Big changes for Shein and Temu in South Africa

The South African Revenue Service (SARS) has issued a notice of its intention to withdraw all forms of concessions currently used by traders that are outside of current regulations.

The notice specifically includes concessions, deviations, agreements or special allowances that have been granted in the past to traders in relation to certain requirements of the Customs and Excise Act.

According to consultancy PwC, the revenue service has suggested that many concessions are no longer applicable due to changes in law, policy, procedure or technological advancements.

SARS commissioner Edward Kieswetter said in the notice that some concessions date back 20 years and were granted for a specific purpose at the time, that are no longer applicable.

So, in an attempt to ensure compliance with the Act, SARS intends to withdraw all these concessions that traders rely on.

This would mean that products from Chinese retailers Shein and Temu can no longer be cleared at customs using a simplified process with a 20% flat duty rate.

This specific concession was implemented in 2007 and was one of the main mechanisms the e-commerce giants used to import their goods into South Africa.

The mechanism, which only applies to shipments valued under R500, was intended to help logistics companies cope with an influx of imports as international e-commerce activity began accelerating.

However, local retailers have flagged this concession as being highly damaging for local businesses that have to face much higher taxes and cannot compete with cheaper prices.

Retailers claimed that the concessions were also open to abuse, with importers using loopholes to ensure they benefited from the rules—such as splitting packages.

In 2024, SARS introduced a temporary measure to clamp down on these practices, modifying the way customs duties and import VAT are calculated.

Specifically, it changed it so that VAT was added to the 20% flat rate customs duty applied.

However, after review, all special concessions are now on the chopping block.

PwC said that businesses will now need to ensure they are fully compliant with the current Act, without relying on outdated concessions.

Companies may also need to adjust their operations and procedures to align with the updated legal requirements, it said.

“The withdrawal of concessions could lead to increased costs for businesses that previously benefited from special allowances or arrangements,” PwC said.

The process is open to feedback, with SARS giving stakeholders until 23 April 2025 to comment.

Stakeholders who believe a concession should stay will have to indicate why the concessions should not be withdrawn and/or suggest legislative amendments.

Wider impact

While the withdrawal of concessions will be particularly damaging to import businesses like Shein and Temu, the shift from SARS also flags problems for wider industries.

According to reports by MyBroadband, customs experts have flagged the negative impact on industries ranging from e-commerce to wine.

For example, wine producers in the Cape will no longer be allowed a concession to clear goods up to 14 days after leaving port.

The withdrawal is expected to face backlash from affected industries.

Legal experts flagged similar issues when SARS made import/export changes in September 2024, noting that, while some industries benefit, other parts of the economy suffer.

The 2024 changes would have benefitted South Africa’s textile industry, with higher prices on previously cheaper imports levelling the playing field.

However, consumers would have suffered, losing out on access to cheaper goods.

There are also risks associated with changes making it more expensive for other countries to get their products into South Africa cheaply.

A recent example of this is how the United States has launched tariffs on trade countries, including South Africa, in retaliation to what it views as “unfair” charges.