TRADE FINANCE
PROFILE INDEX
Introduction 4 Benefits of Trade Finance
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Our Trade Finance Solution
6
Trade Finance Process
7
Total Logistics Package
8
Standard Operating Procedure
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Service Undertaking
10
Contact Details
11
Trade Finance Glossary
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INTRODUCTION WHY TURNERS TRADE FINANCE
OUR ECONOMY & IMPORTERS
Turners Trade Finance offers significant benefits to South African importers and exporters by providing a single point of contact throughout the import process: from the moment the order is placed, through the shipping and customs clearing, right up to the point of local distribution. All of this on a single billing in South African Rands.
International trade is an integral part of supplying goods for the domestic market and while importers can benefit from the cost advantages of sourcing goods globally they have to weigh these up against longer lead times, supply chain disruptions, and the need for larger inventory levels.
The Trade Finance offering/solution from Turners Shipping (Pty) Ltd is unique in that we support/ back up the finance component with our vast experience and ability in logistics management. Trade finance provides businesses with the cash to fund the purchasing and import of inventory. The facility enables the business to pay suppliers / settle supplier accounts in full and to negotiate trade discounts. It funds the transport and shipping, the import clearing and forwarding, and distribution into the local market. It is an off balance-sheet loan which frees-up working capital and at the same time reduces forex risk.
In addition to this, our economy is highly vulnerable to interest and foreign exchange risks and the condition of the domestic monetary market and political climate can greatly influence the way a company finances its cash flow. As South Africa relies heavily on imports, exchange rate volatility has a direct, and often, negative impact on trade and margins. Now, more than ever, importers need to manage the financial supply chain and take comfort in a reliable physical supply chain. Turners Shipping (Pty) Ltd provides an innovative ‘Start-to-Finish’ trade finance facility which is designed for the South African importer. This bespoke service is the result of combining a Trade Finance element with our Freight Forwarding and Customs Clearing services, delivering a fully integrated and tailored supply chain package.
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BENEFITS STANDARD CASH FLOW AND OPERATIONAL CYCLE The cash flow cycle of an importer in South Africa is characterised by long lead times before goods are distributed and then an equally long wait for customer payments to be received. Research puts this at an average of 115 days for capital outlay between the foreign supplier payment and accounts receivable, placing a strain on cash flow.
Pay 30% Deposit
Receive Stock
Pay 70% Balance
3 Weeks Manufacturing
4 Weeks Sailing
Stock Sold
2-3 Weeks to Sell Stock
Client Pays Average of 45 Days
115-day Cash Flow Cycle 49-day Average from the outlay of initial funds to receipt of stock
66-day Average from the receipt of stock to the payment from customers
THE INTRODUCTION OF TURNERS TRADE FINANCE INTO THE FINANCIAL SUPPLY CHAIN Introducing Turners Trade finance eliminates the burden of financing the process from the business’ cash flow. The supplier is paid up front, allowing the customer to negotiate an early settlement discount to offset the local finance cost, as well as lock-in the rate of exchange to fix margins. The 120 day terms provided means the product can be manufactured, imported and delivered, sold locally and paid for before the customer settles the account with Turners Shipping.
Receive Stock
100% Paid 3 Weeks 4 Weeks Manufacturing Sailing
Stock Sold
2-3 Weeks to Sell Stock
Client Pays
You Pay
Average of 45 Days
120-day Available Working Capital 49-day Average from upfront payment by Turners Shipping to receipt of stock
66-day Average from the receipt of stock to the payment from customers
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SOLUTION By combining the strengths of Turners Shipping’s experienced Freight Forwarding and Customs Clearing operations with the value-added service of an affordable Trade Finance facility we are able to provide our customers with the ultimate start-to-finish package. Turners Shipping remains the single point of contact throughout the process ensuring efficiency, accountability and transparency.
HOW IT WORKS • This is a single Rand-based transaction with the importer’s Trade Finance facility being split between Customs Clearing/ Freight Forwarding and Trade Finance. As such, the margin and interest is only charged on the foreign disbursement to the supplier, and not on the total landed cost of the product. This makes the product extremely competitive and provides the importer with flexibility pertaining to their required terms on both Customs Clearing/ Freight Forwarding and Trade Finance.
• Turners Shipping manages every aspect of the process from the time the importer places an order with the supplier, to the point that the products have been distributed locally. • We pay the supplier directly, manage the port to port transport, take care of the Customs Clearing and Forwarding, local Warehousing and Distribution. Throughout the process the client is kept up-to-date by real-time reports generated by our integrated IT systems.
• Clients receive a detailed and fully transparent costing schedule reflecting fees and charges relating to each step in the process. With this in hand an accurate unit cost can be determined for each imported or exported item. • The importer receives a single billing from Turners Shipping which is payable in South African Rands on the extended terms agreed to when the facility is granted. The advantage to the client is a process with complete financial transparency. • The overall objective is to allow importers and exporters the time to concentrate on running and growing their own business while Turners Shipping attends to their total logistics supply chain requirements.
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PROCESS Throughout the process Turners Shipping remains the customer’s single point of contact.
Supply schedules and costing reports are available to the customer.
We manage the transport and shipping of the consignment, take care of the customs clearing and forwarding, and organise local distribution of the goods. All forex arrangements, payments and necessary disbursements are taken care of.
With a Trade Finance agreement in place the customer takes comfort in knowing that the import process is in the hands of a professional logistics management team.
PAYMENT Turners Shipping arranges the forex and pays the supplier as per instructions. ORDER The Client places the order with the supplier.
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S
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SHIPMENT Turners Shipping arranges collection and the goods are shipped to South Africa.
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PAPERWORK Turners Shipping arranges the customs clearing and the consignment is delivered to the customer.
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oint of Con P ta e l ct g n i
PAYMENT The customer pays Turners Shipping in South African Rands.
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TOTAL PACKAGE The concept behind our Trade Finance facility is to combine the financing of imports and exports, and the logistics of getting the products here, all into a single integrated system. As such, Turners Shipping would provide the following: • • • • • • • •
Financing Supplier Payment Logistics Management Cargo Tracking & Shipment Status Reporting Freight Forwarding Customs Clearing Communication & Reporting Invoicing & Costing
Features and Benefits: • • • • • • • • • • •
Off balance-sheet financing Simple payment application procedure B-BBEE procurement points advantages SA Rand transaction therefore no forward purchase requirement Reduced Forex risk Possible discount on purchase price No Letter of Credit costs / complications Highly competitive rates and terms Full costing facility Total visibility on each shipment (Shipment status report) Extension on, and improved, working capital and cash flow
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PROCEDURE
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Procurement of Product
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Payment of the Supplier
The importer places an order with their supplier and advises Turners Shipping of the details and payment terms arranged with the supplier.
Turners Shipping will arrange for Foreign Exchange, pay the Supplier and arrange collection of the order.
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International Customs Clearing and Freight Forwarding
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South African Customs Clearing and Delivery
Turners Shipping takes control of the overseas landside logistics; customs clearing and forwarding; sea or air freight transport to South Africa.
Local customs clearing is completed and the product is delivered to a general or bonded warehouse in preparation for distribution or to the client.
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Invoicing
Turners Shipping then prepares a Trade Finance Invoice and a Customs Clearing Invoice in accordance with the agreed rates and payment terms. The invoices are payable in ZAR as per the terms arranged.
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Full Reporting
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Costing Schedule
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Local Distribution and Sales
Turners Shipping will advise the importer of the status and progress at each stage of the process; from Estimated Time of Departure (ETD) ex the Supplier’s address; through the clearing and forwarding, until the final delivery. This information will appear on both the shipment Status Report as well as the Purchase Order Management System (POMS).
Turners Shipping will provide the importer/exporter with a full Costing Schedule, which will be inclusive of both the Trade Finance charges and the Customs Clearing charges. This information enables the importer to calculate the actual landed cost of each item.
Armed with this information the importer is able to price the product, distribute it and sell it into
the market.
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Payment to Turners Shipping
In keeping with the terms of the Trade Finance agreement the final payment, in South African Rands, is made to Turners Shipping.
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SERVICE UNDERTAKING •
Best practice principals
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Regular operational meetings (Stakeholders/service providers)
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Approved Key Performance Indicator (KPI)
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Sanctioned Service Level Agreement (SLA)
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Agreed Standard Operations Procedure (SOP)
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Shipment Status Reports
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Purchase Order Management Systems (POMS)
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IT connectivity to and integration with the Importer/Exporter/Client
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Most competitive rates practice
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CONTACT DETAILS Durban Head Office Turners House 37 Margaret Mncadi Avenue Durban P.O. Box 29, Durban, 4000 Tel: +27(0)31 368 8000 Fax: +27(0)31 332 8125
Johannesburg Office Unit 1, Highway Gardens Office Park Cnr Minuach & Partridge Roads Highway Gardens, Edenvale P.O. Box 9421, Edenglen, 1613 Tel: +27(0)11 400 6300 Fax: +27(0)11 452 1055 - Sea Fax: +27(0)11 452 9566 - Air
Cape Town Office Unit 9, M5 Business Park Eastman Road, Off Upper Camp Maitland Postnet Suite 42, Private Bag X21 Howard Place, 7450 Tel: +27(0)21 506 6200 Fax: +27(0)21 510 7170
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GLOSSARY Letter of Credit or L/Cs
Standby Letter of Credit
More correctly, Documentary Credits, enable international payments typically for foreign sourced goods. LCs entail a formal set of documents to be delivered to the Purchaser’s bank which, if all in order, will result in the bank making a payment to the seller’s bank. Documents include a commercial invoice, Bill of Lading, packing list, amongst others. LCs have expiry dates, beyond which the delivery of the above documents will result in no payment being made.
A Standy Letter of Credit differs from the “normal” documentary credit in that, in order to draw down under the standby the beneficiary one would need to provide the bank with evidence of something the applicant did not do, i.e.. Did not pay under open account terms as agreed. Essentially it is a default instrument rather than a payment instrument.
Revolving Documentary Credit This is set up in the normal manner but does not expire or close. As the beneficiary sends cargo and draws payment against the instrument the credit gets topped up by the applicant at the other end each time they receive cargo or for a specific time period.
Foreign Exchange Contracts FEC/Forward Cover is an agreement to exchange one currency for another currency at a fixed rate on a specified date in the future. This agreement fixes the price of foreign currency payments or receipts expected to materialise at a future date and eliminates adverse currency movements beyond the agreed forward rate.
Factoring Confirmed Documentary Credit This is when an additional bank (not the applicant or beneficiaries bank) is asked to underwrite the payment in order to “insure” against the insolvency of the applicants’ bank, collapse of the country or currency.
This is a sophisticated, financial tool which enables credit sales to be converted into working capital by allowing a third party to purchase your outstanding book of debts, against which an amount is advanced and the balance paid to you once it has been collected from your customers. The third party controls and maintains your debtors’ ledger.
A Telegraphic Transfer Invoice Discounting This is an instruction (via SWIFT) on behalf of a buyer to credit the account of a seller. Effectively, an international EFT.
This is a method to raise debt from a company’s outstanding invoices that does not require the company to relinquish administrative control of the invoices.
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GLOSSARY General Notarial Bond
Freight Forwarders
GNB or NGB is registered over movable property in general terms. That is, the movables are not individually specified in the notarial bond, but, instead, are generally identified (for example, as trading stock or furniture).
They arrange transport on behalf of a buyer or seller of goods. When contracting with a transport owner (such as a ship owner) can also be known as a Shipper. In SA, Freight Forwarders usually also provide customs clearing services.
Special Notarial Bond
Clearing Agents
This is registered over specified movable property. The goods are specified through their description in the bond, which must make it readily recognisable and identifiable.
They interface with customs and excise to declare goods in the correct manner, use the correct forms and procedures as well as the correct formulas and calculations to ensure that goods are properly cleared and customs duties paid.
Insurance This is a contract whereby the insurer undertakes to indemnify the insured in the event of the specified risk arising. It is the intention of the insurance agreement to place the insured in a position they would have been had the insurable event not have occurred.
Customs & Excise Ad Valorem costs or charges are applied based on the value of goods during movement or customs clearing, i.e. 10% of the invoice value. Customs & excise rates are generally ad valorem but freight rates are generally calculated in a different manner, i.e. per weight.
Marine Insurance This refers to the insurance of goods being transported in all forms of transport including air, road or rail.
Shipper He books transport services with a transport owner (such as a ship owner) on behalf of buyers and sellers of goods.
Open Marine Policy This is normally used when there is a high volume and frequency of goods movement. Quite often these are taken out by Freight Forwarders and Clearing Agents to offer to their clients. Declarations of goods being covered need to be provided to the insurer before the realisation of a claim.
Carrier A transporter of goods, such as a ship owner or land transporter.
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GLOSSARY Bill of Exchange This is defined as instructions from one party to a second party to pay a third.
Bill of Lading B/L is a receipt issued by a shipping line for cargo, which is a document of title to the cargo and which details the terms of the contract of carriage.
Commercial Invoice An invoice issued by a seller to a buyer used extensively for the purposes of Customs & Excise procedures, and is typically one of the documents required to accompany an LC.
Some of the more commonly used Incoterms are: Free on Board FOB means that risk and responsibility pass from the seller to the buyer when the goods cross the ship’s rail at the port of loading, cleared for export by the seller.
Cost Insurance Freight Risk passes from the seller to the buyer when the goods cross the ships rail at the seaport of loading; however, the seller is responsible for the payment of freight and procurement of insurance to the destination seaport.
Cost and Freight Incoterms To improve consistency and remove uncertainty in international trade, the International Chamber of Commerce (ICC) in Paris developed INCOTERMS (International Commercial TERMS), a set of uniform rules for the interpretation of international commercial terms defining the costs, risks, and obligations of buyers and sellers in international transactions. First published in 1936, these rules have been periodically revised to account for changing modes of transport and document delivery. For a summary of all Incoterms, please click the following link: http://en.wikipedia.org/wiki/Incoterms
C&F / C+F / CFR is when the seller meets his obligation under the sales contract i.e. Risk passes from seller to buyer when the goods cross the ship’s rail at the seaport of loading. The seller is however responsible for the payment of freight to the destination seaport.
Ex Works EXW is when risk and responsibility pass from the seller to the buyer when the goods are made available on the ground at the “works” i.e. where the goods are produced, such as at the factory, at or on the agreed future date or future time, uncleared through customs and Excise.
PLEASE NOTE The above definitions are for basic information purposes only, and do not constitute technical or legal definitions, as such may differ from country to country, and depend upon the context in which the terms are being used.
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Turners Shipping is one of South Africa’s top Local and International Freight Management and Logistics Companies
Turners Forwarding, with our worldwide network partners, is able to provide logistics services to and from any global location.
Turners Trade Finance offers selected Clientele International Trade Finance Facilities
Turners Warehouse provide for both bonded and general storage and handling facilities thoughout South Africa
Turners Training Academy was established to maximise personal motivation and operational skills
Turners Conferences is a leading Professional Conference and Event Management Company
Turners Secretariat provides a full house secretariat function for Professional Associations and Societies
The Turners Destination Management Company offers a comprehensive range of services to PCO’s
Turners Travel is one of South Africa’s most recognised Travel Management Companies
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042019