Why E-commerce Must Be Regulated

In recent months, e-commerce has become the hot topic of conversation in the news media, on social media and at various freight industry forums, unfortunately not for the right reasons.

At first, the main area of concern related to the low value of goods supplied by Shein and Temu, which posed a threat to both importers and local manufacturers. The focus soon changed, however, when clothing retailers highlighted the fact that due to the de minimis rule, the 45% import duty applicable on articles of clothing was not being paid to SARS, and this was a direct threat to the local clothing industry.

In response, SARS issued a notice stating that as from July 1, all clothing purchased via e-commerce must be declared separately and that the 45% duty would become applicable as well as VAT. Of concern is that SARS has decided to act on behalf of a specific sector which may be viewed as a form of favouritism, even though this step has been welcomed. One reason for concern is, for example, imported footwear, which attracts an average of 30% duty or R5 per pair (whichever is the higher), is currently not required to be declared separately and only the flat rate of 20% is applicable. A level playing field has therefore not been created as was intended but this is, of course, a matter of interpretation.

Another challenge for SARS is the collection of Ad Valorem duties applicable on luxury goods. Using the simplified clearance process, with a flat rate of duty applicable, the excise duty is not being applied on commodities such as beauty preparations, loudspeakers and video game consoles, as examples. These duties are additional to import duties and are calculated using a formula prescribed by SARS.

Specific commodities may also attract anti-dumping duties in terms of Schedule 2: Part 1 and, unless declared per HS Code, these duties are also not collected by SARS. The anti-dumping duty percentages are very high, to prevent or limit the local market from being flooded with 'cheap' imports, and there is support for the argument that cheap goods are currently being dumped into the local market through e-commerce.

Of greater concern is the risk to the health and safety of individuals. The importation of a wide variety of goods is either totally prohibited or restricted meaning they may only be imported under certain conditions. In terms of Section 113(80)(a) of the Customs and Excise Act, SARS is obligated to detain goods on behalf of Other Government Agencies (OGAs) to ensure that goods are compliant.

All clothing, textiles and footwear must meet the labelling requirements of the National Consumer Commission, most electrical goods require a Letter of Authority from the National Regulator for Compulsory Specifications, and beauty or make-up preparations must meet the requirements of the Port Health office, etc. These are only a few examples but, considering the huge variety of goods available for purchase online, the risk to consumers is massive because these shipments are not physically inspected or detained for release by the OGAs. Who will accept responsibility when a person is seriously or possibly fatally injured by a product that should not have entered our country?

There is also the question of how SARS will deal with repetitive imports by individuals in terms of their Registration, Licensing and Accreditation Policy which states No person may import into or export from South Africa unless registered as an importer or exporter.

Currently, there are no measures in place to restrict the number of imports by an individual purchasing goods online and this creates an opportunity for an individual to purchase cheap goods, pay the lower rate of duty, not pay VAT and then sell those goods commercially.

It is therefore imperative that SARS, in collaboration with Department of Trade and Industry, introduces a policy to regulate e-commerce. This will ensure that all loopholes are covered, the correct amount of revenue is collected, and all imported goods are compliant, as well as to enforce the Customs and Excise Act relating to all who import goods into South Africa.