The respondent, Coltrade International CC, imported coconut milk, coconut cream, and coconut powder into South Africa. Since March 2005, SARS had issued a 'half-slip determination' classifying these products under tariff heading TH2008.19 of Schedule 1 to the Customs and Excise Act 91 of 1964. For approximately seven years, SARS cleared the imports under this tariff heading. In 2012, SARS officials in East London decided that canned coconut milk fell within tariff item TH2106.90.90 instead. The Commissioner subsequently made tariff determinations on 8 May 2012 and 19 October 2012 confirming this new classification for all the coconut products. The respondent appealed this determination to the High Court, which ruled in its favour that TH2008.19 was the correct tariff heading. SARS appealed to the Supreme Court of Appeal. The products are manufactured by crushing mature coconut meat (endosperm) into liquid form, with water and minimal emulsifiers and stabilizers added to produce coconut milk or coconut cream, while coconut powder is produced by removing water from the liquid endosperm. All products retain the essential characteristics of coconut.
The appeal was dismissed with costs.
For purposes of tariff classification under the Customs and Excise Act, goods that have been processed by crushing to extract liquid, where such processing retains the essential organoleptic characteristics of the original product, fall within tariff headings covering 'crushed' preparations of that product. The ordinary grammatical meaning of 'crushed' includes extracting liquid by pressing or squeezing, and encompasses products in emulsion form. The removal of inedible components and addition of minor amounts of substances (such as water, emulsifiers, and stabilizers) that enhance rather than alter the essential character of the base product does not remove the goods from the applicable tariff heading. Classification is determined by the objective characteristics and properties of goods as they are imported.
The Court noted with some criticism that SARS attempted to argue coconut powder should be treated differently from coconut milk and cream, despite having placed on record in its answering affidavit that it accepted all three products were essentially the same and could be treated the same for classification purposes, stating this 'does not redound to SARS's credit'. The Court also recorded that SARS had conceded, due to the history of the half-slip determination, that even if the appeal succeeded, it would only regard the new tariff determination as effective from February 2012 for coconut milk (10-11% fat) and October 2012 for other items, treating the interim period as if the TH2008.19 determination had been correct.
This case establishes important principles for the interpretation and classification of goods under the Customs and Excise Act's tariff schedule. It clarifies that: (1) the decisive criterion for customs classification is the objective characteristics and properties of goods; (2) processing that retains the essential character of the base product does not remove it from the applicable tariff heading; (3) the ordinary grammatical meaning of terms like 'crushed' should be applied, informed by dictionary definitions; (4) liquid preparations and emulsions are not excluded from tariff headings covering prepared nuts unless specifically excluded; and (5) the addition of minor substances that enhance rather than alter character does not change classification. The judgment provides guidance on how courts should apply the Harmonised System and explanatory notes when interpreting tariff classifications, balancing technical precision with ordinary meaning.