Tariffs on Shein and Temu: Cheaper clothes versus saving jobs

Thousands of people have signed a petition opposing the SA Revenue Service decision to close a loophole in the tariff on clothes imported from outlets such as Shein and Temu.

Before 1 November, importers had to pay a 45% tariff on clothes above R500, as well as VAT. But a “concession” was applied for goods valued at less than R500, with importers paying a flat rate of 20% instead of a tariff, and no VAT. Exporters could therefore break up their orders into “small parcels” valued below R500 and escape the 45% duty and VAT.

According to Simon Eppel, director of policy and research at the Southern African Clothing and Textile Workers Union (SACTWU), this allowed retailers such as Shein and Temu to sell their products more cheaply, undercutting local retailers, and undermining local factories. 

As of November, imports under R500 are also subject to the 45% tariff and VAT. Announcing the change, SARS said it had noted “legitimate concerns” which had been expressed about the import of goods, especially clothing, by importers who had not been paying customs duties and VAT, resulting in unfair competition.

As a result, SARS said, VAT would be introduced on these imports, and the duty would be reconfigured from 1 November.

UNDECLARED GOODS

South Africa’s Retail-Clothing, Textile, Footwear and Leather Masterplan launched in 2019 was designed to strengthen local factories and increase jobs in the industry.

According to Eppel, more than 20,000 jobs have been created, and there has been an increase in locally-sourced clothing, accessories and footwear by almost 60%.

The Masterplan also includes measures to minimise customs fraud, which Eppel says is one of the biggest challenges facing clothing manufacturers. Goods are misclassified or under-invoiced to evade tariffs and then sold at deflated prices, undermining local factories. Under the Masterplan, SARS has increased inspections and seizure of goods.

Michael Lawrence, executive director of the National Clothing Retail Federation, said that illegal activity is difficult to quantify, but that there are differences of billions of rands between exports declared in China and imports declared in South Africa.

He said he supported the new tariffs.

But Free Market Foundation policy officer Zakhele Mthembu told GroundUp that people who relied on cheap clothing will not be able to afford those products anymore.

“The government, after being lobbied by local businesses, has the intention of making imports more expensive so that consumers would buy the already expensive clothing sold by South African retailers,” Mthembu said.

More than 24,000 people have signed a petition on change.org, calling on SARS not to implement the change.

“South Africans cannot afford this, we buy from Shein and Temu because we cannot afford clothes from local businesses, the point of Shein and Temu is affordability,” the petition reads.

A CONSUMER'S VIEW

A GroundUp staff member bought a pair of fashionable boots from Shein for R300. She said locally they would have cost her several hundred rand more and she would have been reluctant to buy them at that price.

Comparing clothes across retailers is hard because one seldom finds exactly the same product for sale from more than one company. But an orange sundress from Shein is being sold for R132 (including the tariffs as far as we can tell). A similar dress at a local retailer is being sold for over R200.

A pair of women’s high-waist ripped jeans is being sold on Temu for R379. We found a similar product at a lower price on Superbalist. But an equivalent product in-store at a popular chain was over R500.

When we searched the Temu website, we were struck by how fast it is and the number of choices for an item like “men’s jeans”. The website of a very popular local clothing chain was much slower and had far fewer options.

But there are also numerous complaints online about quality and service. An article in The Guardian describes shopping from Temu as “playing a lucky dip”.

Also, returning goods in-person to large South African retailers like Mr Price or Foschini is usually straightforward. Ordering goods online is easy.

Returning goods ordered online appears to be more frustrating and requires much more trust. Temu’s site describes a decent though complicated return policy; the consumer has to hope that a process that involves packaging it and sending it back via courier, will result in a refund.

There are numerous complaints on Hello Peter, a consumer review site, from people who struggled to obtain or return goods or get refunds from Shein and Temu. Nevertheless, the success of these online exporters shows that many South Africans have confidence in their products and delivery model.

POOR WORKING CONDITIONS

Shein and Temu operate their manufacturing primarily in China, where workers are paid very low wages in poor working conditions compared to South Africa.

Shein was founded in Nanjing, China, in 2008. It specialises in fast fashion. Temu, also a Chinese company, started in 2022. Both are online marketplaces, exporting products from China directly to consumers across the planet. Their Wikipedia pages list numerous controversies and criticisms of the companies, particularly with regard to labour practices.

We asked both companies to comment for this article, but neither responded.

This article first appeared on GroundUp. Read the original article here.