OVERHAUL OF DIESEL REFUND SYSTEM ~ FISHING INDUSTRY NEWS (MARCH 2020)


OVERVIEW

On 31 January and 4 February 2020, the South African Revenue Service (SARS) published for comment a draft rule and schedule which bring about substantial amendments to the diesel refund system (DRS). Comments on such draft were due on 16 March 2020 and various industry stakeholders have submitted comments.

Over the last at least 5 (five) years, there have been several interactions and workshops with SARS regarding changes to the DRS and SARS must be commended for taking into account these discussions as well as representations made during appeal processes, and for putting out a draft proposal. A high-level overview of the draft rule and replacement note 6 must be commended in that:

• There appears to be a definite attempt by SARS to deal with issues that have been raised by industry.

• One of the key issues in the past was the linking of the diesel rebate system to the VAT system and the prejudice and complications which that caused industry in general. This new
proposal delinks the DRS from the VAT system and the new system will be a standalone system.

• To make the new system more convenient, application and returns can be submitted online once a user has registered a profile and uploaded the necessary documentation.

• Certain contentious provisions under the current note 6 are going to be replaced. For example, the “wet” and “dry” contracting provisions are to be deleted.

• The new provisions do allow for a more simplified logbook and in this regard, it is hoped that the proposed logbook by FishSA is implemented.

• Although on the face of it, the process appears to be more simplified and efficient, there are a number of issues which need to be ironed out or clarified in the amendment process.

Issues still to be ironed out

It is not entirely clear whether existing users who are currently registered must re-register as well as creating a user registration profile.

Although the new system is to be delinked from the VAT system, in terms of other provisions of other customs and exercise provisions, SARS could still set off diesel refund claims against other taxes due by the user.

With the wet and dry contract provisions to be deleted, the new proposal does require some further clarity regarding whether a user can contract a vessel to catch and in terms of such contract purchase the diesel and thereafter claim the diesel refunds. The current system does allow for vessels to be owned or charted.

In terms of the online user profile, there is information to be uploaded by the user including the details of catch permits and contracts with rights holders and vessel owners in respect of the carrying out of the catching function. This needs to be updated within 14 (fourteen) days according to the proposal which may be too short a period taking into account the relevant sectors involved.

Again the claiming of diesel refund is only in respect of South African vessels fishing in South African waters. As there are certain instances where South African vessels catching on South African permits/licenses can fish in the high seas, it would be ideal for the new provisions to have an exemption section which allows for the commissioner to grant a dispensation in these particular circumstances.

Another proposed change under the amendment note 6 is that for a purchase of diesel to be eligible, it must be from a licensed wholesaler in terms of the Petroleum Products Act. This is currently not a requirement and it is anticipated that this proposed amendment will cause prejudice to a number of operators in the sector and SARS should relook at this part of the proposal.

Another issue is that the amendment provisions provide for offloading at a fishing harbor which is defined as a “declared fishing harbor” in terms of the Marine Living Resources Act (MLRA). However, not all offloading of fish occurs at declared fishing harbors and as such, SARS needs to relook at this additional requirement that has been inserted in its proposal.

Currently and in the proposal, the definition of fishing vessel is limited to vessels with inboard motors and excludes vessels with outboard motors. With the advent of the small-scale sector and the operators in this sector, it is suggest that SARS should look at also including vessels with outboard diesel motors.

It is also advised that the proposed definition of local fishing vessel be amended to cover both registered vessels and licensed vessels.

An important change in the proposal, is the list of qualifying fishing activity. Currently the activity of commercial fishing is linked to the definition of fishing under the MLRA. The new proposal set out its own qualifying fishing activity list which in fact limits the activities which are currently covered. For example, sailing from one harbor to another harbor in order to place one’s fishing vessel on the slip for say the 2 (two) year hull certificate survey would not allow for diesel to be claimed under these circumstances. Currently however this activity would fall under an “operation in support or in preparation of fishing” which would be allowed for diesel refund claiming. Only trial runs in respect of refits or repairs to a vessel are excluded currently. It is submitted that SARS should look to widening this aspect of use to be more consistent with the current position.

As regards transires, it would appear now that SARS recognizes that its previous requirement that there must be transires was not actually incorporated in the legislation and they have now incorporated a transire requirement for the claiming of diesel refunds. A technical point is that transires are strictly only required for registered vessels and not for licensed vessels. As such, there will also have to be changes to the transire rules to include transires having to be issued for licensed vessels if SARS is to follow the letter of the law.

As regards usage logbooks, as referred to previously herein, it is submitted that SARS should accept a simplified logbook which is based on the ship stop system where users measure the use of diesel based on the amount of diesel required at the end of a trip to top up the vessel’s tanks. There is reference to this in the proposed changes, but it is submitted this needs to be further clarified by SARS.

In conclusion, SARS must again be complimented for applying their mind and putting out proposed changes to the DRS. In addition it would be ideal at this point for SARS to hold a further workshop for stakeholders in order to refine and amend their proposal so that it can operate as a well oiled machine in the future.



KNOW YOUR COVER – HULL INSURANCE ~ FISHING INDUSTRY NEWS (MAY 2020)


INTRODUCTION

The nature of fishing vessels and their operations gives rise to a wide variety of risks and exposes the vessel and those that run the vessel to a number of different types of losses. Marine hull insurance being one of the oldest types of insurance has the purpose of limiting such risks and such losses, and is a means by which vessel owners can to a degree manage their risk.

Recent experience has indicated that sometimes vessel owners, their brokers and indeed the insurers are at odds as to what the insurance policy actually covers and how certain of the terms are to be interpreted. The general rule is that if the policy wording is ambiguous it should be interpreted in favour of the insured. But one shouldn’t have to get to this point if the process is started correctly.

 

THE BROKER

The intermediary who deals with the insurer is your broker and this is the person who consults with you, assesses your needs and obtains quotes from various insurers which are then presented to you for decision.

The experience of the broker in your particular industry is of vital importance and as such choosing the correct broker is likewise a pivotal decision in making sure you cover the hull risk of your business as best possible and at a reasonable premium.

Often brokers present a cryptic schedule with references to clauses and terms of cover which are not actually contained in the schedule or to any attached document. In those circumstances insist on the full policy wording before deciding on the insurance or at least ask pointed questions as to the cover which is being promised.

 

INSTITUTE CLAUSES

In the fishing industry, the clauses most often incorporated into policies are the institute fishing vessel clauses which form part of the standard policies of the International Underwriting Association of London often referred to as “institute clauses”. These clauses when read together with the English Marine Insurance Act of 1906 set out the ambit of your hull cover.

However, these clauses at times are not easy reading and it is important for you to understand what exactly is being covered. This is particularly so when often there are exclusions referred to in the policy schedule which are very briefly written and can be misleading.

One of the first and most obvious questions is: what is the cover of the policy (and in insurance terms what are the insured perils)? The institute clauses generally set out the main cover under 2 categories: firstly, the perils which are covered by the underwriter irrespective of a want of due diligence by the assured – it doesn’t matter if the insured has been negligent ; and secondly, the so called  “Inchmaree cover” which covers perils insured only if the assured has no want of due diligence – there is no cover if the insured is negligent.

the first category covers the following perils:

  • Perils of the seas, rivers, lakes or other navigable waters – the simple action of wind and wave which gives rise to wear and tear is not covered under this peril. What is covered is fortuitous or unexpected eventualities eg extraordinarily heavy weather. Cover under this peril is regardless of whether the assured or its servants have been negligent.

  • Fire and explosion – this cover is in place regardless of the negligence of the assured, assured servants or any third party;
  • Violent theft by persons from outside the vessel;
  • Piracy;
  • Breakdown of or accident to nuclear installations or reactors;
  • Contact with aircraft or similar objects, or objects falling therefrom, land conveyance, dock or harbour equipment or installation;
  • Earthquake, volcanic eruptions or lighting;

The second category being the inch Maree perils only provide cover if there was no want of due diligence from the insured. These perils are briefly as follows:

  • Accidents in loading, discharging or shifting catch, fuel or stores;
  • Bursting of boilers, breakage of shafts or any latent defect in the machinery or hull (ie machinery breakdown);
  • Negligence of master, officers, crew or pilots – this cover applies even if for instance a master who was negligent owns shares in the vessel;
  • Negligence of repairers or charterers provided such repairers or charterers are not an assured under the policy;
  • Barratry of masters, officers or crew – this is the willful or intentional causing of harm to the ship owner by the master, officers or crew.

There is also other miscellaneous cover under the institute clauses such as:

  • Pollution Hazard cover;
  • General average and salvage under certain conditions;
  • Wages and maintenance of crew during the period of repairs;
  • Sue and labour cover for expenses incurred by the insured to try minimize loss;
  • Collision liability – this is liability of the insured to third parties arising from a collision (subject to certain exclusions);
  • Certain protection and indemnity cover for liability to third parties;

EXCLUSIONS

Along with enquiring from your broker exactly what is covered by the policy, the next important query is to ask what exclusions to cover there may be. It should be insisted that these exclusions are made clear in the policy wording and/or the quote before you accept the cover offered.

WARRANTIES

In addition, one should ask whether there are any warranties in the policy which are given by the insured to the insurer particularly regarding seaworthiness of the vessel and/or compliance with maritime legislation. One does not want a strict warranty in your policy which the insurer can rely on to void the policy even though the subject matter of the warranty is not related to the cause of loss.

DISPUTE RESOLUTION

Finally make sure that you know what law is applicable to the policy and what is the dispute resolution mechanism applicable. It must be a mechanism that is convenient and affordable for the insured.

In fact nowadays it would be prudent for both the insured and the insurer in fact to agree an arbitration clause in the policy which allows for local arbitration in South Africa and preferably agreed maritime arbitration – which is about to be launched in South Africa where experienced maritime lawyers are used as arbitrators in maritime matters without the need for lengthy court proceedings.

CONCLUSION

In a fishing operation a fishing vessel is one of the major assets of the business and is the asset which is placed in the most dangerous position almost on a daily basis. Knowing that you have the correct cover in place is therefore paramount to any business owner. So when renewing or placing cover over one’s vessels, set aside a specific time every year where you can meet with your broker and other operational staff within your business to discuss and agree on the type of cover you require so that there is no misunderstanding when a claim arises in the future.



2017 CAPE ARGUS PICK ‘N PAY CYCLE TOUR – RED CROSS CHILDREN’S HOSPITAL


NEWSFLASH

 

Dear Clients, colleagues, friends and acquaintances:

 

It’s that time of year again. Every year since 2012 to date Peter has been cycling the Argus to raise funds for the Red Cross Children’s Hospital ( the Children’s Hospital Trust) – actually in 2013 his daughter rode on his behalf , duly authorised with a written mandate J.

 

Thanks to the generosity of all of you, over the years Peter has been able to raise substantial donations for this worthy charity which provides such essential medical care to children from disadvantaged backgrounds.

 

Every year being in contact with the exceptional people (always with broad smiles like their logo) at the Children’s Hospital Trust and being able to contribute towards this worthy cause is an experience which Peter treasures and is a highlight of his year.

 

On Sunday 12 March 2017 he will be  back in the saddle cycling again for The Red Cross Children’s Hospital (The Children’s Hospital Trust). This is yet another plea to all for support of a worthy charity by sponsoring Peter in the cycle of the 2017 Cape Argus Pick n Pay Cycle Tour. Any level of sponsorship would be greatly appreciated as it all counts – we realise things are tight out there but even small amounts all add up in the end.

 

If you are able to sponsor please can you reply to this email with the amount you are pledging and we will contact you “to collect” after Peter has  completed the race.

ARGUS PIC



MARINE SPATIAL PLANNING – REZONING OUR OCEANS ~ JUNE 2016


Marine Spatial Planning – rezoning our oceans 

 

On 24 March 2016 in Government Gazette No. 39847 under Government Notice No. 347 the draft Marine Spatial Planning Bill (“the MSP Bill) was gazetted by the Minister of Environmental Affairs for public comment. This public comment process expired on 23 May 2016.

Marine Spatial Planning (“MSP”) is defined by UNESCO as a public process of analysing and allocating the spatial and temporal distribution of human activities in marine areas to achieve ecological, economic and social objectives that usually have been specified through a political process.

 

The intent of MSP is to create and establish a more rational use of marine space by the various users thereof in order to balance the usage requirements on the marine environment and to protect the marine environment, while achieving both social and economic objectives. A brief perusal of past academic papers regarding MSP indicates that MSP has been effectively employed since the 1990’s and various states have been encouraged to adopt MSP in regulating their marine environments. Within the European Union the initial framework for the development of MSP’s was created in 2007 with a Marine Strategy Framework directive issued in 2008 which required member states to develop MSP’s by 2020. There appears to be much support for MSP’s particularly from environmental NGO’s and alternative energy producers with little recorded feedback from the fishing industry. According to UNESCO MSP occurs in Asia, Australia, Europe, the Middle East and the America’s. Interestingly enough South Africa is listed on the UNESCO MSP list together with Seychelles, Namibia, Cambodia, Thailand, Denmark, Finland, Iceland, Russia, Isle of Mann, Bahrain, UAE, Israel, Barbuda, Belize, Columbia, Costa Rica, Granada, Mexico, St. Vincent in the Grenadines and various other Islands as all being entities which will have the MSP legislation in place in 2016. The sheer volume of countries ostensibly having their MSP legislation in place in 2016 suggests an International undertaking to do so.

It is also interesting to note that in terms of Operation Phakisa the creation of Ocean Governing Legislation is listed as a key performance indicator (KPI) and in particular the development of MSP legislation is specified. According to the deadline set for Operation Phakisa the draft MSP Bill will be published for public comment by the end of January 2016 and taken to Parliament at the beginning of December 2016 for promulgation as an Act by the end of June 2017. This does not tie in with the UNESCO expectations but is obviously a more accurate indicator of the expected timeline for the promulgation of the Act by Government.

On the whole it appears as though MSP is accepted as being principally environmentally driven hence the bill being an initiative of the Department of Environmental Affairs (“DEA”).

 

The MSP Bill itself was particularly poorly drafted and suggested that the draft was submitted for public comment more in order to comply with the operation Phakisa KPI’s than as a well thought out document. The MSP Bill contained a number of errors and short comings with a particularly poor definitions section which contributes to an overall lack of clarity as to how the proposed end product was supposed to operate and be applied. Amongst the particularly concerning issues that arise in the MSP Bill is the statement that the MSP Act will effectively trump all other legislation when it relates to Marine Spatial Planning. The trumping provision is quite clear, but what the Government will determine to be in conflict with Marine Spatial Planning is not as clear. In addition, and equally concerning, there appears to be very little opportunity for interested and affected parties to object to the development of the overarching Marine Spatial Plan and the MSP Bill itself does not contain any internal appeal procedure. This of course does not allow an affected party (including the Fishing Industry) any voice in the process other than through inclusion in a public comment process. The Fishing Industry has good reason to be suspicious of public commentary processes as it has witnessed how little credence its comments have been given in respect of policies adopted in the 2005, 2013 and 2015 Rights Allocation Processes.

While the contents of the draft Bill are extremely unclear and create much uncertainty, the motivation behind the push for a Marine Spatial Planning Plan is far less unclear. European Union literature relating to Marine Spatial Planning suggests that the primary motivation for the implementation of a Marine Spatial Plan is revenue. The EU indicates that an effective Marine Spatial Plan will result in lower co-ordination costs between Government in all departments, lower transaction costs and, most importantly an enhanced investment climate. In a 2013 European Parliament briefing it was suggested that an effective Marine Spatial Plan could accelerate investments in aquaculture and alternative energy creation of up to €1.6 billion. Closer to home the Socio-Economic Impact Assessment System (SEIAS), which was referenced in the Government Gazette, suggested that the Ocean Economy could contribute as much as R177 billion to the economy of the country with an excess of 800 000 jobs being created by 2023.

More concerning appears to be the attitude that the Fishery Industry is at best static, and at worst a declining source of employment and revenue for the country especially in the light of declining TAC’s. The push in the Ocean Economy is clearly high lighting offshore mining and the obvious potential impact of a Marine Spatial Plan would be the designation of certain areas of the ocean as being for the exclusive use of mining. This could very well include traditional fishing grounds which would of course have a derogatory effect on the fishing industry. What is most concerning is that this trade off may be seen by the Government as an acceptable loss given the potential gain.

 

It clearly stands to reason that the fishing industry needs to keep a very close watch on the development of this particular piece of legislation and to ensure that as many safe guards as possible are entrenched in the final Act or its regulations. Many may view the introduction of this bill as a short sighted approach to jeopardize actual existing employment and investments that contribute to the economy of the country in favour of potential investments and jobs that could possibly be created.

Unfortunately the draft MSP Bill has been so poorly drafted that it effectively creates more uncertainty and raises more questions than sound solutions. Let us hope that DEA will consider seriously the comments submitted by various industrial bodies and role players in the fishing industry, and in the future republish a substantively amended and more coherent version of the bill for public comment. Until that time we would recommend that this issue be considered in a very serious light by all the role players in the South African Fishing Industry.



FISHING INDUSTRY NEWS – APRIL 2014


SECTION 13(4) OF THE MLRA – ABUSE OF POWER?

 

Section 13(4) of the Marine Living Resources Act states as follows:

“A permit to exercise an existing right in terms of this Act maybe refused if the conditions of a previously issued permit had not been adhered to”

In a number of instances where this provision has been applied by the Department we are left contemplating whether this provision is being abused or in fact is in breach of rights holder’s constitutional rights.

 

Requests for the return of permits already issued

Certainly a clear abuse of this provision is where the Department requests in writing for a permit holder to return a validly issued original permit quoting Section 13(4) as the section justifying such request.  Section 13(4) only provides for the refusal to issue a future permit but does not give powers to the Department to revoke an already issued permit. In fact, Section 28 of the MLRA provides specifically for the cancellation and suspension of permits. However, this is subject to a specific notice issued to a permit holder which allows a period of 21 days for the permit holder to make representations as to why the permit should not be cancelled, suspended or revoked.  The Minister then has a discretion to either revoke the permit, suspend the permit, cancel the permit, alter the conditions of the permit, or alternatively decide not to revoke, suspend, cancel or alter the permit.

Accordingly, if the Department requests the return of a permit quoting section 13(4) then this request falls outside the powers conferred by such section and is a legally invalid request.

Section 28(4) in addition gives the Minister an overriding power which states as follows”

 

“The Minister may whenever he or she is of the opinion that it is in the interest of the promotion, protection or utilisation on the sustainable basis of a particular marine living resources, at any time by written notice to the hold of a right license or permit, revoke, suspend, cancel or reduce that right license or permit”.

Refusal to issue a permit

When the Department refuses to issue a permit on the basis of Section 13(4) in effect it is stating that in the Department’s view there has been a breach of a previously issued permit. Following from this,   Section 58(1)(a)(ii) of the MLRA provides that a contravention of a permit condition is an offence and liable on conviction to a fine not exceeding R2, 000 000.00 or to imprisonment not exceeding 5 years.

Therefore in implementing Section 13(4) the Department makes a decision that a rights holder has committed an offence in terms of the MLRA. Based on this decision the Department then refuses to issue another permit.  A draconian administrative sanction is brought against the rights holder without the rights holder being given the opportunity of defending itself against such charges.

 

Unfair Administrative Action

 Firstly, at the very least the affected rights holder is entitled to procedurally fair administrative action as contemplated under the Promotion of Administrative Justice Act (PAJA). This would include: adequate notice of the nature and purpose of the proposed administrative action; a reasonable opportunity to make representations; a clear statement of the administrative action; adequate notice of any right of review or internal appeal; and adequate notice of the right to request reasons for the decision. In addition it is submitted that the decision maker should also give the rights holder an opportunity to obtain legal representation and/or to present and dispute information and arguments.

Breach of other constitutional rights

Secondly, it is submitted that there is a strong argument that the provisions of sect 13(4) are breach in breach of or give rise to a breach of certain other constitutional rights. In this regard, in terms of Section 35(3) of the Constitution every accused person has a right to a fair trial.  The rights holder would be an accused person in that sect 13(4) relies on an alleged offence under the MLRA for its implementation. The right to a fair trial in turn includes a number of rights. In particular the right of an accused to be presumed innocent, to remain silent, not to testify during the proceedings and not to be compelled to give self-incriminating evidence.

In many cases involving the implementation of Section 13(4) the Department does not institute criminal proceedings (certainly not immediately) and a rights holder is faced with having to either appeal the decision or make written representations to the Department regarding the alleged offence – this would be after the decision to refuse the issue of a permit has already been made.  As such it is submitted that the right holder’s constitutional rights (as referred to above) are placed in breach, including the right to fair administrative action.

Is the aforesaid limitation of constitutional rights justified by the provisions of Section 36 of the Constitution?

Section 36(1) states as follows:

“The rights in the Bill of Rights maybe limited only in terms of law of general application to the extent that the limitation is reasonable and justifiable in an open and democratic society based on human dignity, equality and freedom taking into account all relevant factors, including –

(a)          the nature of the rights;

(b)          the importance of the purpose of the limitations;

(c)           the nature and extent of the limitations;

(d)          the relation between the limitation and its purpose; and

(e)          less restrictive means to achieve the purpose.”

 The argument in favour of limiting a right holder’s constitutional rights (in terms of Section 13(4)) would be that this is necessary in order to protect other constitutional rights.  Such as “the right to have the environment protected for the benefit of present and future generations through reasonable legislative and other measures that:

(i)            Prevent pollution and ecological degradation;

(ii)           Promote conservations; and

(iii)          Secure ecologically sustainable development and use of natural resources while promoting justifiable economic and social developments.”

 

However, the MLRA provides for other means to achieve the protection of the “environmental constitutional right” and therefore there is no justification for the wide draconian powers under Section 13(4).  In particular, as stated previously, Section 28 provides for the revocation of permits which have been issued, and sets out an administrative process which provides for representations to be made and a discretion as to the sanction (if any) to be applied by the Minister.  Furthermore, Section 28(4) already gives the Minister a wide power “in the interests of the promotion, protection or utilisation on a sustainable basis of marine living resources” on written notice to the holder of a permit to revoke, suspend or cancel such permit.

In addition, the enforcement provisions of the MLRA also provide legal means to protect the environment where vessels operating on permits can be detained /seized.  Even in these circumstances the provisions of the MLRA allow for security to be furnished for the release of such vessels.

Conclusions

Bearing in mind these other legal mechanisms available under the MLRA and the severe consequences of a permit revocation on a right holder, it is submitted that Section 13(4) of the MLRA is disproportional in its effect.  In other words the breach of the right holders’ constitutional rights far outweighs the purpose of this section.  Accordingly, the submission is that the limitation of constitutional rights caused by the implementation of Section 13(4) is not justified and therefore the section is unconstitutional.

In summary, right holders faced with notices in terms of Section 13(4) should not react in a knee jerk fashion but should take considered legal advice particularly regarding their rights to fair administrative action and in particular whether their constitutional rights are being breached in the circumstances.