Q196: When exporting, what is the difference between my ‘FOB’ price and my UCR value?

A196: The UCR (Unique Consignment Reference) value is more correctly referred to as the ‘transactional’ value.

This is the selling price for the tangible export, including insurance and transport charges if applicable but excluding certain other intangible items such as a royalty; a design fee, or an installation cost in the destination country, etc.

The transactional value is expressed in box (or field) 28 of the customs export entry, the SAD500. This is the amount the seller expects to be paid, or has already been paid for the goods, and when interfacing with a bank on receipt of the payment (Balance of Payment or BoP reporting), the resident must quote the exporter’s UCR (also taken from field 28) if the supply has already been exported, or the UCR planned to be used by the exporter if the transaction is pre-paid in part or in full.

However, Customs also require a statistical value, informally called the ‘f.o.b.’ or ‘fob’ value. The Customs’ valuation expression is not officially abbreviated and should really be expressed in full as ‘free on board’. The use of abbreviations is an unregulated but wide-spread customary practice. SARS regularly express the symbol using upper case letters, randomly either “FOB” or “F.O.B.”, adding further confusion.

The posed question also uses upper case letters, yet commonly the upper case expression FOB (or F.O.B.) is how the unrelated sales or commercial contract term is frequently expressed.

Be careful of confusing the two as it is a common mistake. The informal-but-common Customs valuation symbol ‘f.o.b.’ expresses a price, whereas the upper-case symbol “FOB” most likely is intended to express the contract commercial term with regard to the seller and buyer’s proposed division of risk.

The free on board statistical value is given in field 22 of the SAD500 expressed in local currency. The party submitting the entry uses a customs-nominated exchange rate* to calculate this local value if the transactional pricing is in a foreign currency. (*The selling rate published by the Commissioner on the last day prior to the submission of the export declaration.)

The statistical value is the transactional value of the cargo adjusted to a specific point in the transport chain. Broadly, this place is –

Sea: loaded on the vessel at the export port of departure (e.g. Durban) or,
Air: loaded on the aircraft at the export airport of departure (e.g. O R Tambo) or,
Road: loaded on the vehicle which will take the goods over the border.

Note that road-freight is variable as the long-distance vehicle could come to the exporter’s door (and the f.o.b. value is therefore at that point), or the supply could be collected and taken to a local point for consolidation before the supply is loaded on the long-distance vehicle. In this second model, the f.o.b. value is now the price at the consolidation point of loading.

To give an example (taking USD to ZAR at 20 to 1) – If the transactional value of the sale of goods delivered to a foreign country up to arrival at a destination airport inclusive of insurance was USD1,000.00, then the UCR value i.e. the transactional value in field 28, would be 1,000.00, with the currency indicated elsewhere alongside this as USD.

Determining the Customs statistical value requires the deduction of all charges incurred after the f.o.b. valuation point. Accordingly, freight and insurance for the international leg would be deducted from the commercial invoice to calculate backwards to the statistical f.o.b. point (e.g. on the departing aircraft at O R Tambo International, Johannesburg) and the result will then be converted to ZAR.

If the international freight was (say) USD300.00 and the insurance premium was USD15.00 then the f.o.b. customs value would be USD685.00 (i.e. the selling price of USD1000.00 less the combined freight and insurance of USD315.00), converted to ZAR at the r.o.e. of 20 to 1. This indicates a free on board customs value of ZAR 13,700.00.

For exports, this figure is statistical, but for imports, as a general proposition, the free on board value is the basis for calculating duties and taxes.

The UCR value is the transactional value drawn from the selling price. A Customs value is a statistical value, calculated at the point of export.

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