The European Union is advancing plans to reform import duties, a move that could significantly affect 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 thrive by importing low-cost items without additional charges.
Shein, known for its fast-fashion model and competitive pricing, heavily relies 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 propelled Shein’s rapid growth in the global marketplace.
The European Commission’s proposal aims to abolish the exemption for packages below €150, aiming to streamline customs procedures and potentially level the playing field for European retailers. The initiative comes amidst concerns over fair competition and tax fairness, with analysts pointing out the significant impact such reforms could have on Shein’s operational costs and profitability.
Analysts speculate that if forced to pay import duties, Shein may need to adjust its business model, potentially resulting in higher consumer prices or reduced profit margins. The proposed reform also casts uncertainty on Shein’s planned London listing, set for as early as this autumn, as investors scrutinize the company’s adaptability 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, favoring traditional retailers like Primark.
Donald Tang, CEO of Shein, has expressed support for revising import duty thresholds to foster fair competition on a global scale. Tang underscores Shein’s compliance with UK tax policies, including VAT and corporate taxes, emphasizing the company’s commitment to transparency and regulatory adherence.
Meanwhile, UK retailers have voiced concerns over 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 for 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 expected to be deliberated in the European Parliament later this month. If approved, it could mark a substantial 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 progress, stakeholders will closely monitor the outcome, particularly regarding how Shein and other affected companies navigate potential changes to import duties and adjust their strategies to maintain competitiveness in the European market.
