INCOTERMS

Published By GlobalTrade Customs (Pty) Ltd

Understanding Incoterms® 2020 and SARS Customs Processes in South Africa

Introduction

In today’s globalised trade environment, the difference between a smooth shipment and a costly delay often comes down to one thing — clarity of responsibility.
This clarity is governed by the International Commercial Terms (Incoterms® 2020), a globally recognised set of rules created by the International Chamber of Commerce (ICC).

For South African businesses, understanding Incoterms is critical not only for logistics and pricing, but also for SARS customs compliance, valuation accuracy, and avoiding penalties.

What Are Incoterms® 2020?

Incoterms® define the responsibilities of buyers and sellers in an international sales transaction. They establish:

• Who arranges and pays for freight and insurance
• Where the risk of loss or damage transfers
• Who handles export and import customs formalities

There are 11 Incoterms® 2020 rules divided into two categories:

1. For any mode of transport

EXW, FCA, CPT, CIP, DAP, DPU, DDP

2. For sea and inland waterway transport

FAS, FOB, CFR, CIF

Each of these terms directly affects how SARS processes customs declarations, determines the importer of record (IOR), and calculates duties and VAT.

How Incoterms® 2020 Affect SARS Customs Processes

1. Importer of Record (IOR) and Customs Clearance

SARS requires that every import declaration lists a registered importer responsible for:

• Submitting the Goods Declaration (SAD)
• Paying customs duties and VAT
• Ensuring compliance with import permits and regulations

Depending on the Incoterm used:

• EXW / FCA: The buyer is responsible for import clearance and acts as the importer of record.
• CIF / CFR / CIP / CPT: The seller arranges carriage, but the buyer remains the importer of record.
• DDP (Delivered Duty Paid): The seller must handle all import duties and VAT. To do this legally, the seller must register with SARS or appoint a licensed South African importer.

If the importer of record is not properly registered or authorised, SARS will delay release and may impose penalties.

2. SARS Customs Valuation

SARS bases import duties and VAT on the transaction value — the price actually paid or payable.
Incoterms determine what this price includes:

• CIF / CIP: Freight and insurance are included in the invoice total.
• FOB / EXW: Freight and insurance must be added to determine customs value.

Accurate valuation is vital. Misstating freight or insurance costs may trigger SARS audits or post-clearance revaluations.

3. Documentation and Compliance

SARS relies on properly aligned documentation to clear goods efficiently.
Each Incoterm determines who provides key documents, such as:

• Commercial Invoice (must state the Incoterm and version, e.g., CIF Durban, Incoterms® 2020)
• Bill of Lading / Airway Bill
• Packing List
• Certificate of Origin
• Insurance Certificate
• Import/Export Permits

Incorrect or inconsistent documentation — particularly around Incoterm or value — can result in SARS halting a shipment for verification.

Practical Examples

Example 1: CIF Durban (Cost, Insurance & Freight)

The seller pays freight and insurance to Durban.
The buyer becomes the importer of record, lodges the SAD via eFiling, and pays duties/VAT based on the CIF value.
If freight or insurance values aren’t disclosed clearly, SARS may adjust the customs value.

Example 2: DDP Johannesburg (Delivered Duty Paid)

The seller handles all logistics and import duties to deliver to Johannesburg.
However, unless registered as an importer with SARS, the foreign seller must appoint a local importer or clearing agent to handle customs clearance.

 

How GlobalTrade Customs (Pty) Ltd Can Help

At GlobalTrade Customs (Pty) Ltd, we help South African and international businesses navigate the complexities of Incoterms® 2020 and SARS customs clearance with precision and efficiency.

Our services include:

• Customs clearance management at all ports, airports, and land borders
• Importer and exporter registration via SARS RLA and eFiling systems
• Customs valuation and tariff classification reviews to ensure accuracy and compliance
• Pre-shipment and post-clearance audits for Incoterm alignment
• Contract advisory services to ensure chosen Incoterms match your logistics and customs obligations
• Specialist guidance on DDP and CIF shipments, including representation as an authorised local agent

With our expert team, clients enjoy faster customs releases, correct duty calculations, and reduced risk of SARS penalties.

Best Practices for Businesses

1. State your Incoterm precisely — always include the version (e.g., “DDP Cape Town, Incoterms® 2020”).
2. Identify the Importer of Record early and verify SARS registration.
3. Keep freight and insurance invoices separate for transparent valuation.
4. Use a registered customs clearing agent for SARS submissions and compliance management.

Conclusion

The Incoterms® 2020 framework is more than just a shipping convention — it directly impacts your SARS customs obligations, valuation accuracy, and import/export efficiency.
Understanding your responsibilities under each Incoterm ensures smoother clearances, predictable costs, and full regulatory compliance.

Partnering with GlobalTrade Customs (Pty) Ltd ensures your business remains compliant, efficient, and protected throughout every stage of the customs process.