The South African Revenue Services (Sars) has increased customs duties on imports from online retailers like Shein, Temu and other similar platforms.
This is according to legal experts from Webber Wetzel.
The decision which is aimed at boosting local business and streamlining the customs process is expected to impact many South African consumers who frequently use these international online stores to shop.
According to Webber Wentzel, previously online retailers like Shein and Temu could use the de minimis rule, which means that imports of R500 or less would 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 would pay up to 45% customs duty on imports and 15% import VAT.
Understanding the new customs duties and import VAT increases
The new regulations which were implemented on September 1, 2024 will change the way that custom duties and import VAT are calculated.
“The changes are grounded on the Customs and Excise Act, No. 91 of 1964, the Value-Added Tax Act, No. 89 of 1991 and the World Customs Organisation (WCO) framework.”
“The WCO developed the WCO Guidelines on Immediate Release in the early 1990s, which classify goods into four distinct categories which account for different tariff thresholds.”
From September 1, VAT will be added to the current 20% flat rate customs duty as a temporary measure and by November 1, the 20% flat rate will be restructured to be in line with the WCO categories.
What is being adjusted?
According to the legal experts, the customs duties are calculated based on the declared value of the goods, including any applicable shipping costs and insurance.
Webber Wentzel experts said that Sars has adjusted the duty rate to make importing small, low-value items less economically attractive therefore discouraging low-value imports that contribute to inefficiencies and unfairness in the local market.
Import VAT is levied on the total value of the goods, customs duties and a 10% upliftment on the customs duty value. This 10% upliftment represents an amount in lieu of shipping and insurance costs.
According to the VAT Act, the standard rate of VAT is 15%, but the recent changes may result in this rate effectively increasing for certain categories of imported goods due to higher customs duty rates.
Why the increase?
Sars has justified the increase in duty rates as a broader strategy to promote local businesses by making international imports more expensive, in particular small, frequent orders that can disrupt local markets and supply chains.
This will in turn encourage South African consumers to shop from SA retailers which could be boost the domestic economy and create more opportunities for local businesses. It also reduces market clutter.
“Small, frequent international orders contribute to logistical and administrative burdens. By increasing the costs associated with these imports, Sars hopes to mitigate the strain on the local customs system and streamline the processing of imports.”
Impact on the SA import/export market
Sars is not the only organisation seeking to bolster the local clothing industry at the moment.
Various government bodies and agencies regulate importing and exporting within the Clothing, Textile, Footwear and Leather (CTFL) sectors including:
– the International Trade Administration Committee
– the Department of Trade, Industry and Competition
– the Clothing and Textiles Competitiveness Programme
– the South African Bureau of Standards
– the National Regulator for Compulsory Specifications
These bodies ensure that trade practices align with national standards, international trade agreements, and compliance with regulations.
SA’s textile and clothing market is currently a mix of locally produced goods and imports as well as a variety of established local brands and retailers, with a growing interest in affordable, fast-fashion imports and luxury, local products for niche markets.
Consumer preferences have shifted towards more affordable and fashionable products, resulting in increased competition from imports, particularly from China.
The change can be attributed to economic factors, globalisation and lack of innovation in South Africa.
South Africa exports textiles and clothing to various markets, including the United States, Europe, and other African countries.
The clothing and textile industry continues to be a significant employer in in the country, particularly in the KwaZulu-Natal and the Western Cape provinces.
While the sector provides jobs for thousands of workers there has been some decline in employment due to automation, globalisation, and competition from cheaper imports.
As consumers lean towards more affordable and fashionable products, SA has faced increased competition from imports.
While SA still produces and exports various products to local and international countries, items that are mostly imports are finished products like footwear and clothing, with the 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.”
IOL Business