Graeme Lennie, Author at The Customs Hub

Samples and the Commercial Invoice

Posted by Graeme Lennieon April 3, 2017June 20, 2025in Commercial InvoicesLeave a comment

The aspect of “Samples” has to do with Customs Valuation, i.e. the value of the goods for Customs duty purposes. This affects the rate of Customs duties and VAT. We question whether a supplier may show “Samples” on a commercial invoice as FOC (Free of Charge). Moreover, we question whether the actual value of “Samples” must be shown on the invoice.

Pro-Forma Invoicing

Should samples be specified on a Pro-Forma invoice rather than the Commercial invoice? Before we move on, let me confirm that, it really does not matter. So long as samples are correctly cleared for Customs duty purposes. Pro-forma invoicing was discussed in the blog titled… “Pro-forma Invoices for Customs Purposes”.

Samples Supplied Free of Charge

Samples supplied FOC (Free of Charge) must be shown on the commercial invoice. This is mandatory.

The value of samples (if supplied free) must also be shown. The value must be realistic, i.e. as if one is going to import them as “paid” goods.

Not wishing to sound contradictory. One may show a “zero” value in the body of the invoice. Still, the invoice must be supplemented with certain endorsements lower down on the invoice.

There are three endorsements which are mandatory for a Commercial Invoice to be accepted by Customs.

These Endorsements Are:

“Goods Supplied Free of Charge – Value for Customs Duty Purposes Only”
The “actual” value of the samples must be specified, and
The reason or reasons why the goods are supplied Free of Charge.

The reasons for goods supplier Free of Charge might include, for example:

Samples for Testing Purposes
Samples for Demonstration Purposes
Samples for Promotional Purposes.

Samples with Nominal or Negligible Values

There are a few occasions where samples may attract a nominal or negligible value. Nominal values may be shown on the invoice under certain circumstances.

The major one to note is where samples are mutilated, or destroyed. For example. If you import footwear with a hole drilled through the sole of the shoe, a nominal value may be utilized. The shoe is rendered worthless. The hole should be the size of a 50c coin to prove mutilation. The shoe must clearly be marked as “Sample“.

The absence of “mutilation“, and the absence of a proper value may be problematic. SARS will want to use alternative methods to value the samples. These include for example, the value of identical goods, or the value of similar goods.

Under these circumstances Customs will request three quotations on the local market. The higher of the three will be used as a benchmark to value the goods for clearance purposes. If the values are proven to be under declared, duties, VAT and penalties may be called for.

So, the best advice is to simply assign a realistic value to samples and the commercial invoice

Unless you import samples in very large quantities, samples are most often a small and negligible issue. Starting a valuation investigation with SARS Customs will merely attract unnecessary costs and inspection fees.

Types of Goods with No Commercial Value

Again, negligible values may be shown on the invoice if the goods are of no commercial value.

Here are further examples:

Mutilated Goods: Items that have been damaged to the point that they can’t be sold
Raw Materials and Demonstration Items: Products like yarn, fabrics, paper, wood, metals, and stones. Also those that are either cut into small sizes or have dimensions making them suitable only for demonstration purposes
Small Accessories: Items like nails, buttons, and buckles that are made from non-precious materials. Also those that are presented as samples on cards, with no more than one of each type
Marked or Mutilated Raw Materials: Goods including wood, cork, paper, and various fabrics that are made useless for sale. These are due to permanent markings, damage, or being glued together for demonstration purposes
Non-Consumable and Consumable Goods: Products displayed as samples with a value not exceeding R 10.00 for non-consumables (e.g., lighters, pencils) and consumables (e.g., food and beverages) that are used up during demonstrations.

The Customs authorities may consider whether samples fall under the category of commercially negligible items.

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Terms of Sale on a Commercial Invoice

Posted by Graeme Lennieon March 20, 2017January 2, 2017in Commercial InvoicesLeave a comment

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.

Rand Invoicing

Posted by Graeme Lennieon March 6, 2017March 12, 2017in Commercial InvoicesLeave a comment

This seemingly complex subject is rarely understood. Getting it wrong can lead to un-necessary risk which is easy to avoid.

While risk is normally of a financial nature, the administrative burdens of getting it wrong can also be overwhelming to importers.

Using a foreign suppliers Rand invoice is generally acceptable for Customs clearance purposes. However, there are certain conditions according to the SARS Valuations Policy SC-CR-A-03 dated 24 January 2014 for using Rand invoicing namely:

The Rand price must be concluded in a Forward Exchange Contract
The rate must be negotiated between un-related parties

According to the policy, Rand invoicing is not accepted when:

The foreign currency was converted at a fixed rate of exchange
The conversion rate was negotiated between related importers and suppliers

The latter circumstances may however be accepted by Customs provided it is accepted in a VDN (Value Determination) issued by SARS. A VDN issued but where the Rand values were not accepted, will contain an alternative course of action which must be followed when clearing goods, i.e. a mark-up on the Customs value or set criteria for converting the currency.

When applicable, the Forward Exchange Contract number, date and rate concluded must be specified on the commercial invoice.

Now, here is the seemingly complex part. Where no Forward Exchange contract or number exists but where the rate was fixed, the invoice must contain the concluded rate. Here are the steps which must be followed by the Customs Clearing Agent when fixed rates are used:

Step 1: Convert the Rand amount back to the foreign currency using the fixed rate on the invoice;

Step 2: Re-convert the foreign amount back to Rand using the official SARS rate of exchange, i.e. using the FOB (Free On Board) date.

It is that simple, but evidence must always be available. If the invoice contains both Rand and foreign amounts, then merely use the foreign amount.

Invoice Declarations

Posted by Graeme Lennieon February 20, 2017January 2, 2017in Commercial InvoicesLeave a comment

Trade Agreements (to which Invoice Declarations relate) are a topic on their own. One agreement which may be specified on the commercial invoice (in lieu of using a Certificate as proof) for preferential duty purposes is the EU (European Union) Trade Agreement. This agreement was established between the EU and certain countries in the SADC (Southern African Development Community).

The EU Trade Agreement was changed on 10 October 2016. It was previously known as the TDCA (Trade Development and Co-Operation Agreement). Today it known as the SADC-EPA (Economic Partnership Agreement). This agreement now includes not only South Africa but also Botswana, Lesotho, Namibia, Swaziland and Mozambique on the SADC side, as participants.

Invoice Declarations also apply to the agreement between the EFTA (European Free Trade Area) countries and South Africa.

The use of Invoice Declarations is allowed by exporters who are approved by the Customs authority in the export country; to insert an Invoice Declaration on the commercial invoice. This may be applied in lieu of the EUR1 (EU) or EFTA Certificates respectively.

Approved exporters are issued with an Authorisation Number by Customs. This number must be inserted into the Invoice Declaration when used. It applies to invoices where the total value of originating products in the consignment is EUR 6,000 or more. Consignments with originating products valued at less than EUR 6,000 do not require the Authorisation Number although the invoice declaration may still be used, i.e. by exporters who are not approved.

An invoice declaration may only be used on a commercial document such as an invoice, packing list or indent order. SARS does not accept invoice declarations to be used on blanket supplier’s declarations covering multiple shipments or on correspondence of any sort.

Third Party Invoicing

Posted by Graeme Lennieon February 6, 2017January 2, 2017in Commercial InvoicesLeave a comment

The golden rule when third party invoicing is involved in international trade consignments is to “use the last invoice”. Third party invoicing refers to invoices issued by a third party, i.e. a buying or selling agent.

But why is it important and what are the implications of not taking the most recent invoice into account?

It has to do with commissions. Commissions according to the SARS policy on Valuations (SC-CR-A-03 dated 24 January 2014) is when an intermediary acts on behalf of either the supplier of the goods (selling commission) or the importer of the goods (buying commission). Third party invoicing may also include other costs, charges and expenses as a condition of the sale.

Commissions and other expenses influence the Customs value of goods imported and hence, the amount of duty and Vat payable to SARS.

The last invoice issued in the trade transaction would (or should), in addition to the original price paid or payable, include all commissions, costs, charges and expenses on the invoice. This does not mean that such commissions must always be included when calculating the Customs value for duty purposes. Buying Commissions are often accepted by Customs (and hence deductible) provided these are “bona fide” buying commissions.

Occasionally when multiple invoices are involved, confusion may exist over which invoice should be used for Customs clearance purposes.

A personal piece of advice is to obtain copies of all invoices involved in the transaction. Analyse the value of each and explore the invoice with the highest value. If Commissions or other expenses are reflected on a separate invoice altogether, then these too must be considered for inclusion.