We have explained the importing basics in a previous blog (READ HERE), so this time we’ll focus on the low down of getting your exports up and running.
The country’s key economic decisions are based on these trade statistics and it is therefore crucial that SARS records export performance accurately. Just reading this sentence can make you anxious, thinking about all the documentation required before you can set the ball rolling for exports. Currency Assist can take the load off your shoulders with regards to the international financial transactions that will be involved and we have good insight to offer before you join the export arena.
The process
You can be an exporter if you have a product or a range of products, assured access to the product, and expertise in trading in that specific product. It will be an advantage if you have already been selling the product in SA and want to expand to international markets. Exporting should not be seen as a separate industry but merely as an extension of your local market. Your success in international markets will depend on whether your business and your product are export ready. It is best if you have a special relationship with an international buyer or if you have the necessary expertise to be able to secure markets. You can also act as a procurement agent or a middleman (general trader).
Setting up the export order
You will require an international purchase order, a pro forma invoice, and documentary credit.
The international purchase order is confirmation by the buyer that there is a transaction, and that you may prepare and ship the goods. The purchase order will include all details of price, transport, and payment agreed upon, as well as some of the buyer’s concerns. The buyer may, for example, request that you arrange for a pre-shipment inspection by a nominated third party, as well as provide a clean report of findings. This will also include the statutory conditions of the country receiving the goods. For example, the customs department may require a certificate of origin issued by a Chamber of Commerce to be presented for customs clearance.
You must ensure that the information given in the pro forma invoice is complete, clear, and to the point. If information is lacking it could ultimately lead to (mainly logistical) problems in the processing of the order. When setting up your export order, and before issuing your pro forma invoice, you should get clarity on who the role-players are (your freight forwarder, your bank, the buyer, and their notifying party).
Certain minimum prescribed terms need to be included when companies draft agreements to buy and sell goods across borders. The Incoterms (International Commercial Terms) require that the goods, and the respective rights and obligations are described in the agreements, as well as how delivery must transpire.
Once the importers receive your pro forma invoice, they will hold you to the terms for the transaction. Importers will need your pro forma invoice for a foreign exchange allocation (applicable in some countries), to apply for an import permit or the establishment of a documentary credit. In the case of documentary credits, if the credit does not include your conditions, because of an indistinct pro forma invoice, you may be held liable for amendments later which will naturally delay the whole process.
Processing the export order
Once you have established your sales contract, you can continue to set up the deal, ship the goods, get paid, and provide follow-up and service where required. The original copy of each export declaration will be processed by Customs and kept for record and trade statistics purposes. Any other applicable documents will have to be produced to Customs when required. Current legislation and policy require specific documents to be endorsed (through examination, date stamping, and signing). Most international ports of entry have examination facilities but under certain conditions and the discretion of the Customs Branch Manager, you can apply to have examinations conducted on the premises of the client.
It is important to take note of all the requirements of the buyer, for instance, pre-shipment actions (e.g. health inspections or product analyses) that must be carried out before packing the goods for shipping. Once you are certain that the transaction is going to continue, you can complete an F178 declaration as a commitment by you to the Reserve Bank, stating that funds will be brought into the country in exchange for goods. Contact your freight forwarder to book the carrier, using a “freight forwarders instruction” and certified copy of the F178 declaration, so that customs clearance and transport can be arranged (and marine insurance if required). You can deliver the goods to their warehouse yourself or arrange for the collection and delivery of the goods to the carrier. A transport document will serve as proof of receipt and customs clearance can be arranged. The transport and insurance documents will be handed to you, to issue your commercial invoice and packing list, and other export documentation such as the transport document, insurance document, and verification documents issued by third parties.
Getting paid (and ensuring a follow up order)
Documentary credits or purchase orders can be presented to the negotiating bank for payment. This will usually be your bank that will check the documents to ensure correctness and compliance with the requirements before making payment to you. At last!
Although it could sometimes be more difficult to secure a follow-up order than it was to achieve the first order, it remains crucial to get feedback from the buyer about satisfaction, and develop your market intelligence so that you can take any necessary adjustments to keep your market. If you don’t know what went wrong, you cannot correct it!
Most of the forms and documents mentioned here can be downloaded from https://www.sars.gov.za, but the information is rather overwhelming and not all necessarily apply to your export product. It is worth your while getting professional advice and making use of an international money transfer specialist such as Currency Assist to minimise risks and ensure that your export transaction runs smoothly: https://currencyassist.co.za/
Currency Assist SA (Pty) Ltd is a registered financial services provider registered in South Africa authorised with the FSCA under FSP number 46057.