Why does my import cost more than I expected originally?

Why does my import cost more than I expected originally?

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Imports have become more and more expensive over time and it seems that this trend is on-going. How can you be sure that what you have been quoted is what you are actually going to pay, or at least close to it?

Whenever Government or our President is making a questionable decision or whenever the South African current account shows an increasing deficit, the Rand takes a knock.

The South African Rand went from R11.50 in January 2015 to R18.50 in April 2020. This represents a drop of over 40%.

How is it possible for an importer to calculate/predict his landed cost with a volatile currency like that?

This is placing increasing pressure not only on the importer himself, but also on the end user/consumer, who at the end of the day will have to pay the price.

What can be done to keep the risk at an absolute minimum?

Confirm all your quotations as close as possible to the time of placing your order. The quotation from your supplier and the quotation for the forwarding and clearing of your consignment to your doorstep.

In order to give you a transport quotation that is as exact as possible, this is the information that is needed. Your ability to supply this information will increase your chances of more accurate cost estimate:

Correct weights and measurements

Should this be incorrect, the quotation is not going to be accurate and you may well be paying more than you have bargained for. Freight charges are all based on weight and volume.

The correct HS commodity number (customs code number)

This information is needed in order to calculate the duties and taxes correctly. According to the law, the importer is liable for the correct customs classification.

The correct Incoterms®

Which freight leg are you paying for? From the door of your supplier (ex works), from the port of origin (fob/fca), from the port of destination (“c” term), are you responsible for the transport insurance? To learn more about Incoterms click the below link:

The correct value of the goods being imported

It is important to specify the exact value of the goods that you want to import. An incorrect assessment will result in an incorrect quotation.

Currency and Exchange Rates

There is another variable factor which influences the landed cost, and that is the number of exchange rates you are working with:

  • The carrier’s rate of exchange. (Airline, shipping line)
  • Customs rate of exchange.
  • Daily rate of exchange.

There are many variables which have to be taken into consideration to give you the best possible quotation. The closer you time your quotation to the time of the actual import, the more realistic it will be, affording you a better understanding of the true expense.

Another possibility is of course buying currency forward-cover as soon as the order is placed. At least you know which rate of exchange you will be paying for the goods. Ask us for advice.

Implementing these tips may well set you on the path of saving you some money when it comes to your imports.