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The delayed import duties on small parcels will go into effect next month. The South African Revenue Service (SARS) has announced that it will impose both VAT (15%) and a 20% import tax on small parcels from 1 September as an interim measure.
The final “appropriate” duties on a range of goods will go into effect on 1 November.
Currently, customers of Temu and Shein are paying a minimal price for importing clothing and other products through the online offshore retailers. Parcels valued at under R500 are taxed at 20%, but don’t attract VAT; for parcels valued at over R500, they pay a 45% import duty.
South African ecommerce players such as Takealot, as well as clothing sector unions have long called for these taxes to be hiked because the offshore retailers have profited from exploiting the country’s laws which allow them to bring goods into the country at a lower cost than local rivals.
In April, leading South African e-commerce group Takealot, which incorporates the Takealot.com, Mr D and Superbalist platforms, said that it is under immense pressure from the Chinese players.
Known as the “de minimis rule”, the loophole has been exploited by Temu and Shein, that have been accused of splitting up larger orders into smaller packages to qualify for the lower import duties.
They have also been accused of undervaluing small shipments, which the National Clothing Retail Federation says has given the foreign businesses an unfair advantage at the expense of domestic clothing manufacturers.
The Southern African Clothing and Textile Workers’ Union (Sactwu) has lobbied SARS for two years to take action against the platforms to stem a surge in cheap items coming from China.
In June, SARS announced that it would clamp down on these imports, but earlier this month it was revealed that the new import duties had not yet been instituted.
In a media statement, SARS has now said it remains committed to streamlining trade processes and creating a clear, predictable environment for businesses in an era of rapidly expanding e-commerce.
‘Legitimate concerns’
“SARS noted legitimate concerns that have been expressed in the importation of several goods, especially clothing, via e-commerce by a number of importers who have not been paying the obligatory customs duties and VAT on these imports, resulting in unfair competition with other industry players.
“The concerns stem from the fact that, due to the immense scale of trade via e-commerce, SARS Customs implemented a ‘concession’ for goods valued at less than R500, in terms of which importers paid a flat rate of 20% in lieu of Customs duties and no VAT.”
To address these concerns and to provide clarity for importers of goods via e-commerce, SARS said it would make several changes in line with the World Customs Organisation (WCO) framework.
It said the rapid growth of cross-border shipments of low-value goods through courier and express mail services in the early 1990s prompted the World Customs Organisation (WCO) to develop the WCO guidelines to standardise customs clearance procedures for e-commerce goods globally.
The changes to be implemented include the introduction of VAT in addition to the current 20% flat rate customs duty by 1 September 2024, and the reconfiguration of the current 20% flat rate into the WCO regime for other categories of goods with appropriate duty rates, by 1 November 2024.
SARS Commissioner Edward Kieswetter said that SARS would partner with the Department of Trade, Industry and Competition (DTIC), as well as other industry players, to bolster public trust and create a fair business environment by protecting local industries and stimulating economic growth. He said that SARS would resort to “the greater use of data, artificial intelligence, machine learning and algorithms to better facilitate trade while minimising risks to the economy”.
Last month, Financial Times reported that the European Commission was planning to scrap the €150 (R2,987) threshold below which goods can be brought in duty-free, targeting China’s online marketplaces Temu and AliExpress and clothing retailer Shein.
The British daily newspaper reported that last year, 2.3 billion items below the duty-free €150 threshold were imported into the EU. Ecommerce imports to the region had more than doubled year on year, reaching 350,000 items in April — which was almost two deliveries per household, commission data showed.
China benefited from subsidised postage costs, which made it cost-effective to send cheap goods by air, the Financial Times reported. The new provisions would apply to any online retailer shipping to EU customers directly from outside the bloc.
US-based Amazon typically used sellers based in Europe, the Financial Times said. DM
