Temu and Shein South African crackdown looming

Chinese online retail giant Temu has gone silent regarding the looming crackdown on its alleged questionable activities in South Africa, while Shein has denied dodging customs and other taxes.

This comes after trade and industry minister Ebrahim Patel told textile industry workers that the government wanted to confront online retail platforms using tariff loopholes that undermine locally-produced goods.

The minister said Temu and Shein’s dominance was one of the local textile industry’s biggest import-related challenges.

National Clothing Retail Federation executive director Michael Lawrence said they flagged suspicious practices by Temu and Shein with the South African Revenue Service (SARS).

Lawrence alleged that Shein, Temu, or their local agent exploited tax and customs loopholes to cheaply import their products into South Africa.

By avoiding tax, they can undercut local retailers, putting thousands of local jobs on the line and limiting tax collection.

Takealot Group CEO Frederik Zietsman made similar allegations without naming Temu and Shein directly.

In late April, Zietsman said some “new players” aren’t adhering to tax regulations while sellers on Takealot are forced to pay import duties.

He said they were engaging with governmental and non-governmental bodies to tackle the issue, adding that it negatively impacts the South African economy.

Patel told textile workers it was critical to ensure everyone paid full customs duties and VAT so the country didn’t suffer from regulatory gaps.

While Temu did not respond to our requests for comment, Shein told MyBroadband that it is — and has been — paying all the relevant tax on clothing imports in South Africa.

It is important to note that Temu is a marketplace similar to Takealot and Amazon that allows third parties to sell on its platform, while Shein produces and sells clothes.

“We seek to comply with relevant local laws and regulations of every country where we operate, including those pertaining to customs and tax compliance,” a Shein spokesperson told MyBroadband in a statement.

“In South Africa, like any other retailer, we pay customs duty and VAT at the appropriate rates on every order that we deliver to local consumers.”

Shein said it’s a common misconception that it can only offer such low prices by skirting local import taxes.

“Contrary to some common misperceptions, we keep prices affordable through our technology-based on-demand business model and flexible supply chain,” the company told MyBroadband.

“This reduces inefficiency, helps us to lower wastage of material, as well as reduce our unsold inventory. We pass this cost advantage to our customers, and this is what has driven our success.”

Incorrect customs declarations

One possible explanation for the problem was that Temu and Shein’s delivery partners, like Buffalo International Logistics, may have been incorrectly reporting which duties and taxes to SARS.

Lawrence said that, according to tests they conducted, the taxes applied to packages can amount to as little as 10% of the item’s value.

This is much lower than the 45% tax and VAT on imported clothing levied to protect local manufacturers against cheap exports that could threaten their businesses.

However, Shein also said this doesn’t happen with its parcels.

“Customs duty is payable on every order, and prices displayed on the Shein website include applicable taxes,” the spokesperson said.

“We work with our local agents to ensure that items are declared according to the appropriate World Customs Organization Harmonized System (WCO HS) codes, and pay customs duties accordingly, which for imported clothes can range from 30% to 45%.”

Shein said its orders do not benefit from any favourable tax treatment compared to other offline or online retailers.

Although Temu did not respond to our request for comment, it previously dismissed the allegations that it is dodging tax.

The e-commerce platform said it doesn’t list duties and taxes with pricing in its South African store because they are only imposed by local authorities after parcels arrive.

“In our commitment to providing the best service to our customers and adhering to local customs laws, Temu collaborates with a reputable logistics company with extensive experience in e-commerce packaging,” a spokesperson for the company said.

“The logistics company acts as our customers’ agent with the local customs and tax authorities to clear the package, process, and remit applicable taxes.”

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