Clearing confusion around taxes on imports from Chinese e-retailers Shein, Temu
There is still a lot of confusion around the taxes on imports from Chinese e-retailers like Shein and Temu.
A long-established common law principle is ‘de minimis non curat lex’ more commonly known as ‘de minimis’. It roughly translates to ‘the law does not concern itself with trifles’, meaning that the law should not get involved in circumstances where what has occurred is extremely trivial.
When importing, the de minimis rule applies when you import a product below a certain value (the de minimis value), and consequently don’t need to pay any import tax on the product.
De minimis values vary by country, but South Africa’s de minimis value is set at zero, meaning you will have to pay import duties and VAT on all products imported no matter the value of the product.
As with most things in life, there is an exception to the rule. In 2007 the SA Revenue Service (Sars) published a ‘concession list’, which is a list of special exceptions to normal customs rules.
On that list was a concession applicable only to bulk import clearances (couriers), through OR Tambo airport, allowing them to pay a flat 20% on the total value of any dutiable goods imported.
In other words, if you imported dutiable items like clothing, you would pay only 20% duty, and no VAT. Clothing normally attracts a 45% duty, but so little was being brought in 17 years ago that this had little impact.
From July 1, 2024, that exception no longer counts and anyone importing clothing or footwear, no matter the value of the parcel, will be subjected to the import tax of clothing and footwear.
This tax is 45% as well as 15% VAT. If you import anything else, you will pay whatever the applicable duty rate is for that product.
Upset consumers circulated a petition to try to reverse this decision by Sars, but failed. We could debate whether this is fair for days, but it will still not change the fact that you have to pay 45% import tax plus VAT when you now import clothing.
When local retailers import clothing, they have to pay the 45% import tax. The government feels it is only fair that the importing consumer, who is now effectively bypassing the middleman (the local retailers), also faces the same import tax.
Looking at the import statistics, these online retailers have been able to cut out the middleman quite successfully.
Local retailers and importing consumers pay almost the same price out of China for an item like a cotton T-shirt, but local retailers buy the T-shirt from the factory, import it and then display it in a physical shop in an expensive shopping centre.
The importing consumer effectively buys the same T-shirt directly from the factory (via Shein or Temu) and imports it. No additional overheads are added to the price.
The imports from online retailers increased from around R19 million in January 2022 to R120m in December 2023, a significant 539% increase over the two- year period.
But if you look at the bigger picture, online retailers only accounted for 5.66% of the total R1.91 billion worth of clothing imported in December 2023.
Even with the added 45% duty and the VAT, the articles the importing consumer can buy from these online retailers are still a lot more affordable than the same article in a local retailer’s shop.
Online retail is the future and it’s hard to see how this trend changes. They offer consumers choice and price options never available before.
Whether you like your T-shirt cropped, baggy, fitted or asymmetrical, the online retailers have it in every style and possible colour.
With a push of a button, you can add it to your cart from the comfort of your own home. Sometimes it arrives looking very different in real life, so this is certainly not without risk. But then how often have you spent a day frustrated in a mall unable to find what you are looking for.
Consumers, especially the poorest, can buy clothes cheaper, but removing the concession will give the traditional retailers more time to adjust to this new normal. Use this time wisely.
Donald MacKay is founder and chief executive of XA Global Trade Advisors and Anneke Jansen van Vuuren an analyst at XA Global Trade Advisors.MacKay has been advising local and foreign companies on global trade issues for more than two decades. X handle: XA_advisors; email: donald@ xagta.com; website: xagta.com. The views in this column are independent of Business Report and Independent Media.
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