An industry expert with over 30 years of experience in trade logistics and customs revealed that Buffalo International Logistics leveraged an import concession initially designed for bulk couriers to circumvent paying full duties. This source, speaking anonymously to MyBroadband, clarified that Buffalo did not use the "de minimis" provision, which allows for lower tax rates and no VAT on items valued under R500.

Instead, allegations surfaced that Buffalo split larger customer orders into smaller packages to exploit this provision. However, the expert noted that Section 38(1)(a)(v) of the Customs and Excise Tax Act limits this simplified import process to duty-free goods, excluding clothing, which incurs a 45% duty plus VAT.

Buffalo reportedly utilized a SARS concession list from 2007, which allowed couriers to pay a 20% flat rate monthly for high-value, low-volume consolidated shipments processed through OR Tambo Airport, then known as Johannesburg International Airport. This clearance is done using a DA306 form, bypassing the formal customs declaration (SAD500).

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Unprecedented Import Volumes

The concession was originally intended for bulk courier businesses, and the volume of imports from Temu and Shein was unexpected. Despite no legal basis for the 20% duty concession, it effectively became the standard, enabling Buffalo to pay minimal import taxes.

The expert added that Buffalo’s status as an Authorised Economic Operator (AEO) offered no significant benefits unless both the broker and the registered importer were AEO-accredited. “The bulk of the brokers, including couriers, are AEO accredited,” they said.

In response to the growing media scrutiny and pressure from local retailers and e-commerce platforms, SARS Customs is set to impose the full 45% duty and 15% VAT on all clothing parcels, including those under R500, starting July 2024.

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Challenges for SARS

Temu and Shein have also presented challenges regarding importer registration. Recent legislative amendments now allow individuals to import goods valued up to R150,000 per year without registering as importers, up from just three transactions per year previously.

The expert highlighted that the simplified clearance Buffalo used only listed customer details on the manifest held by the courier. “There is no way to trace if a person has exceeded the threshold of R150,000 or not without a big data audit,” they explained. “Customs do not have the capacity to audit on this volume.”

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