How Incoterms 2020 will affect your business

Incoterms, short for International Commercial Terms, were first introduced to global trade in 1936 to grease the wheels of commerce. They do so by stipulating where sellers hand over risk, responsibility and cost of fulfilling a shipment to their buyers.

Incoterms are revised every ten years and the ICC (International Chamber of Commerce) has recently published the 2020 version which comes into force on the 1st of January 2020.

Download a handy printable chart of Incoterms 2020 here.

How does this affect the average importer and exporter?

Not very much.

Firstly, using Incoterms in a sales contract is not required by law. Making use of these terms is optional but recommended as they do simplify where accountability lies in the case of a legal dispute. An Incoterm only becomes legally binding when it is written into a sales contract. Even so, adjustments to the relevant term’s definition can be predetermined and written into the agreement.

Secondly, the updates made with Incoterms 2020 are not of massive consequence, unlike the modifications that were published with the 2010 version. Like the 2010 edition, Incoterms 2020 consist of 11 terms with some minor alterations to be more applicable to current trends in international trade.

Thirdly, Incoterms 2010 and every version published prior to this are still completely valid, as long as the Incoterms referred in the contract are clearly defined. 

The correct way to specify the Incoterm used is in the following format:

Rule – Point of transfer – Incoterms of relevance

E.g. EXW at 20 Example Street, Cape Town, South Africa as per Incoterms 2020

Incoterms 2020 updates to take note of

DAT is changed to DPU

Incoterms 2010 specifies DAT (Delivered at Terminal) to mean the goods are delivered once it is unloaded at the named terminal. This does not allow for goods to be delivered at a private or business address. DPU (Delivered at Place Unloaded) is more general and applies to any point of delivery specified.

DPU is also greatly beneficial to the buyer as risk remains on the seller until the goods are unloaded. Damage incurred during the unloading process is therefore the seller’s obligation to rectify.

Businesses who have become accustomed to using DAT need not fret. You can use the DPU incoterm and with the name of the terminal where you want the goods unloaded for the same end result.

Insurance in CIP/CIF is changed

The Incoterm CIP (Carriage and Insurance Paid) means that the seller delivers to the carrier, and is responsible for payment of the carriage and insurance to the named destination. CIF (Carriage Insurance and Freight) is the same except that it can only be used for maritime transport, which means delivery is onto a ship and the destination must be a port. In both cases the seller is responsible for supplying insurance cover, but the risk transfers to the buyer once the goods have been delivered to the carrier.

Under Incoterms 2010 the seller is obligated to provide insurance for the buyer that is equivalent to Clause C of the Institute of Cargo Clauses. This is a very basic level of insurance which is generally suitable for bulk commodity cargoes but may not be comprehensive enough to adequately cover manufactured goods.

Incoterms 2020 defines CIF as inclusive of the same insurance requirements, but the insurance requirement of CIP has increased to Clause A of the Institute of Cargo Clauses. The reasoning behind this is that CIF is more often used with bulk commodity trades and CIP, being a multimodal term, is more often used for manufactured goods.

Terms and costs are clarified

Incoterms 2020 has clarified any vagueness around allocation of costs, especially as it pertains to port or place of delivery. This is due to an increased number of disputes around this point. The broad principle is that the seller (exporter) assumes responsibility for transport costs incurred up to the predetermined point of delivery, and the buyer (importer) picks up the cheque from there.

Incoterms 2020 also makes provision for transport being provided by the seller or buyer (e.g. the seller’s own vehicle). For example, according to Incoterms 2020 FCA stipulates the buyer must “contract or arrange at its own cost for the carriage of the goods from the named place of delivery”.

To summarise, revisions included in Incoterms 2020 have been made for the sake of clarity. Explanations are more detailed and diagrams more user friendly.

How do I incorporate Incoterms 2020 in my business dealings?

If you are already using Incoterms in your sales agreements, find out how your preferred terms are affected by the 2020 revision and how this will impact your current dealings.

Generally speaking, every importer and exporter should review the definitions of Incoterms periodically to make sure they have a thorough understanding of what these terms include (and exclude), and to check whether they are still making use of the Incoterm best suited to their needs.

Once you are confident about the Incoterms 2020 you want to make use of, ensure all your standard contracts are updated and referenced correctly.

Click here for a user friendly summary of Incoterms 2020 and pitfalls to look out for when using them.

Need assistance with Incoterms, other import- and export-related matters, or booking transport for your goods? Contact our friendly consultants on 0861 0 TRADE (87233), or get in touch via our website.

Cross-border permits

Planning to start a road-based export or tourism business? If your planned business involves transporting goods or passengers across South African borders, you need to make sure you have a valid cross-border permit.

What are cross-border permits?

In accordance with the Cross-Border Road Transport Act 4 of 1998, regulatory services issue cross-border permits to exporters and transport companies to conduct road transport business within South Africa and its neighbouring SADC countries.

The purpose of cross-border permits is to:

  • Ensure a more efficient flow of goods and passengers across borders. The permits assist freight operators, passenger transport, and tourism vehicles to move from one SADC country to the next without experiencing extended delays at border posts.
  • To regulate competition in the cross-border passenger road transport industry.
  • To minimise operational constraints for the cross-border road transport industry.
  • To enhance business opportunities and broaden market access for cross-border road freight transport operators.

When do I need a cross-border permit?

You need to apply for a cross-border permit if your business meets the following criteria:

  • You transport goods or passengers over the border for commercial reasons; and
  • Your vehicle, or the combination of vehicles, exceeds a total mass of 3,500kg.

Note: If you use a foreign-registered vehicle within South Africa for commercial purposes, you also need to register for a cross-border permit.

Which types of permits can I apply for?

There are several types of cross-border permits, including:

  • Goods permits: To transport physical goods sold for commercial purposes across SADC borders (This permit is needed whether the goods are transported by the seller themselves, or a third party accepts payment to transport the goods).
  • Bus passenger permits: To transport passengers across SADC borders for commercial gain using a bus.
  • Taxi passenger permits: To transport passengers across SADC borders for commercial gain using a minibus taxi vehicle.
  • Tourist passenger permits: To transport passengers across SADC borders for the purposes of tourism, and for commercial gain, using minibus taxi vehicles or busses (any vehicle exceeding 3500kg).
  • Organised group permits: To transport organised passenger groups travelling for business, education, or other purposes, and for commercial gain, using minibus taxi vehicles or busses (any vehicle exceeding 3500kg). Organised groups require a letter from a body hosting the group in the destination country to confirm that the group members are travelling for a predefined, specific purpose.
  • Cabotage permits: To transport goods or passengers between two locations in the same country by a transport operator from another country (for example, a South African tour group operator transporting tourists in Namibia).

Frequently asked questions (FAQs)

  • Can one cross-border permit be used for multiple countries?

You need to apply for one permit for each country where you plan to drop off or collect goods or passengers.

  • Is it necessary to obtain a cross-border permit for every country passed through en route to the final destination?

No, you only need to apply for a permit for the country in which the goods or passengers are dropped off or collected. In the permit application, you need to outline the route that you will be driving from and to your destination country.

Here is an example of a route containing multiple stops:

  • Pick up goods from different locations within the Republic of South Africa;
  • Transport the goods through the RSA/Zimbabwe border at the Beit Bridge border post;
  • Transit through Zimbabwe, through the Mozambique/Zimbabwe border at the Nyamapanda/Cochemane border post;
  • Transit Mozambique, through the border post at Cassacatiza/Chanida;
  • Transit Zambia to the Zambia/Democratic Republic of Congo border at the Kasumbalesa border post, en route to the Democratic Republic of Congo.

In the example above, no goods may be picked up or set down within Zimbabwe, Mozambique, or Zambia. The goods may only be delivered to the final destination – the Democratic Republic of Congo (DRC). You will only need to apply for a cross-border permit for the DRC.

  • Does one cross-border permit cover all the trucks or vehicles in a fleet?

No, each vehicle within a fleet requires its own permit. You also need to ensure that each vehicle has its own roadworthy certificate (which needs to be submitted during the permit application process).

  • What else is needed to cross road borders for business?

For all exports to SADC countries, you can save on import duty tax by applying for SADC certificates of origin.

You can learn more about certificates of origin and their cost-saving benefits in our blog post –  Trade Agreements.

Apart from the SADC certificates, there are a few additional things to keep in mind. To make sure you aren’t left in the dark, we’ve created a comprehensive blog post on cross-border trade. We cover everything you need to start trading across SADC countries using road transport.

You can read our blog post, Cross border trade, here

  • When is registration as a road hauler/transporter or carrier necessary?

All businesses carrying bonded cargo must register as either a:

To submit a manifest (a list of all the items in the transport vehicle) to Customs, a carrier registration is required. Electronic manifests can be submitted through the Electronic Data Interchange (EDI).

You can find more information on the above registrations in our blog post, Bonded Goods Transport and Terminology.

Any additional questions?

If you have any additional queries about cross-border permits, our team of consultants are here to help. Contact us on 0861 0 TRADE (87233) for a free consultation, or simply fill in this short webform and they will contact you.

Customs rebates, drawbacks, and refunds

Your guide to saving money on your imports through rebates, drawbacks and refunds.

If you’re in the business of manufacturing, processing, or packaging goods that contain imported materials, you may be in luck. To stimulate industrial development and economic growth, the South African government incentivises businesses to manufacture goods locally. They do this by making allowance for reduced or no duties on imported goods needed for manufacture (if the goods are not available at a reasonable price in South Africa). If you import for this reason, you can apply for either a drawback or rebate on your imported goods. Additionally, in the event that you receive damaged or inadequate imported goods, Customs also allows you to apply for refunds on duties and VAT paid on these goods.

In a nutshell, the purpose of rebates and drawbacks is to:

  • Stimulate the local manufacturing industry by removing duty tax on specific imported raw materials used in manufacturing.
  • Stimulate exports by allowing South African manufacturers, packers and processors that intend to manufacture goods for export to obtain raw materials at world prices. This is done by reducing, removing, or refunding duties on certain goods.

The Customs and Excise Act No. 91 of 1964 makes provision for VAT and duty rebates and drawbacks (hereafter referred to as the Act).

What are rebates?

A rebate is a full remission or part reduction of import duties, subject to the importer’s compliance to specific conditions set out in the Act, at the time of import. Every rebate item has its own extent of rebate. The Act lists goods that qualify for rebate under the following headings:

  • Schedule 3 (industrial rebates),
  • Schedule 4 (general rebates), and
  • Schedule 6 (excise duties, fuel levy, and environmental levy).

To qualify for a rebate, importers must have a dedicated rebate store located within the Republic of South Africa and registered with Customs, wherein the rebate items are safeguarded. The rebate store has to be separate from a bond store, complete with its own security measures (a securely locked area, with only one lockable entry point and room on the gate for a Customs lock).

What are drawbacks?

A drawback is a refund of Customs duty that the importer paid when acquiring certain materials that were used in manufacturing, processing, packaging, or otherwise altering goods for the purpose of export.  The Act lists goods that qualify for drawback under the following headings:

  • Schedule 5

The importer will pay full duty tax at the time of import. Once the imported goods become a component of a final product and are exported, the importer can claim the initial duty tax from Customs. Applying for a drawback after the imported materials have been processed allows the importer to more accurately determine which percentage of their imported materials were used to manufacture goods for export. For example, sometimes the importer may only use some of the raw materials to produce goods for export, while the rest of the goods are sold locally. At other times, the importer might import the materials not knowing that they will use them in the manufacture of goods for export.

Note: Importers can only submit a drawback application once they’ve exported the final product. Applicants must attach proof of export to their application. All export declarations must reflect the correct Customs procedure code (CPC) and drawback item prior to the goods being exported from South Africa. Applications must be lodged within 6 months of the date of export.

What are refunds?

Importers can apply for refunds from Customs if they can prove that they paid a duty or levy for which they are not liable, or if they export goods in the same condition in which they were imported.

Customs stipulates that it is acceptable to apply for refunds under the following circumstances:

  1. There was an error in determining or calculating a price;
  2. The importer was overcharged for a duty;
  3. The product was imported under an incorrect tariff classification;
  4. The imported goods were damaged, destroyed, or lost by circumstances beyond the importer’s control before Customs released them for home consumption;
  5. All or part of the goods were shortlanded, shortshipped, or shortpacked; or
  6. The substitution of any bill of entry in terms of section 40 (3) of the Act;
  7. The applicable duties were reduced or withdrawn.

Note: Importers must apply for refunds within 2 years of the goods being cleared for home consumption, or from the date on which the charge to which the application relates was paid.

How do I know if my goods qualify for rebates or drawbacks?

In order to qualify for rebates or drawbacks, an importer must make sure that they:

  • Are importing materials that qualify for rebate or drawback under the Customs schedules; and
  • Are using the materials in accordance with the specific use stipulated in the Customs schedules.
  • Are registered with Customs as a rebate user and, if necessary, have the applicable ITAC permit.
  • To help you quickly look up the extent of the drawback or rebate you can claim we have a copy of Schedules 3-6 on our website under ‘Rebate, Drawback and Refund look up’. All you need is the imported product’s tariff code. Simply open or download the guide, press CTRL+F (or CMD+F for Mac users) to open the search bar in the PDF, and type your tariff code into the search bar. Check that the product description in the guide matches the tariff heading you entered, and refer to the last column to see whether your product qualifies for a rebate or drawback. Image 1 below outlines this process.

Refund, duty and drawback lookup guide example

Image 1: How to use our rebate, drawback, and refund lookup guide.

Open our drawback and rebate guide here.

Note: Customs will not issue drawbacks or rebates under the schedules outlined in the guide if the importer does not use the imported product for the purposes specified in the guide. For example, in Image 1, drawback item 501.02 is listed as “containers of printed paper or paperboard (excluding corrugated), used for packing frozen fish and frozen fish products”. Should the importer not use the paper or paperboard specifically to package frozen fish products, they will not qualify for the drawback.

What if I can’t find my goods in the schedules?

If the current Customs schedules do not list the goods you would like to claim for, Customs may still consider the goods for rebate if you have used them in the manufacture, processing, finishing, equipment, or packing of goods for sale. You may also qualify for a drawback if the afore mentioned goods are produced for sale in an export market. In this case, you will need to lodge an application with ITAC for a rebate or drawback permit.

Need additional assistance? If you are struggling to find your imported item on the current schedules, we can help you assess whether you qualify for a rebate, and help you apply for the relevant ITAC permit. Contact us for more information.

If you are struggling to find your imported item on the current schedules, we can help you assess whether you qualify for a rebate, and help you apply for the relevant ITAC permit. Contact us for more information.

Reasons you might not get your refund or drawback

Customs can refuse to grant refunds or drawbacks under the following circumstances:

  • When the application wasn’t lodged within the specified time frame;
  • When Customs duties and taxes have been paid on counterfeit goods that are destroyed;
  • When Customs duties and taxes have been paid on goods that violate any law;
  • When duties are paid on imported goods that are subsequently exported to Botswana, Namibia, Lesotho, or Swaziland.

Want to get started?

Would you like to know if you qualify for a rebate, refund or drawback? Contact our team on 0861 0 TRADE (87233) for assistance. Alternatively, simply fill out this short webform to let us know how we can assist, and we will contact you.

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