Samples Archives

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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Quite simply, one may not clear goods moving in to or out of South Africa through Customs without the existence of a commercial invoice.

The new Customs legislation states that the contents of an invoice must be a “true reflection” of the goods being imported or exported.

This concept is important especially when dealing with samples of no commercial value, goods being supplied free of charge or replacement stock. Customs still wants to know what the goods are and what value such goods would be – as if in a commercial undertaking. The purpose obviously is to establish the correct duties and taxes which must be paid. Some of these issues will be discussed in the blogs which follow.

The concept a “true reflection” introduces another concept covered in the legislation namely, “the amount paid or payable” for the goods. The amount paid is the actual amount paid in the commercial transaction. The amount payable is the amount that would have being paid if any goods that were supplied at no charge were charged. The meaning of the concept “transaction value” is inclusive of the latter explanation; again, for duty purposes.

When it comes to duties, Customs wants its pound of flesh so to speak.

In a nutshell, whether the goods are charged for or supplied free of charge, or even discounted, a true reflection of the goods and their values must be present on the commercial invoice at all times.

Minimum requirements on a commercial invoice in terms of the Customs Control Act number 31 of 2014 and the SARS Valuations on Imports Guide (SC-CR-A-03) generally include:

a. Nature of the Transaction.

b. Goods to which it relates.

c. Amount (price) paid or payable.

d. Currency.

e. Goods marks and numbers, i.e. part numbers.

f. Description of the goods.

g. Any propriety or trade name of goods.

h. Invoice number and date of issue.

i. Name and address of issuer.

j. Name and address of the buyer (and the consignee if different from the buyer).

k. Any commission, discount, cost, charge, expense, royalty, freight, tax, drawback, refund, rebate, remission or other information which affects the value of the goods.

l. Freight and insurance where applicable.

m. Must be in the official language.

n. Country of origin.

o. Weights and quantities.

p. Forward exchange contract particulars (for Rand invoicing).

The last invoice issued in respect of the goods must be supplied and used for clearance purposes, i.e. if there is more than one invoice issued for the goods. This would generally apply where buying and selling agents are involved.

Any change in invoice particulars must be accompanied by an amended invoice, debit or credit note. Such changes must be communicated to Customs with the use of a VOC (Voucher of Correction) if the goods have already being cleared.

Interestingly, the Customs Control Act makes mention of a “secret discount” in any form, a term not officially used before. These must also be reflected on the invoice.

Tag: Samples

Samples and the Commercial Invoice