Invoice Proof of Payment

          Proof of payment is often required by SARS Customs in order to verify the correctness of invoice amounts.

          [The SARS requirement for proof of payment is no longer aligned to the way that banks operate…]

          Occasionally proof of payment from a bank can be hard to come by. I have seen companies work very hard, sweating in fact to obtain proof of payment from a bank thinking that this is the only option available.

          The SARS Policy SC-DT-C-13 dated 27 November 2015 covering Refunds and Drawbacks offers the best description of what is required as proof of payment, namely… “from financial institution clearly indicating the beneficiary and the applicant, method of payment, currency transfer and invoice related to the transferred currency”. Most requests from SARS require this to be bank stamped and signed.

          The SARS requirement for proof of payment is no longer aligned to the way that banks operate in this technologically advanced environment. Many banks do not print, stamp and sign the payment advice. Today, special arrangements must be made for this to happen. In addition, most companies today make bulk payments with long annexures of invoice amounts consolidated into one amount. This can get tricky as a method of proof.

          Many companies make term payments, i.e. 60 x days or 90 x days from shipment date. I have seen companies make early payment in order to obtain some form of proof in order to expedite live shipments or refund applications with SARS. While there is nothing wrong with doing this, it does defeat the objective of the term payment in the first instance.

          But, the objective of proof of payment has less to do with the payment advice and more to do with proving the value of the goods, namely the price paid or payable. There are other ways of proving the value of the goods namely:

  • Proof of payment from a previous Customs clearance of identical goods (if already paid)
  • Putting up a PP (Provisional Payment) as surety to SARS pending proof of payment
  • Suppliers price lists proving the price of the goods to be paid

These can often be negotiated or discussed with SARS Officials, although the prerogative to accept these remain in the hands of SARS.

Invoice Charges and the Freight Statement

          We have seeing allot of controversy in the recent past created by the need for freight statements. Why has this become so important?

          It has to do with the costs, charges and expenses reflected on the commercial invoice. Charges are often deducted from the Customs value as non-dutiable charges. As usual, this affects the Customs value and hence, the duties and Vat payable. This was also discussed in the blog titled… “Terms of Sale on a Commercial Invoice”.

          SARS Customs simply do not trust that the dutiable and non-dutiable charges specified on a commercial invoice, is the price that was ‘actually’ paid.

We often see charges such as freight and insurance specified on an invoice verified differently on a freight statement. This is because charges quoted at time of export are often based on estimated amounts. When the cargo is physically freighted, the actual amounts (which are occasionally different from the estimated amounts) become due; hence the need for a freight statement.

          But, what is a freight statement? Where would you obtain them?

The SARS Policy number SC-CR-A-05 dated 24 January 2014 covering Method 1 Valuation on Imports refers to freight statements as… “third party invoices”, or a “transport document”, or a “specific freight statement from the international freight carrier or freight forwarder.”.

          The Freight Forwarding Agent will most often have access to the freight statement for example, in the form of a HBL (House Bill of Lading). But this will depend on the charge, who directly contracts for the charge, and the mode of transport. Freight statements can be hard to come by. This happens when the Freight Forwarding Agent in the export country is different from the Agent in the import country. Freight amounts are very confidential. Most companies do not want to divulge such statements to third parties even though it is lawfully required by SARS. There are ways to overcome this problem but this level of depth is best left for another blog. You may also contact me via this blog to find out more.

Tariff Heading on an Invoice

          The global Customs community is becoming increasingly harmonised. But please be cautioned about the use of a tariff heading on an invoice.

[This will certainly get the attention of Customs officials who like to stop such consignments.]

          As an importer or exporter of goods you may be tempted to insist that the tariff heading should be reflected on the commercial invoice. While there is nothing wrong with this, it is not a mandatory Customs requirement. Not in South Africa in any event.

          The World Customs Organisation established the Harmonised System for the global classification of goods at a six digit level. Countries which work at an eight or ten digit level do so independently. Headings at eight (South Africa) or ten digit levels do so in order cater for domestic tariff and regulatory requirements.

          While headings are globally harmonised at a six digit level, this does not mean that classification will always be identical from one country to another. A product recognised under one heading in South Africa, might be tariffed within a different tariff heading in Germany for example.

          The simple reason for this is that different people see things differently. This is exasperated by classification in different countries in relation to culture, language, education, technological advancement in some countries (or a lack thereof in others), and so forth. Tariffing at an eight or ten digit level, (which adds to the complexity of the tariffing process) may in itself be the cause of differing opinions.

          Because inconsistencies in the tariffing of goods from one country to another do exist, headings may occasionally be misaligned. This will certainly get the attention of Customs officials who like to stop such consignments. The status of your tariff headings will depend on how you manage the tariffing process with your supplier or consignee.

          Again, there is nothing inherently wrong with having a tariff heading on a commercial invoice, so long as the classification process is managed well.