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Big Tax Hikes for Temu and Shein Clothing Orders in South Africa

Starting July 1, 2024, South Africa will implement higher taxes on low-value clothing imports from Temu and Shein, aiming to support local industries. This new policy will increase the cost of such imports significantly, potentially leveling the playing field for local retailers.

South African shoppers who favor budget-friendly clothing from Chinese online retailers Temu and Shein will soon face significant price hikes. Beginning July 1, 2024, all clothing parcels from these retailers will be subject to a 45% import duty plus VAT, marking a sharp increase from the current tax rates. This move, confirmed by the CEO of The Foschini Group (TFG), Anthony Thunström, aims to bolster local production and protect jobs within the South African textile industry.

Previously, Temu and Shein benefited from a tax loophole under the de minimis rule, which allowed clothing parcels valued under R500 to pass through customs with just a 20% import duty and no VAT. In contrast, local clothing retailers were subjected to the full 45% import duty plus VAT on their imports, creating a significant competitive disadvantage.

For instance, an R100 clothing order from Shein, which previously incurred an additional R20 in taxes, will now be taxed R45 for import duty and R21.75 in VAT. Consequently, the total cost of the order will rise to R166.75, representing a 39% increase from the previous total of R120. This change will make low-value clothing imports considerably more expensive, potentially deterring customers and pushing them towards locally produced alternatives.

The South African government, under the direction of Trade and Industry Minister Ebrahim Patel, has been investigating Temu and Shein for potential tax evasion. Patel highlighted the detrimental impact these retailers have had on the local textile industry, which struggles to compete with the low prices offered by direct-from-China imports. The National Clothing Retail Federation has also raised concerns about the practices of Temu, Shein, and their logistics partner, Buffalo Logistics, accusing them of exploiting tax and customs loopholes to import goods cheaply.

Both Temu and Shein have denied any wrongdoing, attributing their low prices to efficient business models that source products directly from factories or suppliers in China. However, this explanation has not placated local industry players, who argue that these practices undermine local production.

Interestingly, not all South African e-commerce players see the rise of Temu and Shein as a threat. Zando, for example, has adopted a similar direct-import model, partnering with Buffalo Logistics to streamline international shipping and customs clearance for its Zando Global clothing service. Meanwhile, other major retailers like TFG’s Bash argue that their superior product quality and established brands provide a competitive edge over the Chinese retailers.

It is crucial to note that this tax hike specifically targets clothing imports. Other popular imports, such as small electronics, remain unaffected by this policy change.

The new tax regulations signal a significant shift in South Africa’s approach to international e-commerce, emphasizing the protection of local industries while adjusting to the growing dominance of global online retailers.

Keywords: South Africa, Temu, Shein, clothing imports, tax hike, import duty, VAT, local industry, textile industry, e-commerce, Buffalo Logistics, Zando, TFG, Bash, trade regulations, Anthony Thunström, Ebrahim Patel.

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