Sarah Travers
The European Union is pushing forward with plans to revise import duties, a move that could have profound implications for popular online retailers such as 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 thrive by importing low-cost items without additional charges.
Shein, renowned for its rapid-fashion model and competitive pricing, heavily relies on this exemption to ship products directly from China to consumers in Europe and the UK, avoiding import duties. This advantage, combined with subsidized postage costs from China, has fueled Shein’s rapid expansion in the global market.
The European Commission’s proposal aims to eliminate the exemption for packages valued below €150, aiming to simplify customs procedures and potentially level the playing field for European retailers. This initiative arises amidst concerns over fair competition and tax equity, with analysts highlighting the substantial impact such changes could have on Shein’s operational costs and profitability.
Analysts speculate that if compelled to pay import duties, Shein may need to reconsider its business model, which could lead to higher consumer prices or reduced profit margins. The proposed reform also raises questions about Shein’s planned listing in London, scheduled for as early as this autumn, as investors closely monitor the company’s ability to adapt to regulatory shifts.
In addition to regulatory pressures, Shein faces mounting competition from other social media-driven retailers like TikTok Shop and Temu, alongside a resurgence in in-person shopping post-Covid, which benefits traditional retailers like Primark.
Donald Tang, CEO of Shein, has voiced support for reforming import duty thresholds to foster fair global competition. Tang underscores Shein’s adherence to UK tax policies, including VAT and corporate taxes, underscoring the company’s commitment to transparency and regulatory compliance.
Meanwhile, UK retailers have expressed concerns about the competitive edge enjoyed by Shein and Temu due to the current import duty exemption. Business leaders such as Simon Roberts of Sainsbury’s and Argos have urged the UK government to review these loopholes, advocating for a level playing field that ensures fair taxation and competition among retailers.
The European Commission’s proposal is slated for discussion in the European Parliament later this month. If approved, it could signify a significant shift in the regulatory framework for e-commerce within the EU, affecting not only Shein and Temu but also other online retailers employing similar business models.
As deliberations proceed, stakeholders will closely monitor the outcome, particularly to see how Shein and other impacted companies navigate potential changes to import duties and adjust their strategies to maintain competitiveness in the European market.
