Before providing information of what represents a third party payment for imports, it is important to briefly explain what is deemed to be an acceptable import transaction, in terms of Exchange Control principles. It should therefore be noted that in the normal course, an import payment can be processed by a local Authorised Dealer (Bank) against the presentation of the following documentation.
1. A commercial invoice issued by the supplier and addressed to the importer.
2. A transport document as prescribed by the International Chamber of Commerce Uniform
Customs and Practice for Documentary Credits in UCP 600 or eUCP 600, e.g.
a. A Bill of Lading or
b. Freight Forwarder’s Receipt or
c. Freight Forwarders Certificate of Transport
3. The consignees copy of a SARS Custom Declaration which must reflect an MRN
(Movement Reference Number).
4. As necessary, Banks will request the presentation to them of the prescribed SARS
Customs Declaration bearing the Movement Reference Number (MRN) as evidence that
goods in respect of which transfers have been effected have been cleared by Customs.
These documents must be presented at the time foreign currency payments for imports
are made where the goods have already been cleared by Customs, or in the case of
advance payments in excess of R50 000, within four months of the date of payment.
It is relevant to note that advance payments for imports may initially be made against the presentation of a Pro-Forma invoice, whereas payment requests in respect of goods already received and Customs cleared into South Africa must always be supported by a Commercial Invoice.
It is useful to note that a Commercial Invoice is the document required by Customs to determine true value of goods imported, largely to correctly assess tax and duties. This document will typically identify the buyer and seller of the goods, indicate the date and the terms of the sale, provide details of quantity weight and volume of the shipment, as well as type of packaging, description of goods and total value of the consignment, together with insurance, shipping, and other charges. Import payments (other than Advance Payments) should not be supported by pro-forma invoices.
It follows that a basic import transaction represents an arrangement between a resident importer (Company A) and a non-resident exporter of goods (Company B), with no other parties involved in the movement of goods, or perhaps reflected as the foreign recipient in respect of payment for the goods. A transaction of this nature will meet Exchange Control requirements, since the beneficiary of payments will also be the supplier/importer of the goods, as per Bill of lading and Customs Clearance documents.
However, if a further company (Company C) is party to the transaction, whether from the same jurisdiction or a different jurisdiction to Company A or B and such entity or entities play a role in either the movement of funds or the movement of goods, then Company C becomes a third party to the import arrangements, as they would be influencing the cross border transaction/arrangements
It needs to be noted that Company C is viewed as a legally independent entity, even if it is part of a Group of Companies including Company A or B
The legal standpoint of SA Reserve Bank, as relates to third party payments can be summarised via a quotation of the following extract from the Currency and Exchanges Manual.
“Care must be exercised by Authorised Dealers to ensure that no payments to third parties abroad are affected. Transactions of this nature must be referred to the Financial Surveillance Department for prior written approval.”
Furthermore it is relevant to point out that, in respect of third party payments for imports, SA Reserve Bank have further and formally clarified that import payments to be effected to affiliated third party beneficiaries, i.e. related by way of shareholding directly or indirectly, to the actual supplier of goods, may not be excluded as forming part of third-party payments as outlined in terms of the Currency and Exchanges Manual. It should therefore be clear that such transactions must be submitted to Financial Surveillance Department, for adjudication.
It follows therefore that if a third party is involved in an import transaction, prior approval from SA Reserve Bank, Financial Surveillance Department will be required, before payments may be made. To legally simplify ongoing and repeat payments to the same beneficiary, it would be advisable to make application to SA Reserve Bank for a ‘Blanket Authority’ in respect of a projected amount, sufficient to meet similarly documented payments for a 12 month period. Such authorities can be renewed on an annual basis.
A company that that is defined as ‘Trading As’ (T/A) is regarded as the same company and does not represent a third party in a transaction.
It should additionally be noted that invoices which are issued with branding names commonly marked with Trade Mark (™) and Registered Trade Mark (®) are not regarded as third party arrangements. Please note that the name of the business must also reflect on the invoice and it must align with beneficiary on the Cross Border Reporting (BOP) form.
It is also important to point out that invoices, transport documents etc, reflecting a specific South African counterparty, cannot be presented to a Bank for payment by a party other than the party specified in the documents. Such a ‘third party’ payment arrangement will also be subject to the submission of a fully motivated application to SA Reserve Bank, for permission to make the payment.
– Keith White