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.

Customs: Minimum Requirements on a Commercial Invoice

          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.