Pre-shipment inspections (PSIs)

Pre-shipment inspections

Pre-shipment inspections

You can arrange a pre-shipment inspection (PSI) to certify the standard of goods prior to the actual shipment. Pre-shipment inspections serve as a quality control method. They help you as the buyer to know that the correct quality and quantity of goods will be shipped.

As a buyer, you can request a PSI. Sometimes the country of destination will require a PSI as part of their import regulations.

PSI companies

You can arrange a PSI through a PSI company. These companies check that:

  • Approved suppliers made the goods
  • The goods are made to specification
  • The goods are tested for standards
  • The goods have no inherent vices
  • The goods are packed to specification
  • The full consignment/amount purchased is packed
  • The goods are loaded into a container and sealed
  • A light test is conducted on the container to ensure the container does not leak
  • All listed documents are filled in correctly
  • Documents are sent to the buyer

Arranging a pre-shipment inspection

A freight agent can arrange a PSI with a reputable PSI company on your behalf. If you need to obtain the PSI certificate due to a government requirement, then the inspection must be performed by the relevant inspection authorities in the seller’s country. The importer’s government will appoint the authority that must complete the inspection. Government inspection is particularly common in African countries. An example of a company you can make use of is Societe Generale de Surveillance (SGS) – one of the world’s larger organisations in the field of quality insurance, inspection, and verification.

Facilitating inspections

To facilitate PSIs, exporters should pay close attention to the following points:

  • Assign an assistant: Exporters or their representatives must assign a person to assist the inspector in his or her inspection (e.g. the assistant can help to carry and open randomly selected cartons for examination).
  • Separate the goods: The goods must be presented as a recognisable consignment (as distinct from lying in individual warehouse bins).
  • Ensure meaningful inspection: The goods must be presented for inspection under circumstances that allow for a meaningful inspection.
  • Include packing lists: A packing list that details the contents of each case should cover cases or cartons that contain a mix of goods.
  • Inspect before packing: Goods must be presented for inspection prior to any intended containerisation.
  • Include container numbers in reports: In a number of countries, Customs will release full containers without opening and examination IF the number of full containers is included in the report of findings. In order to include the container number in reports, the PSI inspector must have the opportunity to witness the loading and sealing of the containers.
  • Ensure a Customs officer is present: For consignments stored in a Customs bonded store, a Customs officer must be present. If such an officer is not present, the PSI inspector may not open the cartons. This makes it impossible to examine the goods. In such cases, the goods inspection may need to be aborted.

Figure 1 below is an example of a PSI certificate.

Pre-shipment inspection certificate

Figure 1: Example of a pre-shipment inspection (PSI) certificate

Need some extra guidance to make sure your PSI is done correctly the first time around? Contact us today on 0861 0 TRADE (87233) to enquire about our freight services, or enquire online.

 

 

 

Trading with regulated and prohibited goods

Trading with regulated or prohibited goods

Trading with regulated and prohibited goods

Each country has different requirements regarding what they classify as regulated, restricted or prohibited goods for import and export trade. For example, some countries might allow prescription medication or animal skin trade, while others do not. Sometimes, a country may prohibit a product for import, but only regulate it for export.

What is the difference between regulated and prohibited goods?

According to Customs, prohibited goods are goods that are not allowed to cross the border either out of or into the country. Attempting to import or export prohibit goods can lead to serious fines and even criminal charges.

Regulated goods are goods that are controlled by an import or export permit. These permits regulate either the quality or quantity of the goods. Quality permit restrictions are controlled by government departments such as the Department of Health, Department of Agriculture, or the Department of Environmental Affairs for example. Volume (quantity) permits are usually controlled by the Department of Trade and Industry (DTI) or the International Trade Administration Commission (ITAC).

For imports, some products need to be sampled and tested before the import permit is issued. An example of this is when the South African Bureau of Standards (SABS) is required to test a product for safety. The permit may only be issued once the SABS accepts the product as safe.

How do I know if my goods are regulated or prohibited?

The good news is that Customs has made it easy for importers and exporters to find out whether they are allowed to bring their goods into, or take them out of, the country.

Figure 1 below shows an excerpt from the Customs list of regulated and prohibited goods. An explanation of each section in the figure follows.

Excerpt from Customs Regulated Cargo List

Figure 1: Excerpt from the Customs regulated cargo list

  1. Heading: This is the 4-digit number or the first 4 numbers of the HS/tariff code.
  2. Designation of goods: The description of the goods according to the category they fall into.
  3. Prohibition or restriction: Stipulates how the goods are controlled for import or export.
  4. Authority: Stipulates the law (Act) that authorises regulation or restriction of the goods.
  5. Action required/Detained for: Lists the authority that must be notified if the importer or exporter is stopped.
  6. Competent authority: The authority responsible for issuing the import/export permit.
  7. Customs mandate requirement: Outlines what Customs must look for when checking the imports/exports.
  8. Document requirement: States what Customs must see on the permit provided.

If the importer/exporter is not in possession of the applicable permit, then the goods will not be allowed into or out of the country. Should Customs need to store the goods for the duration it takes to obtain the necessary permit, the importer/exporter will accrue storage costs. Delays in Customs clearance due to incorrect documentation may also result in business losses due to lack of availability of the goods. It is therefore very important to make yourself aware of any restrictions and obtain a permit before Customs clearance.

You can look up prohibited or regulated items in our lookup guides below. Our office can obtain most permits for you.

For assistance with permits, enquire online or call 0861 0 TRADE (87233).

How to source and sell products globally

Source and sell products globally

How to source and sell products globally

Are you looking for a product to import and sell? Or do you want to expand your current business by selling to an international market? If you are new to importing and exporting, you may have many questions about how to source and sell products globally. In this article, we will explain the top sourcing and selling methods you can use to make your new business venture a success.

1. Web trading portals

The first and easiest avenue to start searching for a product to sell or a place to sell your product is the global business-to-business (B2B) web portals. These web portals showcase products from suppliers situated all over the globe. The portals have systems in place to verify that suppliers are legitimate and to avoid fraud. Products can easily be listed on these websites and viewed by an international audience.

A number of the most popular and trusted web portals are listed below. These websites have easy search functions that allow you to search for products per category or country.

Web platforms: Product listings from multiple countries

The following websites can be used to source and sell products from and to multiple countries:

Some B2B web platforms are industry-specific. For example:

Web platforms: Product listings from Asia

The following web platforms can be used to source products from multiple Asian countries:

Web platforms for Hong Kongese and Chinese suppliers:

Web platforms for Korean suppliers:

  • GobizKorea.com
  • EC21 (this is a global sourcing site, but is strong with regards to Korean suppliers)

Web platforms: Product listings from Africa

2. Trade shows

Trade shows are a very popular way of sourcing international products or exposing your existing products to new international buyers.

Generally, trade shows are industry specific and follow a particular theme.

Advantages of visiting trade shows include:

  • Variety and accessibility: Trade shows allow you to view numerous products specific to your industry at one destination.
  • Networking: At trade shows, buyers and sellers can meet face to face, thus establishing trust and building relationship. You also have the opportunity to network with global businesses in your industry, and to identify suitable potential agents and distributors for your product in foreign countries.
  • Quality control: When you see a product on demonstration at a trade show, you can assess the quality of the product before placing an order.
  • Comparison: Access to multiple products in the same location gives you the opportunity to compare products side by side to find the most suitable product.
  • Exposure to trends: Trade shows give visitors and traders exposure to the latest products and new trends in their industry.
  • Idea generation: Visiting different exhibitions can serve as inspiration and stimulate ideas that can be implemented in your local business.
  •  Market research: When you exhibit at a trade show, it gives you the opportunity to test public reaction to your products.

Trade show funding

South Africa currently offers funding for South African exporters that would like to attend trade shows. Typical expenses covered by this funding include:

  • Sample transport;
  • Exhibition space rental;
  • Stand construction;
  • Interpretation fees;
  • Internet connection;
  • Telephone installation;
  • Subsistence allowance per day;
  • Return economy-class airfare; and
  • Exhibition fees up to a maximum of R45 000

It is advisable to contact the Department of Trade and Industry (DTI) for more information about these incentives.

Where to find suitable trade shows

To find a trade show in your industry, you can make use of any of the websites listed below. Alternatively, you can simply conduct a Google search be entering the name of your industry, followed by the phrase “trade shows” into the search bar.

3. Keep it local

If you would prefer to keep your product sourcing as local (i.e. country-specific) as possible, there are a number of methods that you can use to tap into local markets.

Local internet directories

In addition to global online B2B web portals discussed above, there are also local portals that list products for a specific country only. These directories are easy to search and list products on. A popular local directory is Cylex. Here is a list of Cylex directories for different countries:

You can also easily use online search engines like Google to find business directories for specific countries.

Many countries have a local Yellow Pages business directory. You can find a local directory by using a search engine to search for the country’s name followed by the phrase “yellow pages”.

Local search engines

Numerous countries have country-specific search engines. Google owns some of these search engines (for example Google’s South African specific search engine – www.google.co.za). Country-specific search engines will search for information on websites based in that country. This method is most effective for countries whose languages you can understand. Google does have a function that translates some pages, but using translation software does leave room for misunderstandings.

Local Chamber of Commerce or trade office

You can contact a country’s local Chamber of Commerce or Department of Trade and Industry for assistance in sourcing a product. Some countries are eager to grow their exports and are willing to assist. Order quantities must usually be large to stimulate interest from the Chamber of Commerce.

Funding for visiting or hosting potential new buyers

South Africa currently offers funding for South African exporters that would like to visit potential new international buyers or invite international buyers to visit their business.

The funding typical covers the following expenses:

Hosting potential buyers

  • Flights
  • Subsistence allowance
  • Car rental

Visiting potential buyers

  • Flights
  • Subsistence allowance
  • Promotional material transport
  • Developing marketing materials
  • Product registration in a foreign market

Funding applications must preferably be made at least 2 months or more in advance.

It is advisable to contact the Department of Trade and Industry (DTI) for more information about these incentives.

For more information on types of available funding to assist exporters, arrange a consultation with us online,  or call our offices on 0861 0 TRADE (87233).

4. Other methods to source and sell products

Here are some other great ways to source and sell products if you want to try something different to the mainstream methods:

Small order quantity web portals

Sometimes, a company will only need to import one or a few of a particular item. Most global web portals have minimum order quantities that make this impossible. There are however, some web portals that cater for single and small quantity orders. AliExpress is one such portal.

Social media product sourcing

Social media networks specifically geared towards business, such as LinkedIn, can also be used to source products. LinkedIn’s user-friendly interface allows users to locate people that work in specific industries or companies and build up business relationships with them.

E-magazine listings

Certain industries publish trade magazines that keep readers up to date on the latest global industry news. These magazines are a useful source of new ideas and helps keep you up to date with progress in the industry. They are also useful for finding and advertising new products.

 

Finding the ideal product or market involves a bit of diligent searching, but do not grow despondent – there is a big pay-off for the effort. Using the resources and methods discussed in this article make for a productive start; use them as a springboard for deeper research to obtain the best possible prices and buyers.

Guide to choosing a supplier

How to evaluate a supplier

Guide to choosing a supplier

It makes no difference what business you are in – finding the right suppliers and vendors plays a key role in your company’s success.

You know you’ve found a good supplier when the quality of the items you receive match the description in the catalogue and is acceptable to your target market, the supplier delivers on time, and the products are in perfect condition.

Having some basic evaluation criteria in place for choosing a supplier, and encouraging effective communication and transparency is essential to the smooth operation and profitability of your company.

Considerations in choosing a supplier

The first step we recommend you take is to establish the key parameters that are critical to your product or service’s supply. The four most basic considerations are:

  1. Cost
  2. Quality
  3. Service
  4. Reliability
Evaluating a supplier

Figure 1: Four considerations when evaluating a supplier.

Each of these considerations are discussed in more detail below.

Cost

Competitive pricing is an important factor. However, it is essential to not only focus on obtaining low prices, but to emphasise service quality too (ensure that there isn’t a trade-off between cost and service quality). Your goal is to understand what value-add the supplier will bring to your company.

Quality

Make sure to find out the following quality-related details about your potential supplier:

  • Process control methods used
  • Whether the company is ISO 9000 registered (the ISO system is a quality management system which ensures the creation of quality, consistent products by means of providing specific steps and processes to follow)
  • Approaches to problem solving and preventative maintenance. If a company is doing preventative maintenance, there will be records that you may have to look at. When machinery is down, it could cost a company a large sum of money daily. Good companies will monitor their machines religiously.
  • Cleanliness and housekeeping. If possible, conduct an informal inspection of your supplier’s factory or work space. If it is messy and dirty, that is an indicator of the kind of service and product you are going to receive.

Service

Ensure that working with the supplier will not become more difficult as your company grows. It is important to share your own numbers and forecast with them. Suppliers with extensive knowledge of market conditions and contemporary issues impacting your business can be very valuable in helping small companies find a way to sustained financial success. Find out from other customers whether the supplier takes extra measures to satisfy their customers, for example after-hours accessibility, training or inventory support.

Reliability

The first step in determining reliability is basic desktop research. Also make sure to seek out customer references. Look for available press releases of the particular supplier, and ensure that the supplier maintains a policy of open communication.

Other categories, or sub-categories, can be added to your list of considerations, but at the very minimum you should include the four above mentioned categories. Think about these considerations very objectively. It would be wise to write down your parameters without thinking of any specific supplier, so that you can keep your thinking broad.

Comparing suppliers

A very easy and effective way to rate your supplier is by using a weighted point method. This method helps you to objectively evaluate each supplier before choosing a supplier. Figure 2 below provides an example of this method by comparing two suppliers.

Weighted point method for evaluating suppliers

Figure 2: Weighted point evaluation method comparing Supplier A and Supplier B

Establishing long-term relationships with suppliers is a key to successful business. With this in mind, it is important to always do your homework before choosing a supplier. The more time is spent upfront evaluating the supplier, the less likely you will have to spend time fixing (potentially costly) mistakes later.

Need assistance with other import and export related queries? Contact us on 0861 0 TRADE (87233), or fill out this form on our website and one of our friendly consultants will be in touch.

International payment methods

International payment methods

International payment methods

As globalisation makes international trade more and more accessible, moving money safely and cost-effectively across borders is becoming an important consideration for many. Businesses and individuals alike need to be knowledgeable in the different international payment methods available. This will help them alleviate risk and reduce their money transfer costs.

In this article, we explore the most common and trusted international payment methods, as well as what to consider when making or receiving payments.

International payment method considerations

When selecting international payment methods the following criteria must be taken into account:

  • Security;
  • Buyer/seller acceptability;
  • Cost; and
  • Ease of use

As with all trade, there are some risks associated with international trade. These include:

Commercial risks: Exporters run the risk of non-payment for merchandise after it is exported. Importers run the risk of making payment and then not receiving the merchandise, or receiving faulty merchandise.

Political risks: If the country supplying or purchasing merchandise undergoes political instability or war, trade with that country may no longer be possible.

Transfer risks: When currencies are exchanged, the bank in the local country needs to have a sufficient amount of each currency to make the exchange. Occasionally banks in Third World countries run out of foreign currency. Should this happen, the bank will delay payment until the foreign currency is available.

A number of payment methods are available to meet the various needs of buyers and sellers. These are discussed below.

In addition to choosing a suitable payment method, a valid contract between buyer and seller is required. In trade law two agreeing documents, such as the purchase order and invoice, is deemed a valid contract. Alternatively, for large transactions, an international trade lawyer may draw up a sales contract.

Payment methods used in international trade

 

Cash before or after delivery of merchandise

Importers favour cash on delivery for merchandise, as it eliminates risk and improves their cash flow. For the same reasons, exporters prefer merchandise to be paid in full before it leaves their premises. When considering payment before or on delivery of goods, carefully evaluate the reliability of the supplier or buyer. Cash before/after delivery is a convenient payment method and is often used when there is a strong trust relationship between buyer and seller.

Typically, buyers use bank transfers or credit cards to facilitate payment.

Open account

If the buyer is well-established, has a long and favourable payment record, or has been thoroughly checked for creditworthiness, an open account is a simple and convenient way to conduct payment. With this method, the buyer orders the merchandise as required and makes payment after an agreed time period.

The seller carries all the cash flow pressure and risk when using an open account. Open accounts are generally only used when business from the buyer is significant enough to outweigh this downside. Open account payments are typically made by bank transfer.

Letter of Credit (LC)

Letters of credit (LCs) are often used to protect both the buyer’s and seller’s interests.

LCs are a guarantee of payment issued from the buyer’s bank upon receipt of all documents required by the terms and conditions stipulated in the letter of credit. Typical documents required by a letter of credit include:

  • Shipping documents;
  • Insurance documents; and/or
  • Inspection documents

The seller is protected, as he is guaranteed payment after providing the required documents. The buyer is protected, as the bank will only pay after proof that the terms and conditions in the LC are met.

In practice, this is how a LC works:

  1. The buyer arranges with his bank to have a LC issued.
  2. The LC lists the terms and conditions of payment.
  3. The LC is given to the seller.
  4. The seller chooses to accept the LC and sends the merchandise to the buyer.
  5. The seller then takes the shipping documents and any other required documents stipulated in the LC to the bank.
  6. The seller’s bank checks that the documents comply with the LC and sends the documents to the buyer’s bank.
  7. Upon receipt of the documents, the buyer’s bank checks that the documents comply with the LC and pays the seller.

Check the following when working with LCs:

  • LCs are governed by an international body called the Uniform Customs and Practice for Documentary Credits (UCP). This must be stated on the letter of credit.
  • LCs normally have an expiration date. Ensure that the date stated on the LC gives the seller enough time to send the required documents to the buyer’s bank.
  • If the documents presented to the buyer’s bank are incorrect, the bank is under no obligation to pay.
  • If you are not experienced in working with LCs, it is recommended that you use a company, freight agent, banking consultant, or legal consultant that is experienced in LC terms and conditions. This will help you avoid any problems with making and receiving payments.
  • If the seller is concerned about the inability of the buyer’s bank to pay due to political instability or lack of foreign exchange in the buyer’s country, then the seller can request that the LC be confirmed by a second bank. This is called a confirmed letter of credit. The second bank guarantees payment should the first bank not be able to make payment. The second bank is typically a bank in the seller’s country, or in a First World country.
  • Take into consideration that banks charge fees for LCs. The fees, as well as the entity responsible for payment of the administration fees, should be stated on the LC and/or agreed upon by the buyer and seller.

Documentary bank collections

Documentary bank collections are similar to LCs in that banks collect payment from the buyer on behalf of the seller against the delivery of required documents. The major difference between the LC and documentary bank collections is that for documentary collections, the buyer’s bank does not guarantee payment.

The seller obtains payment security in one of two ways:

  1. Withholding documents: As per the LC, the required documents are sent to the buyer’s bank. The buyer’s bank agrees to give the documents to the buyer only after the buyer has authorised payment. Without these documents the buyer cannot clear the merchandise at customs.
  2. Bill of exchange: The bank agrees to give the buyer the required documents upon the buyer signing a bill of exchange. A bill of exchange is an unconditional order to pay. It is acceptable in the international court and enforcement upon non-payment is immediate. A bill of exchange is often used to ensure payment after an agreed period, such as 30, 60 or 90 days.

Check the following when working with documentary bank collections:

  • Documentary bank collections are governed by an international body called the Uniform Rules for Collection (URC). This must be stated on the sale contract.
  • The terms and conditions on the documentary bank collections need to be agreed upon in the sale contract.
  • If you are not experienced in working with documentary bank collections, it is recommended that you use a company, freight agent, banking consultant, or legal consultant that is experienced in documentary bank collection terms and conditions to avoid any problems with making or receiving payments.

Escrow

An escrow is often used in conjunction with trade that originates from internet-based business-to-business trading platforms.

Internet escrow places money in an independent and licensed third party’s control in order to protect both buyer and seller in the transaction. When both parties verify that the transaction has been completed per the set terms, the money is released. If at any point there is a dispute between the parties to the transaction, the process moves along to dispute resolution governed by the third party. The outcome of the dispute resolution process will decide what happens to money in the escrow.

Payment to the third party is typically made by bank transfer.

Tools used for international money transfer

 

Bank transfers

  1. Transfers through a local bank

The foreign exchange division of your local bank can facilitate international payments or receipts. Some banks also have international payment facilities as part of their Internet banking offering. Alternatively, you can also contact your private banker, business banker, or visit your closest bank branch with a foreign exchange division. Not all bank branches have a foreign exchange division – be sure to find out which bank branches in your area have one before making the trip.

Your bank will require the following documentation from you:

  • Your FICA information. If you are using your local bank, they should already have these documents.
  • The reason for the international transfer.
  • If you are importing or exporting, the bank will need the banking details, SWIFT code, and address of the receiving bank.
  • A signed international transfer form from the bank.

Once submitted, the bank will process all the relevant information and book the exchange rate. The bank may contact the applicant to confirm that the exchange rate has been booked. Exchange rates fluctuate constantly and there is little control in regards to exactly when the rate is booked. This results in a small exchange rate exposure risk for the duration of the process. After the exchange rate is booked, the bank will arrange payment. The whole process usually takes between 2-5 days.

The banks have a set fee structure for foreign exchange transactions. Clients are charged as follows:

  • Administration fees. An administration fee is charged for the transaction. This fee varies depending on the amount that is exchanged. Both the buyer’s and seller’s bank charge a fee. The buyer can choose whether or not he will pay the seller’s banks’ fee.
  • Mark-up: The banks add a margin or mark-up on the foreign exchange. The exchange rate quoted by the bank is usually the SPOT exchange rate plus 1.5%-2.5%.

If the volume and frequency of foreign exchange is sufficient, a better fee structure can be negotiated with the bank. The more money transferred, the better the fee structure.

2. Transfers through a local bank using a private exchange broker

Private exchange brokers negotiate a better exchange rate and lower admin fees with the local banks due to the large volumes of foreign exchange they manage.

Transferring money with a foreign exchange broker works in the same way as transferring money through a bank, but with the following advantages:

  • Savings. You save on the bank’s foreign exchange rate, and on bank administration fees.
  • Convenience. All documents can be provided electronically to your broker. You can also contact your broker telephonically during office hours, which means you never need to leave your office.
  • Control. You decide on the time and date to book the spot exchange rate. This way, you avoid paying higher exchange rates due to the timing when the bank books your rate.

Due to our customer base of over 18 000 importers and exporters, Import Export License has secured favorable exchange terms with local private exchange brokers to bring these benefits to you. Set up your account and start trading.

Credit card payments

Using a credit card for international payments is a popular payment method for smaller transactions. Credit card payments are quick and convenient. Payment is typically made using an online secure payment portal. Payment typically takes between 1-2 days.

Credit card foreign exchange administration fees are charged according to the standard fee structure from your credit card supplier and cannot be negotiated. Credit card payment costs are typically higher than bank transfers.

Due to fraudulent activities associated with credit card transactions, it is important to make sure that your merchant and the portal you are using are both valid and secure.

In conclusion

By weighing up the risks and benefits around security, acceptability to the buyer and seller, cost, and ease of use for each of the above payment methods, you can make a calculated decision on the international payment methods best suited to your business or transactions.

Your import readiness checklist

Tariff codes 101