Agents and Transport Options
When to use a clearing agent
The first time that you import goods into the country, there is nothing stopping you from clearing the goods yourself. However, if you repeat the process and import on a regular basis, you will have to use a clearing agent,” explains Margie Pedder of the South African Association of Freight Forwarders.
“The reason for this is that the import process has become a fully automated process, which means that as a small importer you don’t have the infrastructure to use Electronic Data Interchange systems (EDI) which is why you need the services of a clearing agent, says Pedder”.
In July 2009 in terms of Government Notice R814 SARS enforced the use of EDI for the submission of certain cargo and goods declarations and reports.
What is EDI?
EDI organises the flow of information from one end of the supply chain to the other. The EDI revolution benefits customs and trading partners because it offers a number of advantages and in this way, South Africa can keep up-to-date with global import and export data requirements.
- EDI is a fully automated process that needs little or no intervention by either party
- Declarations that can be accepted round-the-clock
- The quicker retrieval of cargo through the reduction of clearance times
- A reduction in manual administrative processes resulting in fewer errors and no duplication
- Harmonised business relationships with other bodies such as Transnet Port Terminals, Transnet Rail Terminals, airlines and container depots.
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Drop shipping’ is a technique used in supply chain management where the retailer transfers customer orders and shipment details directly to either the manufacturer or a wholesaler instead of physically keeping goods in stock. The manufacturer or wholesaler then ships the goods directly to the customer.
As in the case of all retail businesses, the retailers make their profit on the difference between the retail price and the wholesale price. The upside of using drop shipping is that you the retailer avert the risk of capital outlay in purchasing or importing products. You also remove the risk of sitting with unpopular products that you may battle to sell.
As in all business ventures, you will have to have a detailed contract with the partners with whom you drop ship. This contract will contain details including when and how you obtain your payments and details on fulfilment on orders, product guarantees, etc.
How would using a clearing agent affect import costs?
“It is vital that a small import company conducts proper research to determine the most economical and cost effective method of importing products.
Clearing agents have years of experience, keep up to date with legislation, exchange control and banking regulations. They want to save money for their clients,” says Pedder. “It’s wrong to think that using a clearing agent isn’t cost effective. They only make 2% on disbursement”, advises Pedder.
According to the South African Revenue Services, (SARS), if you are importing goods frequently into South Africa you must have an import licence and if the value of the goods exceeds R400 you have to pay full duty.
Regulatory bodies for different imported products
Statutory regulations state that to import any product to South African you must register as an importer with the Department of Trade and Industry (DTI).
If your shipment is customs-dutiable, it needs to be accompanied by an invoice especially if it is a commercial shipment with a commercial value. A commercial invoice must show the price you have been charged, the importers and exporters names and details.
Other documents you may need include:
- Bill of Lading
- Insurance documents
- Import permit number
- Packing list.
How do I know whether my product is export-ready?
Your product has to tick several boxes before you can consider exporting it.
I want to start exporting my product into Africa. I’ve made contact with some buyers in Nigeria and they’re interested in signing a contract. How do I make sure that my product is ready for export?
Whether or not your product is export ready depends on the buyer’s needs, your product’s ability to meet those needs, and how your product will shape up against international competition.
In order to determine export readiness, you need to research the following:
- Your target market
- Any potential competitors
- The buyers themselves.
Common factors that would affect the exportability of a product include:
Unless there is a market for it, your product won’t sell. Look at your domestic market for an indication. If you are meeting a need locally, you should be able to meet the same need internationally.
This, however, is not the only consideration. International markets are usually further away, meaning that you will have to add transport costs, and will most probably have to include the cost of import duties and taxes in the final delivery price.
2. Product adaptability
A key quality of an export product is its ability to adapt to suit an international market. Cultural differences between countries could affect the use or acceptability of a product in each country. A product name could have a totally different and possibly derogatory meaning in another language and might have to be changed for that market.
3. Cost structure
The cost structure of the product will obviously impact on its competitiveness. For example, depending on the cost of materials, and whether or not those materials can be locally sourced, international transport costs and customs duties in the importing country will collectively determine the final delivery price.
The more you know about your competitor’s product, the better your position when determining your own chances of succeeding. Price is an important factor in determining success, but not the only way to compete. You can also differentiate your product by highlighting some of its unique selling points.
5. Product complexity
The greater the complexity of your product, the more important the strength of your business. Products that need a high level of support or installation assistance will need a strong local network with trained staff to support them. The investment in setting up a sales and support structure in the importing country could be prohibitive, making it unviable to export the product.
For more information, read more here.
How do I verify foreign suppliers?
Do your homework to reduce the likelihood that you’ll end up out of pocket.
I run a small import business and want to find some new suppliers in the Far East. How do I establish their credibility from South Africa?
It’s essential to establish that any new suppliers that you intend to do business with are credible and reliable. Here are some ways that you can check up on their credentials:
- Use internet trading forums such as that on eBay to establish whether the supplier has a history of being trustworthy and dependable
- Do online research to find out more about the company, including how long it’s been in business for and how long it’s had the product line that you’re interested in.
- What does their website look like? Has it been professionally designed and kept up to date? Does it have proper contact details including a physical address and telephone number?
- If you can’t afford to visit the supplier, contact them by phone or email and discuss your requirements. Find out about delivery times, payment methods and ability to deliver what you need, when you need it. These discussions should give you a feeling for how professional the supplier is in conducting its business.
- Ask for references and check them.
- You can consider using the services of a reputable inspection agency to make absolutely certain that the supplier is trustworthy.
- Obviously a site visit is the number one way of establishing a supplier’s credibility.
See the full article here.
What insurance does an importer or exporter need to take out?
Being under-insured can cost you dearly in the long run.
Can you point out some of the common insurance mistakes that SA exporters and importers should avoid?
As South Africa continues to strengthen its trade ties with countries like China, Germany, Japan and the United Kingdom, it is becoming increasingly important for exporters and importers to get to grips with the complexities of arranging marine cargo insurance.
With the rise of cargo ship accidents worldwide, including the bulk carrier Smart, that recently ran aground off the main beach at Richards Bay, exporters and importers can least afford skimping on cover, or making costly mistakes that could present their businesses with even bigger problems, in the event of an accident.
Marine cargo insurance helps exporters and importers to cover the physical damage or loss of their goods while being transported by sea. Failing to arrange appropriate cover can potentially harm a business and have a serve impact on its revenue stream.
Exporters and importers should take note of the following when taking out marine cargo insurance cover:
- Limited cover: Inexperienced exporters and importers often view insurance as a grudge purchase and risk not having adequate cover in place. This exposes their businesses to financial and liability risks in the event of an accident.
- Picking on price: During tough economic conditions, exporters and importers have the tendency to shop around for cover only using price as determining factor. Businesses should rather focus on what the policy covers, instead of basing their decision solely on price. Rushing to sign a contract without fully understanding the terms and condition of the policy is a mistake. Each business is unique and has its own insurance needs. For example, a perishable goods importer will have different insurance needs to a components importer.
- Reducing liability: Opting for lower liability, or other limits, in order to save on monthly premium costs is certainly not advisable. Exporters and Importers should seek advice from their brokers and insurers to arrange the right amount of cover for their business, as well as to protect personal assets.
- Unaffordable deductibles: Exporters and importers should avoid opting for deductibles that they cannot afford. A deductible, commonly known as excess, is the amount that a business will have to pay upfront before an insurer can settle a claim. While choosing a higher deductible may help to reduce monthly premium costs, it is best to choose a deductible that will be affordable in the event of a claim.
Know about the general average
Exporters and importers should also be familiar with general average, which is independent from marine cargo insurance. It is an agreement between the ship owner and cargo owners, to share any losses resulting from a voluntary sacrifice of part of the ship or cargo to save the whole during an emergency.
General average claims can arise from the ship being stranded, catching fire, damaged engine, and when the ship is in any danger of sinking.
The 2 types of policies
Marine cargo policies come in two forms, namely, open policy, which covers a number of consignments and a specific policy, which normally covers specific consignments.
There is also an option to take out an all-risk or total loss cargo policy, which covers against all fortuitous losses.
Regardless of the nature of business, it is advisable to seek advice from a broker or insurer before arranging any type of marine cargo cover, to fully understand exclusions and avoid being over and underinsured in the event of a loss.