Temu and Shein tax changes tested — with strange results

MyBroadband tested the amount of tax payable on a Shein and Temu order before and after the changes implemented at the start of July but found no difference or reason behind them.

SARS has committed to tax all imported clothing parcels with a duty of 45% plus VAT from the start of July.

We set out to determine the tax levied on a clothing parcel before and after the changes.

The test started in mid-June when MyBroadband ordered parcels from Temu and Shein.

We ordered a T-shirt and a pair of cheap running shoes from Temu and four beanies from Shein.

This came in at R263 at Temu, with free shipping, and R156 on Shein, with an additional R168 for shipping and related charges.

When we ordered the same items again in July, the Shein order had actually got cheaper, while the Temu order was more expensive, albeit not by the amount we expected.

Retailers and textile industry workers previously accused the companies of exploiting a tax loophole to undercut South African businesses.

This was incorrectly referred to as a de minimis rule that enabled Temu and Shein to pay a flat 20% tax on parcels valued less than R500, instead of paying the full customs duty plus VAT.

An industry source with over three decades of experience in trade logistics and customs, currently working for a prominent international transport and logistics company, told MyBroadband that this wasn’t a de minimis.

Instead, the two China-Africa importers and their local logistics partners benefitted from a 2007 concession list published by the South African Revenue Service.

One of the concessions allowed couriers to pay a 20% flat rate once a month for high-value, low-volume consolidated shipments coming through OR Tambo Airport in Johannesburg.

The expert said the clearance is processed on a DA306 form rather than a formal customs declaration (SAD500).

They explained that this concession was created for the bulk courier business in the past and that the volume of imports Temu and Shein would create was unforeseen.

Although there was no legal provision for the 20% duty as per the concession, it effectively became the legislation allowing Temu and Shein’s logistics partners to pay minimal import taxes.

Temu order in mid-June

Shein order in mid-July

Maritime Legal Solutions CEO and founder Mark Goodger previously pointed to this concession as the loophole Chinese importers were using.

Goodger explained the provision for the courier industry to pay a flat 20% fee was to streamline trade and lessen the burden on customs.

He said the call to remove the loophole wasn’t to hurt consumers, but rather to level the playing field in South Africa’s clothing retail sector.

In other words, either everyone must benefit from a 20% flat duty and no VAT, or everyone must pay the stipulated customs fees on clothing import plus VAT.

Goodger said local retailers feel they’ve been hard-pressed as they can’t benefit from the concession and instead pay roughly 45% plus 15% VAT to import similar products.

“It is not a move directed at depriving any particular community of receiving that low-value product,” said Goodger.

“It is rather a corrective move towards a level playing field, and in terms of the customs that the values declared must be correct.”

Temu order — June 2024 customs clearance payment

Shein order — June 2024 customs clearance payment

For our test, we kept both orders under R500.

The parcels moved quickly, and we were soon prompted to pay R75.53 for the Temu order and R74.33 for the order from Shein.

This equates to 27% and 48%, respectively, which was already way more than the 20% customers were reportedly charged.

We then bought the same items from both stores on 8 July to see if anything had changed.

If the new rules are properly applied, we should pay 66.75% in taxes if the VAT is also applied to the duty, or 60% if both taxes are calculated against the original amount.

When we ordered the same items a second time, their prices had changed significantly, especially at Temu, where our order came to R449.

The Shein order was slightly less expensive at R124, but the same R168 shipping charges were levied on it.

Temu order on 8 July 2024

Shein order on 8 July 2024

When these parcels arrived in South Africa, we had to pay VAT and duty of R75.75 and R72.77 each.

This worked out to 17% on the Temu order and 59% on the Shein order.

The second Shein order is the closest we came to being charged correctly, but it is still not quite right.

All the taxes we had to pay ended up being roughly the same amount, even when order prices differed, which suggests that the couriers possibly applied a fixed fee in a foreign currency.

Curiously, the total tax levied on each order only varies between 29.34 and 30.58 Chinese yuan at the closing prices each day, which allows us to speculate that taxes were levied as a fixed fee of 30 Yuan.

Temu order — July customs clearance payment

Shein order — July customs clearance payment