgment (Pretoria High Court, Full Bench):

SARS’s appeal was dismissed by the High Court. Consequently, SARS must pay Glencore’s legal costs, including those of two counsel. Key rulings included:

• The High Court ruled that the entries were corrected appropriately using VOCs. Consequently, no “diversion” happened, the goods were processed and then exported, just with a detour.

• VAT was already paid by Glencore, so SARS’s demands for VAT, penalties, and forfeiture were set aside.

• The court said SARS took an overly strict, formalistic approach and misapplied the Customs Act.

Lessons Learnt

• VOCs are valid if they correct errors in purpose or classification, even if submitted after the fact.

• SARS cannot impose penalties or forfeiture where there's no financial loss to the fiscus.

• The ruling reinforces a practical, purpose-driven interpretation of customs law over rigid formality.