Replacement Goods and the Commercial Invoice

          This is similar to (but not the same as) samples supplied free of charge discussed in a previous blog. The issues around commercial invoices versus pro-forma invoices also discussed in a previous blog apply here.

          Replacement goods are goods supplied free of charge to replace previously imported defective goods, or goods which did not meet quality standards. The goods are in essence identical. These goods are intended purely for commercial purposes and cannot be treated quite the same as samples supplied free of charge.

          As an importer you may argue that duty and Vat was previously paid on such goods and hence, a “zero” value should be acceptable. You may even argue that a nominal value may be produced. The answer quite simply is that SARS will not accept “zero” valued clearances even though duty and Vat was previously paid. If the commercial invoice contains a “zero” value, then it should be endorsed with… “Goods supplied free of charge as replacement stock for defective goods – value supplied for Customs purposes only”, followed by the value.

          The Customs legislation requires that a fresh clearance for goods is required on a shipment basis. Off-setting against previous shipments is not allowed. So, what do you do with regards to duties and Vat previously paid. You may claim these back via a Refunds process. There are some strict adherences required when claiming such Refunds from SARS.

          The same rules apply when importing short-shipped or short-landed goods.

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Samples and the Commercial Invoice

          The aspect of samples has to do with valuation, i.e. the value of the goods for Customs purposes. Again, this affects the rate of duty and Vat. Should one rate samples as “free” or “zero” on the commercial invoice, or should there be a value even though they are being supplied “free of charge”?

          Also, should samples be specified on a pro-forma invoice rather than the commercial invoice? This really does not matter so long as samples are cleared correctly. Pro-forma invoicing was discussed in the blog titled… “Pro-forma Invoices for Customs Purposes”.

          Samples supplied free of charge must be specified on the invoice. The value of samples (if supplied free) must be realistic, i.e. as if one was going to import them as “paid for” goods. One may insert a “zero” value on a commercial invoice however, the invoice should include an endorsement stating… “Goods supplied free of charge – value for Customs purposes only”, followed by the value.

          There are a few occasions when samples may attract a nominal or negligible value. The one to note is when samples are mutilated, or destroyed. If for example, you import footwear with a whole drilled through the sole of the shoe (i.e. the size of a 50c coin at least) clearly marked as “Sample”, then a nominal value may be utilised. Another example is a motor vehicle component which contains un-intended holes or cuts in it, rendering the product useless, and marked as “Sample”.

          If the samples are not mutilated, this will in any event fall outside of the scope of the transaction value for duty purposes. SARS will want to use alternative methods of valuation (i.e. the value of identical or similar goods) in order to determine a realistic value.

Therefore, the best advice I have is to truly assign a realistic value to samples. Samples are most often a negligible issue, unless you import samples in very large quantities. Starting a valuation investigation with SARS as a matter of principle will merely attract unnecessary administrative costs.