Terms of Sale on a Commercial Invoice

          Terms of Sale, or Terms of Delivery are most commonly referred to as Incoterms (International Commercial Terms) these days.  Terms of Sale simply must be reflected on the commercial invoice for Customs purposes. 

          Customs treat Delivery Terms somewhat differently from the conventional intention. 

          In South Africa, SARS Customs have retained the FOB (Free On Board) point for Customs duty purposes. This point affects the transaction value, which is the Customs value. 

          Therefore, all costs, charges and expenses incurred in the international sales transaction up to the FOB point (the point when the goods are laden on board the vessel or aircraft) must be included in the Customs value.  These are referred to as dutiable charges. Conversely, all costs, charges and expenses which occur beyond the FOB point, may be excluded from the Customs value. These are referred to as non-dutiable charges.

          In other words, if you have an EXW (Ex Works) invoice, then you must add all “dutiable” charges up to the FOB point in order to get to the Customs value. Likewise, if you have a CIF (Cost Insurance and Freight) invoice, then you may deduct all “non-dutiable” charges such as freight and insurance, up to the FOB point.

          A general rule of thumb is to take whatever the Incoterm is on the commercial invoice, and simply to work your way toward the FOB point (by adding or deducting), unless the Incoterm happens to be FOB. Even so, always be sure to check that all charges on FOB invoices are accounted for. 

          This issue is also impacted by the controversial subject of freight statements, which will be the topic of one of my next blogs. 

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