Client Question:
In an indirect export, must the seller sign the carrier’s clearing and shipping instruction?
Answer:
An “indirect export” from South Africa refers to any model where the buyer appoints the carrier and pays the international carriage (the “freight”) directly to them.
In all indirect exports, as it is not allowed for the SA seller to act as exporter, and as the seller is accordingly not acting as the shipper either, it would be inappropriate (at best) or illegal (at worst) for the SA seller to sign the carrier’s paperwork.
As a general proposition, it would never be in the seller’s interest to sign any paperwork offered to them by the buyer’s carrier, other than signing “as agents for [named buyer]” and, even then, to only do so in extreme and controlled cases.
The only exception would be if the seller had the parallel but unconnected role as the foreign Qualifying Purchaser’s Registered Agent. However, then the signing of clearance documentation is the responsibility of the Registered Agent not of the seller. The fact that they may be the same entity is coincidental.
For the seller, an indirect export is a form of local sale.
The seller would not issue commercial invoices or any documentation which may imply their involvement in the export event (should it take place). The seller (as vendor) only issues a tax invoice. It is the Registered Agent that will raise a commercial invoice on the Qualifying Purchaser and undertake the export process.
Presumably, the Registered Agent will also act as shipper. It follows that seller’s supplying restricted, controlled or excise goods, where the law requires that they act as either exporter or shipper, cannot undertake an indirect export model.
In the event of a non-resident payment, particularly should the vendor elect to zero-rate an indirect export in terms of Parts Two and Three of Export Regulation R.316, they must report the export proceeds as a third-party payment, quoting the Qualifying Purchaser’s UCR number in the BoP process.
The vendor treating the model wholly as a standard-rated local sale may still report the foreign payment as above, or in cases where they do not know the Qualifying Purchaser’s UCR details, they may report the payment as a local sale to a non-resident (using BoP category 109).
A central aspect in the control of the risk that these models pose, and to remove the commercial friction they can give rise to, is that the seller should be careful not to mislead the foreign buyer.
If the seller is not responsible for the ‘freight’ leg, then the seller should avoid using international commercial terms that imply an involvement in the export process. For example, if the seller quoted the Incoterms Rules® FOB or FCA, the buyer would have every reason to assume that the seller will function as exporter and will, in that process, sign an export clearing instruction.
Of course, when exporting from South Africa, the Incoterms® FCA, FOB and FAS models are not allowed but it is often the seller’s continued avoidance/ignorance of this law that gives rise to the problem at hand.
A local sale – regardless of the rate of tax applied – would be best termed a “collection”, if the buyer is coming to the seller, or a “delivery” if the seller must take the goods to a point within the Republic before handover.
Source: Freight Training
