Johannesburg – Shein, one of the largest online fashion retailers worldwide, is under investigation by the South African government following accusations of exploiting tax loopholes to gain an unfair advantage in the country’s economy. Local textile unions and industry groups raised concerns about the company’s import practices, alleging that Shein evades import tariffs by sending goods in small packages.
According to the Southern African Clothing and Textile Workers’ Union and the National Clothing Retail Federation of South Africa, Shein’s practice of sending goods in small packages of lesser value allows the company to reduce import duties, which have been put in place to support local industries and compete against cheap imports.
Shein, which was founded in China and is now based in Singapore, ships ultralow-priced merchandise from China directly to consumers in more than 150 countries. Women’s tops on the company’s website sell for as little as $2, and some dresses can be purchased for less than $5. However, if the allegations are true, the company may be paying as little as 10% to 20% in tariffs, while the South African government normally charges between 40% and 45% on imported clothing, depending on the value.
A spokesman for the Department of Trade, Industry, and Competition confirmed that an official investigation has been launched in response to concerns raised by labor and industry groups. The South African probe marks the first time that a government has officially confirmed an investigation into Shein’s import practices. While the department declined to provide details about the investigation, it said that it was initiated to address the concerns of industry groups and labor.
Etienne Vlok, the union’s national industrial policy officer, said that the import documents indicate that the company is using a loophole intended for individual customers. He said that “below a certain value threshold, you don’t have to pay the same taxes as someone importing tens of thousands of garments.” Vlok added that if Shein is found to be evading import duties, “we should be looking at a way to close that loophole.”
Shein has denied the allegations, and a company spokesperson said that the company is committed to complying with local laws and regulations of the markets in which it operates. Groups in the United States, such as the Coalition for a Prosperous America, have also raised similar concerns about Shein’s practices, particularly its use of the de minimis rule to avoid paying tariffs. The rule allows US retailers who sell Chinese imports and Chinese companies that sell directly to American consumers to avoid tariffs as long as goods are packaged and addressed to individual buyers and fall below an $800 cap.
Michael Lawrence, Executive Director of the National Clothing Retail Federation of South Africa, said that Shein’s aggressive, low-price points are a worldwide phenomenon. “It’s not just my membership that is trying to get their heads around what allows for such aggressively low price points,” he said.
