The South African Revenue Service (Sars) is putting its decision to apply a 45% tariff on imported clothing products, such as Temu and Shein, on hold until further notice.
Sars spokesperson Siphithi Sibeko said yesterday that Sars was consulting with the industry on the implementation of the correct duties on imported clothing.
“Once this consultation is concluded, Sars will officially communicate the date,” he said.
Last month it was announced that regulations would be changed. The proposed new tax envisions that clothing items imported into the country valued at less than R500 would carry the same duties as bigger orders. Clothing imports above R500 in South Africa would be subject to a 45% import duty plus VAT.
The ‘de minimis rule’ allowed these companies to get clothing parcels under R500 through customs with a 20% import duty and 0% VAT.
The plan to implement the hike comes after retailers and the textile industry accused Shein and Temu online stores of exploiting a tax loophole. Many South African companies accused Shein and Temu of abusing this rule by breaking up larger orders into smaller quantities and packages.
Local South African players – including the National Clothing Retail Federation, Southern African Clothing and Textile Workers Union and Naspers-owned Takealot Group, a local online retailer – argue that Sars’s regulations on international imports are urgently needed to protect local industry and provide a level playing field.
Chinese companies have refuted this claim, however, adding that their local distributors are fully compliant and Authorised Economic Operator Sars-accredited.
News reports cited July 1 as the date the new tariffs would click in.
However, before implementing this new tax Sars needs to update its legislative framework.
Donald MacKay, the founder and CEO of XA Global Trade Advisors, said, “In order to impose the import duties on courier parcels, Sars needs to lift the exemption they gave to couriers, which allows them to pay a flat 20% on courier items cleared through OR Tambo. Until this happens, the higher duties on items such as clothing will not be payable.”
South African eCommerce International Association (Saeia) said in a statement, that will be released today and seen by Business Report, that in recent correspondence to the Freight Forward industry, Sars had expressed the need for further engagement with stakeholders to ensure trade and systems readiness across the sector.
Saeia said, according to Sars, its current administrative practices were designed at a time when eCommerce volumes were low. However, the recent boom of eCommerce had necessitated a review of Sars tax rules and processes to effectively collect duties and taxes on eCommerce goods.
Dudley Filippa, the chairperson of Saeia, said, “We welcome Sars’s decision to extend the timelines for this change and we look forward to further engagement to find a pragmatic way forward for all parties involved. Saeia fully supports Sars’s mandate to collect legally prescribed tariffs due to the State, however, it is equally important that internal systems and software tools are sufficiently geared for the new process.”
The announcement to discontinue the small parcel exemption, was met with strong resistance from consumers who took to social media to vent their frustration, culminating in a petition that garnered nearly 20 000 signatures, Saeia said, adding that Shein and Temu provided a lifeline for low-income households, university students and pensioners, allowing them to purchase clothing and other items at affordable prices.
Filippa said, “eCommerce significantly contributes to the country’s GDP by creating new jobs, empowering independent couriers, and stimulating new markets for SMEs. As part of our mission, we aim to collaborate with Sars and other relevant government departments to prioritise eCommerce for the growth of entrepreneurs who wish to expand their footprint globally. Ultimately, we hope that the envisaged engagement with Sars will create a conducive environment for the advancement of eCommerce overall in South Africa.”
BUSINESS REPORT