EU Proposes Import Duty Reform Targeting Shein and Temu

The European Union is advancing plans to overhaul import duties, potentially impacting popular online retailers like Shein and Temu. Currently, goods valued below €150 in the EU and £135 in the UK are exempt from import duties, a loophole that has allowed these companies to flourish by importing low-cost items without additional charges.

Shein, known for its fast-fashion model and competitive pricing, relies heavily on this exemption to ship products directly from China to European and UK consumers without incurring import duties. This advantage, coupled with subsidized postage costs from China, has fueled Shein’s rapid growth in the global marketplace.

The European Commission’s proposal aims to eliminate the exemption for packages below €150, streamlining customs procedures and potentially leveling the playing field for European retailers. The move comes amid concerns over fair competition and tax fairness, with analysts highlighting the significant impact such a change could have on Shein’s operational costs and profitability.

Analysts suggest that if forced to pay import duties, Shein may need to adjust its business model, potentially leading to higher prices for consumers or reduced profit margins. The potential reform also raises questions about Shein’s planned London listing, slated for as early as this autumn, as investors scrutinize the company’s ability to adapt to regulatory changes.

In addition to regulatory pressures, Shein faces increasing competition from other social media-driven retailers such as TikTok Shop and Temu, as well as a resurgence of in-person shopping post-Covid, benefiting traditional retailers like Primark.

Donald Tang, CEO of Shein, has expressed support for reforming import duty thresholds to promote fair competition globally. Tang emphasizes Shein’s compliance with UK tax policies, including VAT and corporate taxes, highlighting the company’s commitment to transparency and regulatory compliance.

Meanwhile, UK retailers have voiced concerns about the competitive advantage enjoyed by Shein and Temu due to the current import duty exemption. Business leaders like Simon Roberts of Sainsbury’s and Argos have called on the UK government to review these loopholes, advocating for a level playing field that ensures fair taxation and competition among retailers.

The proposal by the European Commission is expected to be discussed in the European Parliament later this month. If approved, it could mark a significant shift in the regulatory landscape for e-commerce within the EU, impacting not only Shein and Temu but also other online retailers relying on similar business models.

As discussions unfold, stakeholders will be closely watching the outcome, particularly in terms of how Shein and other affected companies navigate potential changes to import duties and adapt their strategies to maintain competitiveness in the European market.