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Saturday, July 13, 2024

EU plan to impose import duty on cheap goods to end tax loophole exploited by Chinese brands

Following steps taken by the United States to check cheap textile imports the EU is also moving forward with plans to impose customs duty on cheap goods in a shift that could hit imports from low cost online retailers.

The potential change comes amid growing disquiet among retailers based in mainland Europe, the UK and the US about rising competition from the Chinese-linked marketplaces Shein and Temu, which exploit a loophole that excludes low-value items from import duty.

In the EU, the threshold for the levy is €150 (£127) and in the UK it is £135, enabling retailers such as Shein to ship products directly from overseas to shoppers in those markets without paying any import duty. In the UK, items valued at £39 or less also do not attract import VAT.

Subsidised postage costs in China make it more cost-effective for businesses based there to send cheap goods by air. A European Commission spokesperson said: “In May last year we put on the table customs reforms for a simple, smarter and safer customs union. What we have proposed now is there is no exemption any more for packages valued at below €150.”

The e-commerce proposal must first be discussed and accepted by the European parliament, which sits again later this month. Last year, 2.3bn items below the duty-free €150 threshold were imported into the EU.

Some countries imposed import duties of up to 30 percent, and having to pay that would force Shein to either completely change its business model, put up prices or take a hit on profit. The whole model is based on not paying duty. It would have a massive impact.

Shein also faces increased competition from fellow social media-driven retailers including TikTok Shop and Temu, as well as the post-Covid return to the high street by shoppers, which has helped the likes of Primark.

UK retailers have called on the government to examine the loophole amid rising competition from Shein and Temu. On Tuesday, Simon Roberts, the boss of Sainsbury’s and Argos, called on a new government to look at unfair taxes including business rates and import duty.
Theo Paphitis, the owner of the UK retailers Ryman and Robert Dyas, and the Next boss, Simon Wolfson, have also called on the UK government to review the loophole.

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