What Happens When Transaction Value Can’t Be Used? Understanding SARS Method 2 – Valuing Identical Goods

When your invoice isn’t enough for SARS, they don’t just estimate a value, they use an alternative valuation method. That’s where Method 2: Identical Goods comes in.

This method isn’t uncommon in South Africa’s import environment. If you’re importing under consignment, receiving free-of-charge samples, or involved in related-party transactions, SARS may reject your declared value and seek a comparative benchmark.

So how does Method 2 work, and more importantly, how can you prepare for it?

Let’s break it down.

When SARS Uses Method 2 Instead of Transaction Value?

Under Section 66 of the Customs and Excise Act, Transaction Value (Method 1) is the primary approach. But there are several cases where SARS may not accept your invoice as the basis for customs value:

• Goods received on consignment stock (no sale at the time of import)

• Samples or items provided free of charge

• Related-party sales, where the price may be influenced

• Invoice value is not reliable due to discounts, barter terms, or incomplete pricing

In such cases, SARS moves to Method 2, which is based on the customs value of identical goods imported into South Africa at or around the same time.

What Are “Identical Goods” in SARS Terms?

SARS applies a strict definition. For a product to qualify as identical, it must match the imported item in:

• Country of export (same origin)

• Manufacturer (if possible)

• Physical characteristics and quality

• Function and commercial use

• Level of trade (wholesale, retail, etc.)

• Brand or model

The products don’t have to be literally from the same batch, but they must be the same in all respects except for minor differences like packaging or color.

How Method 2 Affects Your Valuation?

Let’s say you’re importing electrical components from Germany. You receive them under a consignment agreement, there’s no invoice, and no sale has yet occurred. SARS can’t use the transaction value.

Instead, they look up a prior declaration from another importer who brought in identical components from the same supplier two months ago at USD 120 per unit.

That USD 120 now becomes your customs value, regardless of whether your cost might eventually be lower (due to volume discounts, consignment arrangements, or delayed billing).

What If You Disagree With the “Identical” Label?

This is where many valuation disputes begin.

SARS may assert that your shipment is identical to another importer’s, even if you know it isn’t. To challenge this, you’ll need to prove non-identicality, such as:

• Differences in materials or components

• Distinct product specifications or certifications

• Custom modifications or design alterations

• Different contractual terms (e.g., warranties, delivery models)

This proof must be documented, verbal claims won’t hold. Technical datasheets, product specs, commercial contracts, and supplier correspondence are all valid forms of evidence.

Tips to Prepare for Method 2 Situations

If there’s a chance SARS won’t accept your transaction value, prepare your file to anticipate a Method 2 fallback. Here’s how:

✅ Keep Detailed Product Descriptions

Include brand, model, technical specifications, and functional use in your invoice and packing list.

✅ Document Unique Features

If your goods differ from similar imports, get supplier confirmation on what makes them unique.

✅ Maintain Historical Records

Track your own past imports of the same or similar goods. If SARS uses a different importer’s value, you may be able to challenge it with your own price history.

✅ Collaborate with Your Customs Broker

Your broker should flag valuation risks upfront and help position your import as non-identical if needed.

Why does this Matter More for High-Compliance Cargo?

If you’re importing defense items, hazardous materials, or regulated industrial goods, Method 2 can significantly inflate your customs value if SARS references a premium-priced product from another importer.

For example, in the explosives or specialized equipment sectors, small differences in classification can create large price variations. If these differences aren’t documented clearly, your shipment could be overvalued, resulting in excess duties, VAT, and potential disputes.

Here is where your trusted freight forwarder plays a critical role for high-compliance cargo.

How Transglobal Cargo Helps You Stay Valuation-Ready?

At Transglobal Cargo, we support our clients through every stage of SARS customs valuation, not just the paperwork. Our teams work closely with importers to:

• Prepare valuation-ready documentation

• Manage consignment and free-of-charge shipments with compliance in mind

• Dispute unfair identical goods claims with solid technical and commercial evidence

• Liaise directly with customs to protect your interests

Whether you’re importing commercial stock or government-restricted cargo, we’ll help ensure your customs declarations are bulletproof.

Conclusion: Be Ready for Comparisons You Didn’t Choose

You may never meet the other importer SARS compares your goods with. But their declaration could set your customs value.

That’s why being proactive with your product documentation, internal controls, and broker coordination is so important, especially when transaction value isn’t an option.

Method 2 isn’t just about matching products, it’s about managing customs risk before it becomes a problem. Contact us today for further clarification and smoother operations.

📌 Coming Soon: What Happens When SARS Uses “Similar Goods” to Value Your Imports?