SARS coming after Shein and Temu in South Africa
Legal experts at Webber Wentzel say the South African Revenue Service (SARS) is moving to protect the local textile industry by putting in hard lines for low-cost imports from Chinese companies like Temu and Shein—the first steps of which kicked in this month.
Imported goods are subject to customs duties and a 15% VAT rate based on their value, which must be paid to SARS.
The legal experts noted that the rate of customs duties differs depending on the type of goods imported and the country of origin and that goods which can be sourced locally through the local manufacturing industry would typically be taxed at higher customs rates.
“This ensures that South African manufacturers and suppliers are not disadvantaged. This is often why an item from a foreign e-commerce website may appear to be affordable, but once shipping costs are calculated—which often include customs duties—the final price at checkout makes one abandon their entire shopping cart.”
However, many online retailers such as Shein and Temu have been able to use the de minimis rule to bypass this.
The rule means that imports of R500 or less have been subject to a standard customs duty of 20% on the value of the goods without VAT. This was in contrast to local retailers who pay up to 45% customs duty on imports and 15% import VAT.
Effective 1 September 2024, SARS modified the way customs duties and import VAT are calculated. Specifically, the changes make it so that VAT is added to the current 20% flat rate customs duty as a temporary measure.
The changes are grounded on the Customs and Excise Act, the Value-Added Tax Act, and the World Customs Organisation (WCO) framework.
By 1 November 2024, the 20% flat rate will be restructured to align with the WCO categories.
“In a significant move aimed at bolstering local businesses and streamlining the customs process, SARS has increased customs duties on imports from popular online retailers such as Shein, Temu, and other similar platforms.
“This decision is expected to impact many South African consumers who frequently shop in these international online stores,” the experts said.
Webber Wentzel noted that the changes will have a broader impact on South Africa’s import/export market—for better or worse.
On the one hand, the local textile industry stands to benefit. On the other, it has a negative impact on shoppers who seek cheaper fashion and clothing.
The legal experts said that the balance is likely more positive for South Africa—especially for jobs—even if import duties alone may not be a panacea for all the problems the South African clothing industry faces.
“The textile industry remains a significant employer in South Africa, particularly in KwaZulu-Natal and the Western Cape. The sector provides jobs for thousands of workers.
“However, employment has declined over time due to automation, globalisation, and competition from cheaper imports. As consumer preferences evolved towards more affordable and fashionable products, South Africa faced increased competition from imports,” they said.
While South Africa still produces and exports various products to local and international countries, items that South Africa mostly imports are finished products such as footwear and clothing, with its top imports coming from China, Eswatini, Lesotho and Mauritius.
“With SARS’ stated goal of bolstering local business, the restructuring of import duties may pave the way for the South African clothing industry to boost employment and competitiveness in local production and consumption,” the experts said.
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