Uproar over SA’s new import duties for e-commerce

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 24 Jun 2024
SARS has committed to taxing all clothing imports with an import duty of 45% plus VAT from next month.
SARS has committed to taxing all clothing imports with an import duty of 45% plus VAT from next month.

Thousands of South Africans have signed an online petition, protesting government’s imminent introduction of higher import taxes on smaller clothing items bought from international online shopping retailers.

The new law comes as the South African Revenue Service (SARS) looks to impose measures to ensure local firms manufacturing or selling locally-produced clothing items can compete on a fair basis with global online retailers.

From 1 July, SARS has committed to taxing clothing items manufactured internationally and bought from international e-tailers, such as Temu and Shein, in small quantities (under R500) at the same rate as large quantities (R500 and above).

An import duty of 45% plus VAT will apply to such purchases from next week.

Local e-tailers and the manufacturing sector have over the past six months expressed concern over Chinese multinational e-commerce disruptors Shein and Temu, with complaints of alleged anti-competitive practices.

The petition on has been signed by over 17 000 people, who claim that imposing additional taxes on small clothing parcels would have a detrimental impact on individuals, local couriers, cargo businesses and the economy at large.

“As citizens and consumers, we recognise the importance of taxation in funding government services and programmes,” notes the petition.

“However, South Africans cannot afford this. We buy from Shein and Temu because we cannot afford clothes from local businesses. The point of Shein and Temu is affordability. SARS can increase the tax so quickly, yet they don’t do anything regarding serious issues in South Africa. Shein and Temu don’t only benefit consumers but local couriers as well. This is not fair on consumers; government does not care about us citizens; they just want to eat up all of our money.”

Over the last few years, new online retailers have entered the market, shaking up the local landscape with low-cost products manufactured in China and free shipping.

According to other comments submitted on the petition, access to affordable clothing is essential for maintaining dignity, professionalism and social inclusion, but South African retailers sell these at inflated prices.

Necessary duty

Lorraine, one of those who signed the petition, writes: “It’s not our fault South African companies price their goods so high that we can't afford them. So, we buy from companies who sell at a reasonable price. Why must you interfere SARS!”

Hloni adds: “Big local retailers import the same quality clothes, and sell it to us at hiked-up prices. Instead of protecting the consumers from predatory retailers, we're being punished for finding options. On top of this, we're basically killing competition and protecting lazy and entitled retail companies.”

SARS has confirmed the new rules to ITWeb, noting it cannot comment further as the tax collector is still engaging with online retailers.

Alastair Tempest, CEO of Ecommerce Forum South Africa (EFSA), agrees with the new rule, noting every product imported into and sold in SA should pay the required customs duties and value-added tax.

“Of course, some consumers would like to enjoy cheap products − that’s perfectly understandable. But they need to understand that customs duties and VAT fund the state,” he explains.

“Why should government favour foreign producers over South African manufacturers, retailers and e-commerce businesses? Market competition will adjust prices over time. However, calling on SA businesses and platforms to reduce ‘inflated’ prices suggests quality standards should drop, and that is not a sound argument.”

ITWeb previously reported on the frustration felt by local clothing retailers, which accused global online sites of offering unreasonably cheap prices, with some saying their sales have declined by almost 30% from the beginning of the year, when Temu made its debut in SA.

However, the two Chinese sites denied these claims, saying they adhere to all of SA’s trading laws.

The Southern African Clothing and Textile Workers Union and National Clothing Retail Federation have over the years been complaining to the Department of Trade, Industry and Competition about Shein’s alleged tax aversion tactics.

In March, the department opened an investigation into Shein’s practices; however, it told ITWeb that findings have not yet been released.

According to Tempest, at the moment there is a special dispensation given to low value goods (worth R500 or less). This rule, called “de minimis”, has been abused by some importers over the last couple of years. They import low-value goods and separate them into small packages.

Once these separate packages have passed through customs, they are usually put together in parcels and shipped to the customer. Because the seller has not paid duties and is not registered as a business in SA, VAT is not applied, he points out.

There is a small customs charge levied on each and every container that arrives, either by ship or air cargo.

Explaining what the new rule will mean for shoppers, Tempest notes: “Now the cost of clothes (any dress or shirt, etc), manufactured outside SA bought via an e-shop, will include (1) a share of the customs charge on the container it arrived in; (2) customs duty at 45% of the value; and finally (3) VAT at 15% of the final value in the online store.”

Tempest comments that until now, certain foreign e-commerce shops have avoided those taxes/duties, which is “clearly unfair competition”.

However, the EFSA believes the new rules are unlikely to deter South Africans from shopping on global online shopping sites.

“These off-shore e-commerce sites [Temu and Shein] have managed to keep their costs extremely low. They claim this is due to the fact that they have cut out the middleman. It may also be due to other factors.

“EFSA has always warned consumers to be wary of cheap products. Consumers should also be aware that not all of SA’s consumer and privacy regulations need to be applied by these off-shore companies because they are not registered in SA.”

Recent reports from Europe’s toy manufacturing industry and the South Korean Standards Institute on the quality of some of the products sold by off-shore e-tailers are of concern, he adds.

“There is a point made by some global observers that there may be an anti-dumping case to be made. Producers ‘dump’ products cross-frontier if they sell them at lower than the cost of manufacturing them, or close to that cost. SA and other governments might like to explore whether these cheap products are being dumped,” he concludes.

Temu told ITWeb it is not in a position to respond at the moment, and Shein did not respond to media queries.