Taxman dodging new Shein and Temu import duty questions

The South African Revenue Service (Sars) has been quiet about sweeping changes it planned to implement for imported goods coming into the country due to an increase in international online shopping orders from 1 November 2024.

Due to a lack of communication with the public, it is unknown exactly how much Sars charges on imported items bought from stores like Shein and Temu, among other international operators.

Sars announced the plan to align the country’s import taxes on international e-commerce purchases with the World Customs Organization (WCO) framework in August 2024.

The decision was part of Sars’ response to local retailers and the textile industry crying foul over the impact of Shein and Temu on their businesses.

The parties argued that the Chinese retailers were bypassing duties through dubious import processes.

Over the past few months, it emerged that they were exploiting a “concession” for imports valued at less than R500 to pay a flat duty of 20%

Sars said to address this and provide clarity for traders involved in the importation of goods via e-commerce, it would make several changes in line with the WCO framework to deal with the already changing trade landscape.

The WCO framework or guidelines standardise e-commerce import processing by requiring operators to provide information on the goods in advance of their arrival.

Under the new rules, importers will have to assign packages to one of four categories:

• Category 1: Correspondence and documents — No commercial value, not subjected to duties and taxes, immediate release on the basis of a consolidated declaration that may be oral or written (a manifest, a waybill or an inventory of such items).
• Category 2: Low-value consignments below a specified de minimis threshold — No duties and taxes are collected, and immediate clearance and release are done against a manifest, a waybill, a house waybill, a cargo declaration, or an inventory of items.
• Category 3: Low-value dutiable consignments (simplified goods declaration) — Goods above de minimis, but below full declaration value threshold, dutiable, and the use of a simplified declaration, or release against a manifest with subsequent simplified clearance.
• Category 4: High-value consignments (full goods declaration) — Consignments not falling under the three categories described above and includes consignments containing goods that are subject to restrictions. Normal release and clearance procedures, including payment of duties and taxes, apply.

In simple terms, Sars will still allow for a simplified import process for low-value e-commerce products, provided the shipment details are furnished before the goods arrive in the country.

However, only those products below an as-yet undefined de minimis value (Category 2) will be completely exempt from customs duties when declared before arrival. These products may or may not also be exempt from 15% VAT.

In addition, products valued between the de minimis and another as-yet undefined amount — the full declaration value — will also be eligible for simplified clearance ahead of arrival, but will have all customs and VAT duties.

It is only if a product is valued above the full declaration value that it won’t be eligible for the simplified clearance process.

Without knowing the de minimis and full declaration values, South African online shoppers will not know under which category their order falls.

That makes it impossible to estimate how much tax they will have to pay or whether the tax they had paid was calculated correctly.

Sars responded to our initial query by directing us to its original statement on the plan to implement the WCO framework.

While MyBroadband pointed out the missing details on the de minimis and full declaration values, Sars failed to respond to our queries.

Big differences in de minimis depending on country

The Global Express Association compiled a useful document summarising the de minimus values of numerous countries.

It showed the values can differ significantly from one country to the next, so it was difficult to hypothesise what amount Sars could have in mind.

For example, Lesotho, Mozambique, and Zimbabwe have very low respective de minimis values of R249, $12 (R209), and $10 (R174).

However, European countries and the UK have set their de minimis at a much higher €150 (R2,851) and £135 (R3,060), respectively.

Australia and the United States have particularly high de minimis values of AU$1,000 (R11,580) and $800 (R13,943).

Combined with its proximity to China, it makes sense it has seen a particularly big explosion in e-commerce imports from Shein and Temu.

The table below shows the de minimis values for ten countries or regions.