Import Duty Hike to Impact Shein and Temu Consumers in South Africa

South African enthusiasts of international e-commerce platforms such as Shein and Temu are set for a financial jolt as the South African Revenue Services (SARS) imposes an augmented 20% customs duty alongside an already existing value-added tax (VAT) of 15% on clothing imports exceeding the value of R500.

This critical policy shift, earmarked to commence from 1st September, is designed to mitigate the prevalent strategy employed by these platforms, which involved parsing down large orders into smaller shipments. These smaller consignments, each capped under the prior R500 value threshold, managed to circumvent the heftier tax rate while skirting around the imposition of VAT. By employing this method, these e-commerce giants could maintain an edge by offering consumers more attractively priced products than those presented by local retailers, who are committed to a tax rate of 45% plus an additional 15% VAT.

The loophole being exploited by Shein and Temu was the 'de minimis' rule, which allowed parcels evaluated below R500 to attract just a flat 20% tax without the addition of VAT, as illuminated by Jean-Louis Nel, a tax expert at Van Huyssteens Commercial Attorneys. This maneuver has afforded them a controversial competitive advantage, leading to consternation amongst South African merchants.

The response from SARS has been the establishment of new customs duties in line with global standards. The announcement, which arose amid much conjecture, clarifies the intent to foster equitable competition within the market and tamper the adverse impact on the country's retail sector. This decision is set to shift the economic landscape for online shopping and bolster the framework for local businesses.

SARS Commissioner Edward Kieswetter further elucidated the revenue service's alliance with the Department of Trade, Industry and Competition (DTIC) aimed at buttressing public trust and creating an ecosystem of balanced trade practices that stimulate growth and defend homegrown industries against the challenge of thriving e-commerce.

Additionally, SARS plans to utilize cutting-edge technology, including data analytics, artificial intelligence, and machine learning, to streamline trade operations while safeguarding the nation's economic interests.

Through such initiatives, SARS aspires to entrench its commitment to simplifying processes to facilitate the growth of legitimate trade, a mandate that is increasingly imperative in an era of surging global digital commerce.