February 07, 2020
THE INS AND OUTS OF IMPORTING
At Currency Partners, we help you navigate the complexities of importing and exporting with ease. Benefit from a dedicated Corporate FX dealer with comprehensive solutions across your entire supply chain to mitigate risk, free up capital, facilitate payments and cut costs with preferential terms.
South Africa has a complex import process. This can result in a number of challenges for importers and exporters alike. From not having sight of products throughout the supply chain, currency risks due to volatile exchange rates, clearance delays, and the varying regulations depending on the origin of goods, it’s little wonder that many businesses are overwhelmed by the process.
In most cases, the greatest concern for importers is cash flow. Depending on what you’re importing, your money could be tied up in complex transactions for a fair amount of time. Combine this with a volatile exchange rate and your cash flow may become erratic and unreliable.
In turn, getting paid is a vital consideration for any exporter. Choosing the most reliable and secure method of collecting payments is crucial.
Navigating the legal landscape
Administration and complexities associated with managing the import and export process are extensive. As with any country, the local market is governed by specific regulations that must be adhered to.
Numerous documents and clearances are required. Importers in particular are faced with navigating various shipping and bank documents when attempting to complete their import transaction.
Payment methods to mitigate risk in international trade
There are a number of options when collecting or making payments for imported goods. These include open accounts, advanced payment, and documentary collection as follows:
In this instance, the supplier runs a credit line for the importer so they can pay at their convenience. However, this form of payment has become increasingly rare, and depends heavily on the business relationship between the supplier and importer.
Advanced payment requires the importer to provide the supplier with a deposit on their order. When the importer books currency to make this payment, they must provide the pro forma invoice, indicating that a deposit is required.
Document collection is a cost-effective option for importing and exporting operations. This requires the supplier and importer to provide a number of documents to their respective banks as security for payment and delivery of goods. There are a number of options for documentary collection as follows:
Bill of Lading: The importer pays the supplier once they have received the Bill of Lading and Commercial Invoice. These documents must be submitted to the bank when payment is made.
Payment on delivery: The importer makes payment to the supplier once goods are received. Documents to confirm that goods have been received include a Commercial Invoice, Bill of Lading, Bill of Entry, and SAD500. These documents must be submitted to your FX provider when payment is made.
Foreign Bills for Collection: This payment method includes using the importer’s and exporter’s banks as intermediaries. The exporter submits a draft and other relevant shipping documents to the bank before the goods are exported to the international client. The bank then forwards the documents to the collecting bank overseas, along with instructions that goods may only be released once payment has been made.
Letter of Credit: A Letter of Credit is a contract drawn up between the sending and receiving banks, confirming that payment will be made to the beneficiary bank if the terms of the order are met. It provides an economic guarantee from a creditworthy bank to mitigate risk for the exporter. There are a number of types of Letters of Credit pertaining to the various types of arrangements required and agreed upon by the various parties involved.
What our import and export solutions can do for you
At Currency Partners, we focus on understanding your business in order to provide end-to-end import and export solutions designed to suit your unique international trade needs. You will be assigned a dedicated Corporate FX dealer as your single point of contact to manage the process from start to finish.
Exporters benefit with access to the best competitive currency pricing in international markets. Our faster transaction times, lower fees and preferential terms enable us to optimise the working capital, credit facilities and risk management strategy for your business.
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