252435 Learner Guide

ADVANCED

RISK MA

The most likely of these is going to be your overseas agent’s charges or fees which will be dictated
by the Incoterms® 2010 Rules involved in the agreement between the Seller and the Buyer.

If you are handling an import and the terms are Ex Works (EXW) or Free Carrier (FCA) then there
could be some Origin charges being invoiced to the clearing agent by the Forwarding agent as
well as fees depending upon which ones apply.

If you are exporting and your client is using terms such as DDU or DDP then there may be charges
and fees to come from the clearing agent at Destination which would need to be included in the
final invoice to the client.

The most important point is that the agent must check the commercial invoice for the Incoterms®
2010 Rules to establish whether any charges are to be expected and then to make sure that an
invoice exists for these which will form the basis for charging these out to your client. As before
these are disbursements outlaid by the agent and therefore the latter is entitled to charge out
agency on the amounts involved.

The agent is more frequently involved these days in arranging Insurance on behalf of the client.
This involves the quoting of a Premium by the agent which has been provided by the insurer with
whom cover has been placed by the agent on behalf of the client.

This Premium will be invoiced out by the insurer to the agent and this will be recovered by the
agent from the client in the freight invoice which is issued to them.

Other charges which could be involved depending upon the client’s requirements could include
the arranging of packing of the goods i.e. professional crating as well as the arrangement of the
packing and marking of cargo and possible even inspection of the goods by professional
organizations e.g. SGS or BV.

A frequent requirement these days is the ISPM 15 standard for wood and packaging material
where the destination country authorities need to verify, by means of an original certificate, that
the appropriate heat treatment or fumigation has taken place on any materials, including pallets,
before the cargo will be allowed into the country.

Additionally, the arrangement of Crane hire or additional labour for loading or unloading is
possible other disbursements made on behalf of the client.

It is essential that if these are involved the agent makes sure that rates for the service are
obtained in writing, that these rates, including any over recovery, are communicated to the client
for their approval and acceptance and that the charges for the service when received match the
ones quoted.

It should be noted that because these are “Ad Hoc” charges i.e. depending upon circumstances
and not based on fixed rates then, unlike storage and penalty charges, the opportunity exists for
an over recovery i.e. a Mark Up on the third-party charge before quoting the client so that a small
amount of profit is secured.

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We have already referred to some of these items such as crane hire, packing and fumigation
being based on specific quotes but others, such as storage, can only be quantified once the cargo
or container has been collected and you know exactly how many days are involved.

Whilst you will get a freight account from the ships agent to show how much storage or overstay
has been incurred it is still good practice to check the invoice against the monthly statement to
make sure that their records match yours and that the correct amount has been charged out.
This would usually be done by means of the Bill of Lading number or container number to make
sure that the correct charge is reflected against the correct shipment and therefore against the
correct file.

For LCL cargo it is possible to obtain a verbal confirmation of the charge from a depot when the
cargo is released and collected but this is not the final confirmed amount so it is also important
to check the actual invoice for the charges, when received from the container depot, against their
end of month statement to make sure that the correct amount has been collected.

This is a third-party charge so is not only passed on as invoiced but also a copy of the invoice is
often requested by the client to confirm this charge. It is only be reconciling the invoice against
the depot’s monthly statement that you will pick up the fact that the final invoice may have been
different from that advised verbally and therefore that there may be additional charges to collect
from the client.

ASSESSMENT CRITERION 6

Supplementary charges from outside parties are identified and reconciled to the organisations
invoice taking into account all over-and-under recoveries.

It should be noted at this stage that there is a difference between standard charges which are
incurred in the process of the normal movement of the cargo and supplementary charges which
could be incurred as a result of not adhering to the terms and conditions of the various service
providers and operators involved in the handling and transport of the cargo.

When preparing an estimate for your client you will include all of the expected charges which will
be incurred during the movement of the cargo rather than optional ones or ones which depend
upon certain situations occurring. It is important that the clients are aware that additional or
supplementary charges may be raised if they do not comply with these terms and conditions.

The most frequent type of additional charge will be storage which could be charged when cargo
is not collected within a specified period of time. For FCLs this means the removal of the container
within 3 days of the completion of the working of the vessel and, if this is not done, then the
container goes onto Overstay.

This will require the removal of the container from the terminal to a container depot so this will
not only involve storage at the depot but also haulage to the depot and lift fees at the depot to
remove the container from the truck.

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For LCL cargo storage usually commences 3 days from the unpacking of the container, including
the day of unpacking, and increases the longer the period for which the cargo remains at the
depot.

Another good example of supplementary charges is Trailer Detention a specific amount of time
is allowed for the loading or off-loading process (3 hrs per 6m,4 hrs per 12m) and where Penalty
charges could be incurred if these periods are exceeded.

Alternatively, if a container is delivered to the wrong address and has to be re-directed or
returned to the terminal then a “Futile Trip” charge could be raised.

Additional fees could also be incurred should the empty container not be returned to the
nominated depot within a prescribed period – this is usually referred to as a Container Detention.

Alterations to documents, after they have been issued, such as a change to the port of discharge
on a Bill of Lading will also incur additional charges if the instruction is not issued before the
specified deadline issued by the shipping lie / ship’s agent.

The important point to note about all these charges is that they are disbursements and therefore
the agent can charge an agency on the amount outlaid.

Before doing this the agent must make sure that the charge is genuine and is for the account of
the client as they will expect to receive proof in the form of an invoice, not only of the charge, in
the form of a 3rd party invoice, but also a detailed breakdown of why, and how, the charges were
incurred.

In the same way as the previous charges you must check these supplementary charges against
the final monthly statement to confirm that the charges paid have all been recovered.

ASSESSMENT CRITERION 7

Supplementary invoices are disbursed by the organisation and account for all disbursement items
which have been invoiced.

Once the accounts section has reconciled the creditors account it is then in a position to
distribute its findings by means of a report to the different departments.

On receipt the department must then take action on those items which have been listed on the
report. This will involve the retrieval of the work files involved, if they are not still in an active
status, and checking the nature of the query.

If the creditor’s statement shows an invoice against a file reference and the accounts section has
not captured this invoice then the file must be checked in case the invoice was received but not
passed by the department.

The costing sheet on the file should also be checked as this may show an excessive profit if the
invoice has not been recorded. Alternatively, it may show a loss if the creditors invoice has been
passed but the client not invoiced out.

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The other scenario would be that the department never received the invoice. If the client had
been invoiced for the disbursement in question then a check would need to be made to ensure
that this charge was in line with the creditors invoiced amount and a copy then requested.

If however the charge had not been invoiced out then an additional invoice would need to be
issued to the client for the recovery of the costs involved. As long as this is done within a
reasonable time after the original invoice has been issued and the charges are valid then the
client is not likely to object.

It should be remembered that creditor’s statements are often only issued monthly and this
means that there is often a lengthy time gap between charging out the client and realising that a
specific item has been omitted from the invoice.

The opposite of having to issue an additional invoice is having to issue a credit note for over
recovery of the creditors charges. Whilst this is less usual for monthly statements it is more
common in the case of shipping lines where invoices are paid prior to release of the goods and
the charges must be raised to the client before or on the day of delivery.

This places pressure on the department and lines invoices are sometimes paid and invoiced out
without being properly checked. This could result in charges being paid for the wrong size or type
of container or even the wrong number of containers. It could also result in charges being paid
which were not valid e.g. carrier haulage fees when delivery had been arranged on a merchant
haulage basis.

Either way if the mistake is not picked up then it could leave you with a loss on the file until such
time as you receive the credit note from the line or you could find the client delaying payment
to the agent until such time as the agent issues a credit note.

If the amount involved forms a significant portion of the invoice then this could result in having
to credit the entire original invoice and issuing a new one resulting in the client being given an
additional period of credit in which to pay the invoice.

Whichever situation is involved it is important that action is taken and reported to the accounts
section to enable them to keep track of the situation and keep the creditors statement as
accurate and up to date as possible.

GLOBAL FORWARDERS (Pty) Ltd 252435
Invoice SEA IMPORT
Groupage
American Box & Bag
Date: 1st June 2010 Client

Origin Karlsruhe Tariff Heading 4202 39 00 5 Exchange Rates:

Destination Cape Town Rate of Duty: 30% Currency Rate
7.83
Place of Delivery Tokai No of Packages 250 USD 1.00 = 8.86

Incoterms® 2010 Rules EXW Weight per Package (tons) 0.001 EUR 1.00 = 54

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ADVANCED

RISK MA LCL Volume per Package 0.009 R 446,156.38 FOB
LV Bags Total Weight (Tons) 0.25
Type of Movement € 50,000 Total Volume (cbm) 2.25 Rand
Commodity 1495.13
Ex Works (EUR) Currency Rate Total 996.75
EUR 75 w / m 168.75 664.50
Origin Cartage EUR 50 w / m 112.50
Origin THC EUR 75 Flat Fee 75.00 1673.66
Documentation 114.65
USD 95 w / m 213.75 176.18
Ocean Freight USD 6.85% 14.64
B.A.F USD 10 w / m 22.50 157.82
Other Surcharge 191.25
ZAR 5% 393.75
Collection Fee @ 5% ZAR 85 w / m 337.50
Cargo Dues ZAR 175 w / m 130.00
De-grouping ZAR 150 w / m 281.25
Destination THC ZAR 130 Flat fee 133,846.91
DRO ZAR 125 w / m 87,446.65
Cartage ZAR 30% 938.82
Customs Duty ZAR 14% 228844.81
Customs VAT - 14% ZAR 0.125%
Insurance
Disbursements

If we take the invoice we studied earlier for the groupage import shipment an example where a
supplementary invoice could be invoiced would be as follows:

When checking the tariffs agreed with your client you discovered that instead of USD 95.00 you
should have charged USD 110 per freight ton and instead of R 150 for THC you should have
charged R 175 w /m

The ocean freight should have been 2.25 x USD 110 = USD 247.50 @ 7.83 = R 1937.93

The original invoice showed R 1,673.66 meaning an undercharge of R 264.27

The difference in the destination THC is R 25 w /m at 2.25 freight tons = R 56.25

GLOBAL FORWARDERS (Pty) Ltd 252435
Supplementary Invoice SEA IMPORT
Groupage

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RISK MA Client American Box & Bag 4202 39 00 5 Exchange Rates : Rate
Karlsruhe Tariff Heading 30% Currency 7.83
Date : 1st June 2010 Cape Town Rate of Duty : 250 USD 1.00 = 8.86
Origin Tokai No of Packages 0.001 EUR 1.00 = FOB
Destination EXW Weight per Package (tons) 0.009 R 446,156.38
Place of Delivery LCL Volume per Package 0.25
Incoterms® 2010 Rules LV Bags Total Weight (Tons) 2.25
Type of Movement € 50,000 Total Volume (cbm)
Commodity
Ex Works (EUR)

Currency Rate Total Rand
EUR
Origin Cartage EUR
Origin THC EUR
Documentation

Ocean Freight USD 110 instead of 95 33.75 264.27
B.A.F USD
Other Surcharge USD

Collection Fee @ 5% ZAR

Cargo Dues ZAR

De-grouping ZAR

Destination THC ZAR 175 instead of 150 w / m 56.25

DRO ZAR

Cartage ZAR

Customs Duty ZAR

Customs VAT - 14% ZAR

Insurance ZAR 0.125% 0.46

Disbursements 320.98

Documentation

Agency 2% of Total Disbursements 6.42

Finance Fee 1.5% of Total Disbursements 4.81

Customs Examination

Attendance

Clearing Charges 11.23

TOTAL 332.21

It is important to remember that it is not only the items themselves which need to be recovered
but also the items which relate to these so the insured value will have increased and therefore
the insurance premium will have to be amended.

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Because these items are both disbursements they will also affect the total for these which will in
turn affect the agency and finance fee which are based on this amount.

ASSESSMENT CRITERION 8

Reconciliation is made between the invoices and statement of accounts.

With the large number of parties involved in the transport industry the number of parties with
whom the forwarding and clearing agent has to deal is never small. This ranges from the most
common ones such as Customs, shipping lines and airlines, who are also the recipients of the
largest disbursements, to others such as cartage operators, container depots, groupage
operators and port authorities where smaller amounts are involved.

Although not all of these will be Creditors i.e. they provide a service now but only require
payment at a later date, it is always important to make sure that the amount which expect to pay
and the which you are charged are the same.

You also need to remember that the list of creditors is not only be restricted to those parties who
are based in the same country but also outside of the country e.g. your overseas agents.

These amounts are often in foreign currency and when they are converted to Rand can be
significant. It is essential that the statements are checked to ensure all these costs have been
charged out correctly.

There are a number of reasons why the process of reconciling the creditor’s accounts is so
important. Firstly, you need to make sure that all the invoices listed on the creditor’s statement
have been accounted for on your Posting codes.

This is effected on receipt of the original invoice from the creditor when the import or export
department will make sure that the correct shipment details and amount are shown before
requesting payment to be made and that it is endorsed with the respective file number and
passed to the accounts section for capturing. Then, on receipt of this, the accounts section will
allocate it to a Creditor’s account using a Posting code which ties up with the creditor involved.

On receipt of the creditor’s statement, which in most cases is on a monthly basis, the accounts
section will then check the details and compare them with their own records of all the invoices
captured since the last statement.

The main purpose of the reconciliation is to make sure that the invoices captured by the accounts
department match those on the creditors statement not only in terms of details i.e. invoice
number, file number, but also in the amount shown on the invoice.

It should also ensure that no duplicate invoices have been received from the creditor and passed
for payment by showing if the same invoice number has been captured twice.

It will also indicate where more than one invoice has been captured on the same file reference
which could mean that there is another file where no invoice has been captured.

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Worse still, this may mean that this particular charge has not been invoiced out to the client and
has been under recovered.

It will also enable the accounts section, based on feedback from the different departments, to
indicate where credit notes are due from the creditor to cancel items which were incorrectly
charged.

For the accounts section the reconciliation process will also indicate if any invoices have been
captured on the wrong creditors posting code and must then be transferred from one account
to another. This must be done by crediting the incorrect account and debiting the one against
which it should have been captured.

The more accurate and the faster the statements are reconciled the more accurate the profits
on the files are going to be and the quicker these profits can be taken.

SPECIFIC OUTCOME 5

IDENTIFY AND DISBURSE THE ITEMS ON BEHALF OF THE ORGANIZATION TO BE RECOVERED IN
THE INVOICING PROCESS.

It has been mentioned before but there is no harm in repeating the importance of making sure
that you concentrate on each and every item charged to the agent by a third-party provider.

This is not just to make sure that you receive a charge for any service which was provided whilst
the goods were being transported but also that the charge or tariff which they charged was the
same as the one which was agreed.

It may well be that their invoicing systems are not up to date and they are not invoicing you at
the agreed rate or they have not updated their records and are still invoicing you at old rates.

They may also not take account of any rebates or special deals which have been agreed and
invoice you at “normal“ tariff instead of slightly lower rates.

This should be more straight forward with FCLs as most of these rates are “box” rates i.e. per
container and do not change often or change at specific times of the year such as the THC and
Cargo dues.

As we have seen every bit counts when it comes to making an overall profit on a file and the
accuracy with which you check the amounts which you have been charged therefore makes a
significant contribution to ensuring that you have taken every cent of profit available.

ASSESSMENT CRITERION 1

Cartage charges as disbursed by the organisation are identified and posted to the cartage
disbursement account.

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Cartage charges will be incurred on most shipments unless the importer or exporter arranges
their own collection or delivery using their own cartage operator or delivers in or collects the
container or cargo using their own transport.

Some clearing and forwarding agents also use their own fleet of vehicles although the trend over
recent years has been to sub contract this out to service providers as it is expensive to own and
operate a fleet of various sized vehicles which cannot be utilised on an ongoing basis and make
sure that the basic running and operating costs of both these and the drivers are at least covered
or, better still, exceeded.

Cartage often provides a very useful contribution to the profitability of a file, especially from the
mark up between the basic cost and the agreed rate charged out to the client.

It is there for every important hat, when going through the costing sheet whilst preparing to
invoice out the shipment that you check to make sure the cartage input cost has been recorded,
an invoice for these received and allocated to the file and also posted to the cartage operator’s
account, and that the amount charged out to the client at least matches or exceeds the amount
disbursed.

ASSESSMENT CRITERION 2

Storage charges as disbursed by the organisation are identified and posted to the storage
disbursement account.

There are many reasons why storage could be incurred and several different parties who may be
involved in terms of to whom you disbursed this type of charge.

Full container loads which are not collected from the Terminal within the specified time allowed
will go onto overstay which will involve a storage charge being paid to the ship’s agent on behalf
of the container facility to which the container has had to be removed.

For LCL cargo storage would occur when the cargo has not been collected within the time
permitted from the day on which the container was unpacked at the container depot.

This would be invoiced to the clearing agent by the depot e.g. SACD and must be passed onto the
client, if it is they are responsible for the cause of the late collection, and also posted to the
account of the container depot for payment against their monthly statement.

Another way in which storage can be incurred is based on the specific instruction of the client
e.g. at Christmas, when importers often close their factories, they often ask the agent to store
the goods temporarily until such time as they open again and can accept their cargo.

It is not always possible to cost the charges for this accurately in advance as this will depend upon
the exact number of days or part thereof for which the goods are stored but, as above, it is
essential to check to see if this is applicable for a shipment, obtain an invoice for the final charges
and make sure that this is both billed out to the client and posted to the depot’s account.

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Other sources of storage charges could be a Bonded (Customs Licensed) warehouse where
dutiable goods can be stored pending final, Duty paid, clearance on the instruction of the
importer and for which storage charges will accumulate for the length of time between the
original WH entry and the XDP one.

ASSESSMENT CRITERION 3

All special charges, such as extra attendance, are disbursed by the organisation are identified and
posted to the disbursement accounts.

Special attendance is an additional charge which is not incurred very often as it is raised by SARS
Customs and Excise in circumstances where their time has been wasted whilst trying to carry out
an inspection of some nature.

This could be a Customs Stop inspection of the goods as a result of Customs and Excise detaining
rather than releasing the goods after checking the SAD 500 or it could relate to other kinds of
inspection such as the checking of goods which have been temporarily imported to make sure
that the same items are now being exported.

Whatever the circumstances it is essential that the inspection is carried out on the day and at the
time agreed with Customs and Excise and that all the required paper work is ready and available
and that the Customs officer is brought to the inspection location in good time.

If this does not happen then it is possible that a special attendance fee is incurred and must be
paid to Customs for the rescheduling or rearrangement of the inspection.

This must be posted to the SARS Customs and Excise account and only invoiced out to the client
if it is clear that they were the ones responsible for the original inspection not taking place.

If this was the agent’s fault then this must be absorbed and will probably reduce the overall profit
on the file but it is also important that the reason for the fee being incurred is recorded on the
file in case of a query being raised at a later date as to the reason for this charge.

THE END

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