Sars cracks down on Shein and Temu

After it seemed that online shops Shein and Temu could continue selling in South Africa without paying the requisite custom duties for the time being, Sars has announced that it will now crack down on them in the interim by introducing VAT in addition to the current 20% flat rate customs duty from 1 September.

Sars on concerns about imported goods

The South African Revenue Service (Sars) says in a statement it remains committed to providing clarity and certainty in the implementation of its mandate of promoting legitimate trade for the economic development of the country in an era of rapidly expanding ecommerce.

“This will be achieved by making it simple and easy to facilitate an increased movement of goods. According to this mandate, Sars noted legitimate concerns expressed about several imported goods, especially clothing, via ecommerce by a number of importers who are not paying the obligatory customs duties and VAT, resulting in unfair competition with other industry players.”

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Sars says these concerns stem from the fact that, due to the immense scale of trade via ecommerce, Sars Customs implemented a “concession” for goods valued at less than R500, where importers paid a flat rate of 20% as customs duties and no VAT. Shein and Temu have been pointed out as the main culprits.

To address these concerns and provide clarity for traders involved in importing goods via eCommerce, Sars will make several changes in line with the World Customs Organisation (WCO) framework to deal with the already changing trade landscape.

“In early 1990 the shipment of large numbers of small or negligible value goods across borders carried by courier and express mail services was already experiencing significant growth globally and resulted in the World Customs Organisation (WCO) developing a set of release/clearance procedures, known as the “WCO Guidelines on Immediate Release”.

Sars says these guidelines aimed to assist WCO member Customs administrations in standardising the processing of ecommerce goods, based on the principle of information the operator provides to customs before the goods arrive and the universal categorisation of goods in four distinct 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 minimum threshold where no duties and taxes are collected and immediate clearance and release against a manifest, waybill, house waybill, cargo declaration, or an inventory of items.

Category 3: Low value dutiable consignments (simplified goods declaration): goods above the minimum, 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 other three categories and includes consignments containing goods that are subject to restrictions. Normal release and clearance procedures, including payment of duties and taxes, apply.

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These Sars changes are coming

Sars will now implement these changes:

• The introduction of VAT in addition to the current 20% flat rate customs duty by 1 September 2024 as an immediate interim measure.
• The reconfiguration of the current 20% flat rate into the WCO regime for the first three broadband categories with appropriate duty rates, by 1 November 2024.

“Sars will partner with the department of trade, industry and competition (DTIC), as the custodian of the country’s trade policy and development, as well as other industry players, to build public trust by seeking opportunities to level the playing field to protect local industries and create business opportunities for economic growth,” Sars commissioner, Edward Kieswetter, says.

He says Sars will resort to “the greater use of data, artificial intelligence, machine learning and algorithms to better facilitate trade while minimising risks to the economy”.