The business of exporting computers from Florida, the United States and importing them into South Africa is currently on the rise, thanks to the continuously growing trade between these two countries since the end of the era of apartheid. We intend to be suppliers of high-quality computers and parts to the South African business sector, with the hope of growing into schools and universities. This import/export business is ideal considering the fact that South Africa accounts for the biggest computer in the United States computers in Sub-Saharan Africa. Furthermore, the end of apartheid, coupled with the lifting of sanctions by the government makes South Africa an attractive destination for investment and trade (Seyoum, 2013). South Africa imports computer accessories and peripherals valued over $60 million on an annual basis. It is, therefore, not surprising that the computer sector is faced with strong price competition, which is why our company will mainly be focused on the upper end of the consumer market. Our key competitive advantages include prompt delivery and services, a coordinated marketing program, and professional expertise and image in both the American and South African markets. The South African computer market is estimated to be worth more than $1 billion, with a particular focus on mainframes and personal computers (PCs). The local production of computers and parts in South Africa is negligible yet demand is on the rise, and this poses an evident market for the proposed venture. This paper looks into all the key aspects that need to be considered in the import/export business plan for computers and the parts from the United States to South Africa.
The harmonized commodity description and coding system classification of a product
Computers, computer software, and computer parts account for the main commodity for export and import in the proposed venture. These products are covered under Chapters 84 and 85 of the European classification of goods, and they are classified according to their function, design, performance, build, functionality, and whether they exist as a single unit or a complete system (Weiss, 2008). Computers and software are classified into different categories to facilitate tariff needs. The fact that we will be dealing with multiple product and product categories, we will make use of the General Interpretative Rules (GIRs), which are used when classifying computers and software. The GIRs give a clear outline of the legal foundation that guides the classification. The six GIRs that that the company will apply for this case include:
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GIR I : This rule directs that classification is based on the terms of the product headings and any chapter notes. A chapter code has two digits while a heading code has four digits. Under this rule, the company will have to thoroughly analyze the terms within the heading descriptions and the notes to each chapter when classifying the goods.
GIR 6 directs the classification of goods at the subheading level. We will apply both GIR 1 and GIR 6 in a situation where an item is classified using a code that has six or more digits.
Also, there are times when we will have to use the GIRs 2, 3, and 4 in a specific order.
We will also need to incorporate GIR 5 for all the mainframe computers and software (European Commission, 2019).
Items under the heading 8471 are classified as 'automatic data processing machines,' and we will have to ascertain that these machines are capable of accomplishing various operations, which include:
Store all the processing programs that run on the computers and the data required to run a program
Perform the specified arithmetical computations.
Be freely programmed as the user wishes.
Execute a processing program without the need for human intervention.
Export Regulation in the United States
The government of the United States has a statutory right to regulate the export of a number of products, and this regulation is based on the requirement to have a license prior to the shipment process. All products are required to be classified under the U.S. federal statute and have the accompanying regulations. According to the Export Administration Regulations, all products are classified as an Export Control Classification Number (ECCN) category, which determines the shipping restrictions.
In this case, computer software is controlled technical data owned by the government of the United States and careful scrutiny of software that contains encryption technology is necessary before any shipment is made. Most software fall under the category of ECCN 4D001, which covers all the general software exports ( Young, 2016) . Based on the reasonable and intended use of most software, the restrictions on the software used for crime control, missile technology, and anti-terrorist reasons are not usually applicable. In this case, it is only the national security restrictions that come to play and they require one to have a license before shipment. Computer components and hardware also account for controlled exports, and in this case the company will need to get in touch with the manufacturer to obtain the ECCN codes for each component. This information will direct all the export license requirements that we will need to meet ( Young, 2016).
Import Regulation in South Africa
The first thing that the company will need to do to import computers and computer software and parts into South Africa is to obtain all the necessary tariff information. We will obtain information on the import surcharges, excise duty, and taxes from the South African Foreign Trade Organisation (SAFTO). The tariff schedule will be dependent on the HS number for the product we are importing. The import tariffs in South Africa generally range from 0-45%, and they are in adherence with the Harmonised Tariff System. South Africa levies an import surcharge on the customs value of selected products. The surcharge rates computers and computer software are 15%, and there is a need for import permits (Africa-Business, 2019).
Transportation: Method and Cost
There are three key export/import agents from the United States to South Africa, and these include FedEx, UPS, and DHL. We will transport the computers, computer parts, and computer software through ships using the services of FedEx because shipping the goods is cheaper. The dutiable value of the goods that are imported into South Africa is calculated based on the f.o.b. price in the exporting country, in this case, the United States. The South African Customs and Excise Act holds that the value for customs duty purposes the product’s transaction value. In case the transaction value cannot be determined, then the price is adjusted based on the charges, cost, distance, and mode of transport. Another charge that we will incur is the dutiable weight, which accounts for the legal weight of the products plus the weight of the carriage container. Another cost that we are set to incur is the import duty, which is 20% for computers and associated products with a value-added tax of 14 percent. There are no additional duties and customs fees when using FedEx (FedEx, 2019).
Payment and financing method
There are two main billing options offered by FedEx. First, there is the online billing system to increase efficiency in the operations, transparency, and control on our operations. We will also require the company to give us a paper invoice when delivering the products for the purposes of record keeping. It is estimated that this venture will require an investment of approximately $200,000 million. The President and founder of the company, James Kaav will invest a personal fund sum of $40,000, The Vice President, Ms. Mary Ann, will also make an investment of $30,000, and $85,000 will be borrowed from the bank. The remaining amount of $45,000 will be obtained from a venture capitalist, who will in return acquire 35.5 percent of the company’s stock. It is expected that all the investors into this business will be able to get their money back within the first year of operation.
A Certificate of Origin
A Certificate of Origin is a crucial document when getting into international trade because it helps to fully ascertain that the goods dispatched in a particular export shipment are wholly produced, obtained, processed, or manufactured in the country in question. This document can also be used as the exporter’s declaration. A Certificate of Origin (CO) exists in two forms: non-preferential COs, which certifies that the goods do not need any preferential treatment, and preferential COs, which certify that the goods are subject to exemptions and reduced tariffs when they are exported to countries that extend these privileges (export.gov, 2019) . These COs may be needed to comply with foreign customs and letters of credit. To reduce the many formalities involved in the latter CO, we will use a non-preferential CO for our case, and a sample is as below:
| Exporter’s Name, Address, and Tax Identification Number |
Blanket Period: From: To: |
|||
| Producer’s Name, Address, and Tax Identification Number | Importer’s Name, Address, and Tax Identification Number | |||
| Description of Goods | HS Tariff Classification | Preferential Tariff Treatment Criteria | Other Criteria | Producer |
An Insurance Certificate
The insurance certificate is an essential document in export shipments because it ascertains that you have an appropriate insurance policy for the cargo that you are exporting. Insurance is crucial because any large losses and liability end up becoming the concern of the exporter. Our proposed insurance certificate is shown in the figure below:
| Registration No: |
Country Ref. No. SOUTH AFRICAN DEVELOPMENT COMMUNITY(SADC) INSURANCE CERTIFICATE |
|||
| Exporter Name and Address | ||||
| Consignee Name and Address | ||||
| Particulars of Transport | ||||
| Marks and Numbers, and Description of goods | Customs Tariff No. | Origin Criterion | Gross Weight or Other Quantity | Invoice No. and Date |
|
CUSTOMS ENDORSEMENT Declaration Certified Export Document Form………….. Customs Office……….. Issuing Country or Territory……… Date |
CERTIFICATION Signature Stamp |
|||
A Shipper’s Export Declaration
The Shipper’s Export Declaration is an essential document that is needed by the U.S. Department of Commerce for the export of various controlled items and the shipment to certain countries, or basically any shipment that exceeds a certain amount this document comes in handy in the monitoring of the shipments of controlled goods.
|
SHIPPER’S EXPORT DECLARATION |
||||
| U.S. Principal Party In Interest | ||||
| Date of Exportation | Transportation and Reference Number | |||
| Supplier ID No | Parties to Transact | |||
| Ultimate Consignee | ||||
| Intermediate Consignee | ||||
| Forwarding Agent | State of Origin | Country of Destination | ||
| Loading Per | Transportation Method | Carrier Identification Code | Shipment Reference Number | |
| Exporting Carrier | Port of Export | Entry Number | Hazardous Materials? | |
| Port of Unloading | Contaminated Vessel? | In Bond Code | Routed Export Transaction | |
Any Other Required Export Documentation
The company will also be expected to produce a commercial invoice indicating the price that was charged to the importer plus the cost of transportation to complete shipments to South Africa. There may also be other special documentation specific to the client. There should be at least three copies of the invoice sent separately to the consignee before the goods arrive (Africa-Business, 2019).
References
Africa-Business. (2019). Export-Import regulations in South Africa: Business in Africa series. Retrieved from https://www.africa-business.com/features/faqs.html
European Commission. (2019). Classifying computers & software. Retrieved from http://trade.ec.europa.eu/tradehelp/classifying-computers-software
export.gov. (2019). South Africa - Import Requirements and Documentation | export.gov. Retrieved from https://www.export.gov/article?id=South-Africa-import-requirements-and-documentation
FedEx. (2019). South Africa Country Snapshot. Retrieved from https://smallbusiness.fedex.com/content/articles/fedex/SBC/us-en/2013/05/14/south-africa-country-snapshot.html
Seyoum, B. (2013). Export-Import theory, practices, and procedures . Routledge.
Weiss, K. D. (2008). Building an import/export business . John Wiley & Sons.
Young, C. (2016). Export of computer software and hardware. Retrieved from http://www.btlg.us/News_and_Press/articles/export%20primer.html
