South Africa leads global crackdown on Temu and Shein

The South African Revenue Service (SARS) has responded extremely quickly to complaints that direct-from-China online retailers like Temu and Shein were exploiting local customs concessions.

SARS’ regulatory counterparts in the United States and European Union have only recently started cracking down on low-value parcel imports. Meanwhile, SARS began making changes in July of last year.

In early 2024, disgruntled South African retailers and textile industry stakeholders alleged that Shein and Temu were avoiding taxes on certain classes of goods — especially clothes — by splitting orders into sub-R500 consignments.

A source with close knowledge of Shein and Temu’s practices told MyBoadband that they used a SARS concession introduced in 2007 to keep their import taxes low.

The concession allowed logistics companies to pay a flat duty of 20% with no VAT to speed up customs clearance processes on low-value, high-volume parcels as e-commerce activity started picking up in South Africa.

Following complaints from local clothing producers and retailers, SARS announced it would start levying the full 45% tax on clothing items under R500 from 1 July 2024.

However, it subsequently put this plan on hold “until further notice”.

Our source had predicted this would happen, stating that South African customs did not have the capacity to handle the volume of imports that would need to be declared.

As an interim measure to address the local industry’s concerns, SARS started levying 15% VAT in addition to the 20% flat duty on all imports with values under R500 from 1 September 2024.

SARS also said it would reconfigure the current 20% flat rate for low-value orders into the World Customs Organisation (WCO) Framework for processing border-crossing e-commerce goods, effective 1 November 2024.

The United States has now begun a similar process, with U.S. President Donald Trump announcing at the start of February that the country was halting its de minimis provisions.

De minimis grants all parcels worth less than a certain threshold a waiver on standard customs procedures and tariffs — not too dissimilar from South Africa’s 2007 concession.

Although South Africa’s de minimis was technically zero, the concession granted special customs treatment for parcels valued at R500 or less.

The United States’ de minimis threshold is $800 (R14,750) — among the most generous in world.

The U.S. Congress quadrupled the waiver from $200 during Barack Obama’s presidency, fuelling an explosion in the number of exempted packages entering the country.

Customs and Border Protection data shows that shipments claiming de minimis soared more than 600% over the past decade to over 1 billion items in the 2023 financial year.

The consequences of Trump’s attempt to drop the waiver caused exactly the problem industry veterans in South Africa warned would happen at customs if the 2007 concession were abruptly ended.

Days after Trump ended duty-free entry for cheap goods entering the U.S., more than a million packages piled up at New York’s John F. Kennedy International Airport. His administration was forced to put the order on hold.

The European Union (EU) faces a similar problem with direct-from-China imports flooding their markets, even though its de minimis is set at a much lower €150 (R2,900) threshold.

The bloc’s executive arm, the Europen Commission, proposed in 2023 already that member states scrap their duty-free exemption for low-value parcels as part of a larger reform of their customs rules.

The Commission published a new report in early February urging EU countries to adopt the measure quickly.

However, the EU Customs Union will no doubt encounter the same capacity problems as seen in the United States and South Africa unless proper preparations are made to handle the volume of goods that would need to go through standard screening processes.

New SARS customs rules unclear

While SARS has stated that revamped customs rules based on the WCO framework came into effect on 1 November 2024, it has not responded to requests for comment about how they work.

The WCO framework also includes recommendations for setting a de minimis, and SARS has not revealed if South Africa’s duty-free waiver is now greater than zero after doing away with the 2007 concession.

Although it has been reported that all orders of clothing are now subject to the same 45% duty that large importers pay, this is not the case.

MyBroadband assembled several orders from Shein and Temu customers since 1 November 2024 and found that the taxes on these consignments varied greatly — from 11% to 32%.

One order’s effective tax rate was even lower than the 15% VAT that is supposedly applied to all imports, regardless of value.

This makes it effectively impossible for online shoppers to estimate how much tax they will pay on an order from an international retailer like Shein or Temu.