Question 001: My buyer ‘B’, is in France and they trade on a  Merchanting basis, that is to say they buy from me ‘A’ in South Africa and sell to a third-party ‘C’ in another country. Recently they placed an order with me ‘A’ to ship one container from South Africa, directly to their buyer ‘C’, who was, in this case, in Costa Rica.
My sales term with my French buyer ‘B’ is ‘CFR Puerto Limon, Costa Rica, as defined in the ICC’s Incoterms 2000.
On shipment I was paid against my on-board bill of lading, by buyer ‘B’, who thereafter issued their final commercial invoice and shipping documents to their client ‘C’ in Costa Rica. My buyer ‘B’ sold to ‘C’ on a ‘CIF Puerto Limon’ Incoterms 2000 basis. Note that my buyer ‘B’ is shown as the shipper on the carrier’s bill of lading.
Cargo to Costa Rica transits via the USA where it was randomly stopped for examination as part of the USA anti-terrorism program. When the container did finally arrive in Costa Rica, the consignee ‘C’ was asked by the carrier to pay an additional USD 965.00 for the USA examination, before the carrier would release the container.
My question is; who should bear the cost of the examination in this case? Would it be the original seller i.e. my company ‘A’, or would it be my client the French company ‘B’, or should it be their buyer ‘C’, in Costa Rica?

Answer 001:
To answer this question we need to consider three positions. 1. What is the position of the ‘seller’ (both the original seller, ‘A’ and the on-seller ‘B’)? 2. What is the position of ‘B’ as the ‘shipper’? And finally 3; what is the common ‘commercial’ position?
Note that ‘B’ the ‘seller’ and ‘B’ the ‘shipper’ will have different positions, even though we know they are one in the same entity.
1. Under the CFR and CIF commercial terms, the seller has no risk beyond the ship’s rail at the port of loading and (generally) the seller’s cost is to disburse the basic freight to the destination port, only. As the examination happened after loading (i.e. after the ship’s-rail event) and as costs associated with a random examination would not  normally be included in the basic freight disbursement, so – at the sales-contract level – the risk and additional cost are for buyer ‘B’ under the sales contract between ‘A’ & ‘B’. However, the same principles hold true in ‘B’’s contract with ‘C’ – thus the risk and additional cost is then on-passed by buyer ‘B’, under their sales contract where they are the ‘seller’, to ‘buyer’ ‘C’. All things being equal, we can ultimately conclude that the costs (and risks) are ‘C’’s liability.
2. But, the carrier who is raising the charge has no involvement or interest in the sales contracts between the various sellers and buyers. Their contract is with the party who booked the cargo with them and/or the named ‘shipper’ on the bill of lading (and possibly with the consignee, should the consignee agree to enter into the contract with the carrier at some point – this agreement is often normally evidenced by the consignee applying for the release of the cargo.) For practical reasons, initially the carrier will endeavour to recover the charge from the consignee making this a condition of release. This is practical in that the carrier uses the release of the cargo as leverage to secure the charges. Should the consignee refuse the charge (at which point the carrier will most likely decline to release and continue to hold the cargo, exercising a lien over the goods which the consignee may abandon interest in) then the carrier would make the named shipper liable to pay the additional charge, under the terms of the contract of carriage. If the shipper then declines liability, it could only be because the carrier is prepared to accept the party who made the initial booking with them as being liable for the charge. Should the shipper ‘B’ accept the liability for the cost, we could then assume that (in their role as the seller) ‘B’ would in turn hold ‘C’ liable to them in terms of the sales contract conditions. Equally, should ‘C’ (as the consignee) settle with the carrier, they may have recourse to seller ‘B’, if the terms of the sales contract allow this. But note that, in a strict ‘C’-prefixed sale there would not be such recourse for ‘C’ under normal circumstances.
3. The resulting commercial position is merely a practical one and can be summerised thus; ‘where is the money?’ As ‘A’ has been paid, then how involved ‘A’ now wishes to get in ‘coming to the party’ and contributing something towards the cost of the examination is entirely elective on ‘A’’s part – how important is the buyer to them, do they want future business? (And so on.) This is to say that ‘A’’s involvement or lack thereof, is a commercial consideration, not a contractual one. If, however, ‘A’ (or ‘B’ in their mirror-relationship with ‘C’) had granted a credit period to their buyer, they may have found that an involuntary ‘contribution’ was deducted from the payment. ‘B’ (in the contract with ‘A’ and ‘C’ in the contract with ‘B’) would be contractually wrong to deduct in this manner, but it would be a common solution to their problem and while ‘A’ would have every right to demand full payment (having met the conditions of the ‘C’-prefixed contract), whether ‘A’ would actually be able to exercise this right is debatable i.e. can they ‘afford’ to exercise this right? While there is no direct connection to sales terms (commercial terms) and payment mechanisms, the question at hand illustrates well why seller’s using ‘C’-prefixes would always be advised to endeavour as best possible to avoid giving unsecured credit.

Related subjects can be found by reference to these questions:

CFR / Cost & Freight Q058.
CFR/CIF additional costs in transit Q058.
Merchanting general Q005, Q011, Q036, Q057, Q073.
Merchanting & bills of lading Q004.
The role of the shipper versus the seller Q020, Q023, Q030, Q044, Q058, Q068, Q073.

Refer also to these ‘Trading Words & Phrases’:
Abandonment – Carrier – Cost and Freight (CFR) – Commercial Terms – Consignee – Cost & Freight – Freight – Incoterms – Lien – Merchanting – Seller – Shipped-On-Board – Shipper

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Q002:
We wish to place consignment stock in our customer’s warehouse in Windhoek Namibia.  Please could you advise on the VAT and Exchange Control positions should we get the stock across the border? For example, do we have to apply for permission from somebody to send stock across the border with technically no invoice as we may or may not make the eventual sale?

Q003:
We (company ‘A’) sell to another South African company ‘B’ and we in turn source from our suppliers ‘C’, in the Far East. Our local buyer has now requested that we ship the next order directly to their buyer (D), in Malawi, using their (i.e. buyer ‘B’’s) invoice.
We ‘A’ will pay ‘C’, our Far East supplier, but the Malawian funds (D) will come directly to our customer ‘B’, who will in turn settle with us locally.
What is the Exchange Control implication of this model?

Q004:
We (party ‘A’) have a customer ‘B’ in Dubai.  Unfortunately we are out of stock of the product that they require, so we are buying from a supplier ‘C’ in China and they are going to ship the product directly to ‘B’, our customer in Dubai.  The question is; ’B’ in Dubai requires a Certificate of Origin and a Health Certificate. How do we supply them these, without giving our China suppliers’ details to them in the process?
Secondly, we are opening up a letter of credit (Documentary Credit) in favour of Chinese supplier ‘C’. What should be stated on the bills of lading for the credit, without giving away ‘C’’s details? E.g. could we ask the carrier to do a manifest correction after shipment, stating ourselves as the shipper and our client as the consignee?

Q005:
We sell from South Africa to our own offices overseas, one of which is in Germany, and they normally purchase from us on a ‘CIF Hamburg’ (Cost, Insurance & Freight) Incoterms 2000 contract. However, although we sell to our German office, often they request that the product is shipped directly from our plant in South Africa to the ‘true’ end customer, which is another company in Germany, i.e. our German office’s local client. They invoice this end-user, adding their mark-up to our price but they do not get involved in the physical process of shipment, which we organize here.
The question is; should our German office also sell to their end-customer on a ‘CIF Hamburg Incoterms 2000’ basis or should it be a local sale for them, for example, “ex-harbour, Hamburg” or something along those lines?
We are paid by our German office on an open account – 100-days from shipment date – while the payment terms they allow their customers may vary from prepayment up to 30, 60 or 90-days credit etc. from shipment and/or in some cases, arrival.

Q006:
We have sold to a local company in South Africa and the agreement is that we export the goods under our name, but on their behalf to their foreign buyer. They want to use their freight forwarder who they will pay the freight charge to directly and our client will in turn bill this to us. They have used the term “DDU” in correspondence with us.
My question is, as we are not paying the freight forwarder should we be charging VAT at the standard-rate or perhaps treating this as a domestic sale where our buyer does the export under their name and for their own account?

Q007:
If I ship goods on a commercial invoice, how long can I wait before I issue the tax invoice, is there a time-limit of some sort?

Q008: We recently shipped several tons of bulk cargo to Europe.  On the buyer’s order and all communications before and afterward it was mentioned that the terms of sale are CIF ‘ARA’ (meaning we may select from Antwerp, Rotterdam or Amsterdam), Incoterms 2000. 
On arrival, our surveyor declared that both the quality of the cargo and the cleanliness of the barge into which the product was to be discharged (directly from the main vessel) were in good order.  The buyer did not appoint anyone to act on his behalf.
The mother vessel (which carried the cargo from South Africa to the destination port), commenced discharge but when the first quarter of material was in the barge, the mother vessel (unintentionally) pumped ballast water into the barge and therefore onto the cargo, which is water sensitive.  The ship’s captain chose to continue the cargo discharge, resulting in all the material being spoiled. Although contaminated, it is not totally useless in the general market; it is now of no use for the intended final user. 
Our contract makes reference to CIF Incoterms 2000 as well as a short explanation of the meaning. Our understanding is that as the cargo had passed the rail of the vessel before it was contaminated, the contamination is therefore not our responsibility. We have told the customer that he has no claim against us and that his insurance should take the responsibility and he should talk to the vessel owners who caused the error in the first place.  Despite this our buyer has started a claims process against us. The case has not been resolved as yet.
We sold on credit terms (60-days from B/L by bank transfer) with no security.  We’ve not been paid yet – the due date has not come around – but we do feel we have some security in that our buyer is a very big company and we believe they would want to continue the relationship with us. 
To assist the buyer we have found another customer of ours who can use the material ‘as is’ and who is willing to buy it in its present damaged condition, at a discount.
Do you foresee any further problems arising out of this event?

Q009:
When we take out marine insurance for our exports, should we include the export VAT in the insurance amount – what are our risks, generally if we do not?

Q010:
We have supplied our customer in Tanzania on an EXW Incoterms basis therefore charging them VAT at the standard-rate. However, they are now refusing to settle our invoice and are requesting that we credit them with the VAT amount. What advice would you offer in this situation?

Q011:
Our parent company in Mauritius has purchased cargo in South Africa and wishes to export it to Angola. As we are in South Africa we will coordinate the event for them. The South African supplier has invoiced our principal in Mauritius and will be paid by them in due course.  Our questions are: which invoices and what values should we use for the export from South Africa and the import into Angola? Must we use one invoice for both customs events? We need to get an exchange control document (F178) for the payment from Mauritius but who must do this; our company or the South African based supplier? Finally, what happens to the VAT which the South African based supplier charged to our principal?

Q012:
We supply an overseas buyer on an almost daily basis by air. Getting the F178’s attested each time is time-consuming and difficult. Our clearing agent has undertaken to do this on our behalf provided we authorize them to do so. Would this expose us or protect us do you think?

Q013:
We have been advised by our buyer that the goods we recently sent are defective. We wish to now send replacement stock with ‘no charge’. How do we go about this? The cargo value is approximately R250, 000?

Q014:
We exported product from South Africa which has sat as consignment stock in a warehouse in Europe for a while. We now need to recall the stock. The questions are: Will we have to pay import duties on this stock when it returns?  If so, may we claim import VAT back from SARS and how do we do this?

Q015:
We have received a letter from a bank in a foreign country asking if we will accept “an irrevocable assignment of proceeds” issued by them at the request of a dealer we have in that country. Could you please explain what this expression refers to – how does this work?

Q016:
Could you explain CIF versus CIP and can you confirm which of these is better suited to airfreight?

Q017:
Can you please explain the procedure to be followed for exporting temporary goods as well as the procedure on return? The value of the cargo could be anything from ZAR 100,000.00 upwards and the cargo is for temporary export for site erection. There is no warranty agreement, it is simply that our goods will be used on site – caravans, tools etc. where we are under contract for a building project. Some of the goods have markings for example the caravans have chassis numbers. We will not itemize a charge for the use of this equipment as it is built into the project value and we will control the freight there and back. The project spreads across various countries – for example our current project is for Angola and Swaziland

Q018:
We import and use a clearing agent to arrange our customs clearance process. Could you explain what ‘disbursement fees’ are for as opposed to an ‘agency fee’? Both of these items appear on our clearing agent’s invoice to us.

Q019:
I understand that in a CIP (Incoterms 2000) contract, the sellers’ obligations end when they hand the cargo over to the ‘first carrier’.
Who then is responsible for a marine insurance claim at sea?  Further, who is responsible for marine insurance claims which may arise inland in the destination country, that is to say between final import seaport and final named destination warehouse e.g. “CIP 23 XYZ Avenue Manchester”, when the cargo has previously discharged in the UK via the port of Tilbury, say?

Q020:
What is my risk selling CFR (Incoterms 2000) and is this suited to a ‘cash against documents’ payment transaction – if not, what terms would be and what could my risks be either way?

Q021:
We import vehicles and chassis on a CIF Durban basis. We believe that some of the vehicles may be damaged prior to loading on board. In such cases, which party is liable to put in the insurance claim – the seller or the buyer?

Q022:
Certain of our exports are on a consignment-stock basis and invoicing of the sale only takes place once consumption of the stock is declared by the end-customer.  Our agent overseas collects the proceeds and pays it over to us, usually in the middle of the following month.
In Interpretation Note 30(2) from SARS, consignment stock is not required to have an order or contract and the documents for proof of export may be dated earlier than our tax invoice and payment. So, does this mean that the 90-day ‘rule’ for receiving payment after our invoice date or issuing an invoice within 90-days of receiving payment does not apply to consignment sales?.

Q023:
We supply a buyer in Spain using the term CIP to a named sea port, Incoterms 2000.   We pay for the seafreight and the Marine Insurance certificate is issued in our name. 
CIP indicates that passing of risk from seller to buyer occurs when the goods have been delivered into the custody of the first carrier i.e. our forwarder at our warehouse.  However, if we are holding the marine insurance certificate in our name, how can the risk be the buyer’s?
Am I misunderstanding the terminology ‘risk’?
I have to explain this to a new customer of ours based in Brazil and he doesn’t speak English very well, could you perhaps simplify the passing of risk?  I know that in CIP risk is said to be passed once seller delivers to the first carrier so why would I carry insurance anyway?

Q024:
Which Incoterm is best to use when sending samples via airfreight? Sometimes we (the supplier) pay the freight and sometimes our buyer pays the freight.
Does the country of destination play a role in deciding on the Incoterms?

Q025:
When placing our purchase order, our European supplier insists we use the Incoterm EXW, when we feel we should use FCA. What are the differences between these two? How would EXW ‘work’ for an import?

Q026:
I am currently having a dispute over an Export VAT issue on a shipment where we are delivering FCA, O.R. Tambo International and charging VAT at the standard-rate. Our buyer says we should be using the term FOB and then no VAT would apply.  Apparently their freight forwarders here in South Africa have told them that when FOB is used VAT should not be charged – is this correct?

Q027:
I have heard that it is not advisable to have our Export Invoicing run through an integrated tax invoice accounting package.  What is the reason for this?

Q028:
Recently, I was told that when stock is sold we do not have to invoice at that point but only later when the contract is completed.
I am not sure if this is correct. We sell oil and the contract can take 2-4 months to be completed. If stock is moved (uplifted from the silo) in a given month we should invoice at that moment surely and not wait for the contract to be completed? Otherwise the stock holding would be reduced and how would this be explained? Could you please clear this up for me?

Q029:
We are a forwarder and a buyer nominated our overseas agent to pick up a shipment on an ex works basis from their supplier.  Our agents collected the goods issued a certificate of receipt to the supplier and stored the goods in a third-party warehouse in preparation for export.  The day after positioning at the warehouse, the cargo (a vehicle) was stolen.  The seller had insurance for the vehicle, but cancelled this prior to the theft. The buyer had not yet taken out insurance? Who has the risk of loss?

Q030:
What would happen if a consignee abandoned an import shipment?  I have been told that Customs & Excise give the importer 28 days in which to clear the goods after which the shipping line reports it to customs and the cargo is sent to the State’s Warehouse, where the cargo becomes the property of the State.  But, who is responsible for the landing/storage charges which would have been incurred on the import?  Can the importer simply walk away from these charges too?

Q031:
We have received an order from a Chinese buyer for their end-user in the Congo. We will be sending the cargo directly by road to the Congo from South Africa and we would like some guidance on payment options and documentation, particularly in respect of VAT and if we are offered a Documentary Credit. The problem is also that we have to quote some-sort of price now to get the process started and we’re unsure what to do.

Q032: We export and deliver to our buyer’s country, allowing them an open account of 60-days. In such cases, do we have to use DDU?

Q033:
I have made a prepayment by Telegraphic Transfer to a seller in China who although having received my payment now appears to ignore my need for the shipment to take place and will not return my calls or emails! What do I do?

Q034:
We have a customer in Mozambique that we have sold goods to in a CPT Maputo Incoterms 2000 contract. As you know, in Mozambique all trucks need to go into a customs holding area (Frigo) and while the trailer is sitting there the customer must pay his import taxes and his warehousing costs for that load. The problem is that there has been theft from the trailers while they were in the customs holding yard. We have proof of our loading totals and the customer agrees with us as to where the loss most likely arose, but the problem is that the customer claims that either we or our carrier must be liable for the loss because we have not delivered the goods into his warehouse, even if they did enter his country and were (at one point) in the import customs’ warehouse waiting for him to clear. We feel that if the cargo was delivered straight to his warehouse there would be no thefts from his load. My question is who is responsible for the loss, legally?

Q035:
I have a supplier in India and my buyer is in Botswana. I want to ensure that the goods come into South Africa and then move through to Botswana (Gaborone), but I just need some guidance as to how I can avoid paying double duty. Please advise how I should instruct my supplier to declare the goods on the bill of lading, or is there a way that I can ensure that duties will only be payable at Gaborone and not also on arrival in South Africa?   Will a ‘through bill’ (with my final client being declared on the bill as the consignee) do the trick or are there other alternatives?

Q036:
We are based in South Africa but we will source cargo in the USA for shipment directly to Europe. The freight is prepaid but the European buyer will do the import clearance. Would we use CPT or DDU and if DDU, what exactly is paid by the seller?

Q037:
When selling on the Incoterms CFR or DDU, what would be the appropriate term to put on the commercial invoice between the seller and buyer?

Q038:
We are a South African exporter and we are working on a project in Nigeria through a local trader, i.e. the local trader places an order on us and we are going to be doing the shipping for them.  We will be paid locally by the trader, what is required from us in terms of the F178?

Q039:
With respect to Exchange Control Regulations and South African VAT, if I export goods to a customer zero-rated (using the Incoterm CPT) and payment is by Letter of Credit (Documentary Credit) then, am I restricted by any timeframe?  For example, our customer is requesting a 120-day terms from the bill of lading date on the credit – May we offer this? I realize that there are time limits for SARS etc, but these I think are 60-days or 90-days (or however long) from the date of my invoice (or is it my payment)?

Q040:
We have been offered a contract with apparently two different payment options. The buyer has suggested a ‘deferred’ Documentary Credit (LC) and/or an ‘irrevocable’ Documentary Credit (LC.) What is the difference, if any, and what are the implications?

Q041:
We have sold ‘ex works’ to a buyer who insists we provide our exporter’s code to their forwarder to arrange export customs clearing. In addition, they want us to complete the F178 declaration.
Although the buyer is outside South Africa, we have treated this as a local sale and do not wish to get involved with the export event. Unfortunately, we’ve nothing in writing other than our price list quoting our ‘ex works’ prices, but the buyer insists that they understood this to mean we’d ‘co-operate’ with their agents in the export arrangement. Who is right?

Q042:
Our client ordered goods from their supplier in Japan. They shipped the goods FCL/FCL on a bill of lading were we (the importer’s clearing agent) were shown as the notify party. However, we were never notified by the shipping line that the goods had arrived and now that we have tracked the cargo to the state’s warehouse we must pay demurrages and other storage charges before we can get release of our client’s goods. We don’t think the importer should pay this as the shipping line did not notify us when the cargo arrived – what happens now?

Q043:
We are working on a Letter of Credit (Documentary Credit) and the applicant and beneficiary have agreed on a “forwarder’s house bill of lading” for a seafreight shipment moving on a transshipment basis. Will the use of this document create a problem for the bank or any of the other players in the transaction?

Q044:
Please clarify what the term ‘CIF Johannesburg’ means for marine insurance on an import into South Africa. Our understanding is that the seller is responsible for the cargo only to the loading port and on to the ship.  Once the cargo is shipped on board, the risk of loss is the buyer’s. Is this correct?
Only, we are the buyer’s clearing agent and we have been insuring him door-to-door but the buyer claims that if he buys CIF Johannesburg he is already covered door-to-door and he is now double insured.  Again, is this correct?

Q045:
We want to export product on a consignment basis.  This means we will only invoice for the product once it has been sold in the foreign country.  The buyer could be either our sister company or a direct customer but the product remains as our stock and on our books until sold.
Will the ‘normal’ set of documents be applicable for this export? Will it be subject to VAT and would a Proof of Delivery document from the foreign country be enough proof of sale or will we have to get more evidence/information? If we do not know exactly when the money for this transaction will be coming into the country, what do we state on the F178? And finally, which Incoterm will be best to use?

Q046:
We have acquired various companies over the past year, all of which are involved in either imports or exports (most as importers) and we are concerned that the companies might not all be utilizing the correct tariff headings i.e. not using the same codes as the rest of the group.
How could we go about checking this? Are we supposed to apply to use a specific tariff heading and if yes, do we receive approval in writing from customs?

Q047:
We are importing and the supplier requires an LC (Documentary Credit.)  The supplier is in India and the contract is on an Incoterms 2000 CFR arrangement. The terms of payment are 30-days from the bill of lading shipped-on-board date. In the past, this date has always come about after we have already received the cargo.
Could you explain why a supplier allows us access to the cargo before the due payment date? Are we exposed in this?
In the current instance, one of the special conditions of the Credit is stated as “…The beneficiary may issue a Letter of Indemnity (LOI) to the owner of the ship for discharging the cargo to the applicant at the discharge port in case the original bill of lading is not available to the applicant…” Could this clause expose us in any way?

Q048: We import various goods. Some are imported ‘straight’ as a normal import, but some other items are brought in and placed in a ‘bond store’. There is also a third category where we bring goods into our ‘rebate store’. Could you explain the differences here – what would be our advantage in operating like this?

Q050:
We need to provide loan units from South Africa to various countries throughout Africa. We have been advised that these items need to be returned to us and then re-shipped to the customer every 6-months. The logistics of this are quite involved and time consuming and it would mean the customers would be without a unit for a period of time which is not desirable.
Is there an option to “donate” these items to avoid the returns process every 6-months?

Q051:
Our business model is as follows. Our office in China (‘A’) has sold product to their client (‘B’) (in China) who requires the cargo placed at their client (‘C’) in the Congo. Two-thirds of the product is here in South Africa and we (‘D’) will position directly from here. However, the final third requires that we import to South Africa from Germany (‘E’), add value to the product here – using a local third-party supplier (‘F’) of ours – and then re-export the finished article as the final third in due course.
What would be the optimum way to achieve the South African leg of this and what pitfalls are we facing?

Q052:
When we import by seafreight on a DDU (Incoterms) basis we sometimes are charged the Durban Harbour Port Dues and sometimes we are not. Our clearing agents appear to be unsure on this point – can you clarify who should receive this cost – the buyer or the seller?

Q053:
We quote our buyer including freight and insurance and as we have been prepaid in the past “Cash Before Delivery”, we have sold using the Incoterm CIP.
Now the customer wishes to pay in ‘30-days’ from the Airwaybill date. My question is, do we still use the term CIP and if not, what else is there?

Q054:
On occasion we are contacted by individuals living in other African countries including the neighbouring states, i.e. Lesotho, Namibia and Swaziland. Do we have to invoice in South African Rand and (for Namibia etc) do the export VAT rules still apply?
We always quote prices in USD for exports to Africa.
Sometimes the quotes are accepted and the purchaser will arrange to collect the product on an ex-works basis where we add VAT at 14%. They pay in USD.
My question is how does the customer claim back the VAT if it is calculated in USD and not ZAR?

Q055:
We quote our exports excluding freight and we use the Ex Works Incoterm for this, both on our invoice and in the sales agreement.
Our problem is that we now have read that under an Incoterm EXW sale the buyer is not obligated to actually export the goods. So, if it does not leave the country should we be charging VAT even if we are paid in a foreign currency? You have made mention of the fact that to zero-rate the buyer must arrange the courier, do you mean this literally? I often contact their courier to make the arrangements but my buyer pays them, not me.
We have good relationships with some companies overseas and we trust that they are taking our product out of the country, but where do we stand officially?

Q056:
I have received a labour contract from my overseas customer. I export product to them at the moment and we do regular business. Now they wish to send their product from overseas to our processing facility where we will do the necessary work, then repack and export it straight back to them.
1. Do we have to import this product into the country first?
2. Would they be exempt from all import taxes as the product is only being re-worked here and then exported again to the source it originated from?
3. After working the goods, would the origin of the product change to being ‘South Africa’?
4. If we do import the goods, how do we invoice their company for a service such as processing when no physical product is changing hands?
5. My client has a South African entity but they have no importer’s code although they are VAT registered. What if I invoice their South African company as a local supply for the services and include the VAT?
6. Is it an option for their South African business to register as an importer, thereafter to import and deliver the goods to us locally when, after processing, they will then export it back to origin?

Q057:
We are merchanting, buying from India and selling to Holland. We have bought (using Incoterms) “CFR Holland” and we are paying the Indian supplier on a documentary credit, at sight.
We have sold “FOT Rotterdam”, containers unpacked, cleared for import and loaded on a truck in Rotterdam. We are being paid on a documentary credit; 60-days from Bill of lading date. Are we protected in this?

Q058:
When cargo is purchased from a seller in a CFR contract who must nominate the destination port agent; the buyer or the seller?
Is it the responsibility of buyer, the seller, the port agent, the shipper or the ship’s broker to ensure the vessel used to transport goods is suitable to the port it will be discharging at? If the one “free and safe” berth is not available and the ship can’t dock to off-load, who pays the demurrage cost of the ship sitting at anchor waiting to dock?
In a CFR contract, what responsibilities does the buyer have? All we assumed was making sure trucks were available to discharge the cargo into.

Q059:
We are a South African company bidding on a large tender for an official agency in an African State and the requested contract term is ‘DDP’. We do not have a registered company in the destination country and it’s a government project.
I am concerned as to the risk that we open ourselves to as we are not sure of the duties or taxes or any other hidden charges that there may be. Our other concern is that we may price ourselves out because we have done the calculations incorrectly or worse, we get awarded the contract and stand to lose money due to hidden costs we haven’t catered for. How should we proceed?

Q060:
We are trying to change our selling terms from FOB to FCA, but now our buying agent wants me to give him a comparison of the two terms.  The problem is that our prices are quoted FOB but we now want to ship FCA although we still wish to pay all the FOB costs up to the THC in the harbour.  The agent is concerned that there will be additional costs if we change terms.

Q061:
We export and we make use of an L/’C’ (Documentary Credit) to arrange payment. How can we be sure, should we submit the wrong documents and we do not get paid, that our buyer has not yet taken delivery of the cargo?

Q062:
We import and we make use of an L/’C’ (Documentary Credit) to arrange payment. How can we be sure that our seller does not get paid before we take delivery of the cargo and confirm

Q063:
Normally, we receive Express Waybills for our import seafreight cargo which we purchase on an open account. We have recently made a purchase from a new overseas supplier who wants payment by “collection on acceptance”. Could we still expect to receive an Express Waybill in this example too?
Q064: I understand that in a CIF contract, the insurance cover is from port-to-port and that the buyer may be exposed from destination port to the place of final delivery. My question is, however, whether the seller is covered prior to delivery over the rail in the port of loading?

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Q065: We buy from an overseas supplier but route the cargo directly to our buyer, also overseas, in a merchanting transaction i.e. the cargo never comes to South Africa. Must we charge South African VAT on our sale? Secondly, we are incurring VAT in the country of origin as our seller is charging us VAT. Are we able to claim this back?

Q066:
We import on a DDU basis (using Incoterms) and we are concerned that the seller’s freight component is not market-related. How can we verify this? What are our general risks?

Q067:
We import and our supplier has requested payment by “collection”. What does this mean and how would it vary from a Letter of Credit (Documentary Credit)?

Q068:
We import from various suppliers, often in 20ft (6m) General Purpose Full Containers (FCL’s.) What is our position if the container is received damaged? Who will be liable for the repair costs and what influence would the commercial terms have on this?

Q069: We wish to send product from South Africa to our own distribution centre in East Africa. We need to send 3-months’ worth of stock (about R600, 000) and then sell / distribute it to customers as and when they require. Effectively the sale only takes place once it leaves the distribution centre. The question now is, when the customer is charged for all inclusive local-sale – how do we get the money back here?
When we send the goods, we will do the normal documents but as we do not know when or if we will sell the stock do we also do an F178 and maybe make the payment terms 180-days or do we complete an NEP?
What other documentary requirements are there to consider?

Q070:
Our overseas customer purchased goods from us on an Incoterms 2000 EXW basis. The documentation is now completed but now their customer – the end user – has requested the goods be prepared for airfreight. What happens now – we have packed as instructed for seafreight?

Q071:
Could you clarify whether a seller under a CIF or CIP contract (using Incoterms and where transport is by sea) must in terms of the Insurance cover provided (on the understanding he must only provide minimum cover), ensure that the cargo is always covered for a General Average. Can the buyer under a CIF contract always be sure the Insurance cover will cover any / all costs incurred as a result of a General Average event (obviously other than consequential loss, or losses due to the late arrival of the product)?.

Q072:
We work with tenders and many of these run for a period up to two years. Could we use an LC (Documentary Credit) in such a case? Most of the South African banks will not exceed a 6-month period I believe.

Q073:
In a merchanting arrangement, we (party ‘A’), export by sea to an end-user in Australia (party ‘B’) and we currently ship these on DDU Incoterms 2000.  However, we have our own offices in Hong Kong (party ‘X’) and we actually invoice them for the goods, not Australia. They in turn invoice the end-user and their final price includes storage and delivery in Australia.
Should we be invoicing our Hong Kong office on a CIF term and they invoice the customer DDU?
Note that the inland charges in Australia are included in the price we invoice to our Hong Kong office.
Could you clarify where and when the risk is transferred from us to our Hong Kong office and then onto the end-customer?  What should be stated on the bill of lading and the invoices?  Who should be reflecting the stock holding?

Q074:
We ship product to a destination country and then store it in an agent’s warehouse there.  We do not invoice the end customer for this product since it is still our stock, but when they require a delivery our agent delivers and once we have receipt of a delivery confirmation document then the buyer is invoiced.  We currently show the cargo in our local records as being in our own stock (as this is not consignment stock.)  We carry the risks up to the customer’s final warehouse, although we only invoice them on a CIF basis.  They are invoiced separately for the destination warehousing costs as well as the final local delivery to their production facility.  Bills of lading show us as the shipper and our agent as the consignee with the ultimate customer shown only as the notify party.  We issue a commercial invoice that states “this invoice maybe used for customs clearance only”.  The customer requests us to change the ‘B’/L to show them as the consignee when they take ownership of the container.  Are we trading on a DDU basis?

Q075:
We ‘A’ have a plant located outside of South Africa (‘X’.) We receive orders here and supply from there, normally importing directly into South Africa. But now a local buyer in South Africa ‘B’ has placed an order on us to supply directly to their client (‘Y’) who is outside of South Africa, so the cargo will move directly from ‘X’ to ‘Y’ but we will still sell the goods here, (‘A’ to ‘B’); do we charge VAT on our sale to ‘B’ and are there any other issues we need to be aware of in this transaction?

Q076:
We have shipped goods on a DDU basis and some of the cargo was found to be damaged on arrival. Our buyer is now requesting that we provide a credit note – how should we proceed?

Q077:
Some time back, we exported to our buyer on an Incoterm DDU contract where we offered them extended credit terms. For a variety of reasons they have since refused to pay us and we wish to write-off the debt and move on. Apart from our loss, what complications, if any, do we face?

Q078:
We have received a written agreement/contract from our buyer and we would like some advice as to what we should be looking for with regards to stating export liabilities and payment etc.

Q079:
We have the following business model; our principal ‘A’ is based overseas and procures goods from a supplier ‘B’ in our country. They ‘B’ deliver to us ‘C’ and we act as a consolidation point for our principal. On consolidation (sometimes from several suppliers) we export the goods overseas to the ultimate buyer (D.)
Party ‘B’ invoices ‘A’ and receives foreign proceeds. We act as the exporter of note, yet ‘A’ sends an uplifted invoice to (D) so that they may arrange import clearing in the destination country based on the value of their sale ‘A’ to (D.)
What are the risks to this model and what variations could we consider?

Q080:
We Import from our sister company (Supplier ‘A’) on a DDU named-airport basis and although we (Party ‘B’) often bring the goods in for our own account, we sometimes find a local buyer for the goods (buyer ‘C’) before the cargo arrives. When would ownership pass in these two instances? Would it help if we claused our local contract with ‘C’ ‘we are the owners until we are paid’ or something along those lines? How do we account for the stock movement from ‘A’ to ‘B’ (in the first model)? Could we (‘A’ or ‘B’) attract liabilities in the second model if ‘C’ miss-declared cargo to customs or attracted some other ‘official’ fine?