These tax breaks are crucial for Shein and Temu, allowing them to sell clothes, accessories and gadgets at steep discounts compared to their EU competitors.
ADVERTISEMENTCritics of Shein and Temu in the United States have already complained that they use an import tax exemption there to undercut rivals and avoid customs inspections of their products.
Germany has recently revealed that it backs the scrapping of some EU import taxes, which could potentially see the winding up of tax breaks for cheap packages. This is because currently, parcels bought online from a country outside the EU are exempt from custom duties if their total value is under €150.
These tax breaks have been crucial for Chinese online retailers such as Temu and Shein, allowing them to charge significantly lower prices than their European counterparts and gain a massive following.
These retailers usually sell clothes, gadgets and accessories at a steep discount.
Shein and Temu have also been receiving import tax breaks in the US, which have meant that their packages do not necessarily have to be checked by customs. Similarly, due to the current EU tax breaks, packages coming into the EU are also not being inspected at the moment, making it increasingly difficult to ascertain whether they meet import regulations.
These changing regulations could potentially be part of a larger reform plan suggested by the European Commission, that will take a closer look at EU customs laws as a whole.
Shein is currently planning to go public and has chosen to list in New York. However, if the EU does end up removing these import tax breaks, it could change things significantly for Shein and other low-cost foreign retailers wanting to trade in the EU.
It could also mean that Shein could come under considerable scrutiny for the contents of its packages, as well as checks over whether it is meeting import regulations on production and labour laws.
Shein and Temu face more pushback in the US
In the last few months, both Shein and Temu have come under fire for a number of things. Recently, Temu has been accused of manipulative practices by 17 EU companies, which have alleged that the company does not do enough to protect its consumers and does not comply with EU rules which are mandatory for companies wishing to trade in the bloc.
Not only that, but the app makes it difficult to delete consumer accounts, with cases of untraceable suppliers and reports of misleading pricing. Often, it is also not sufficiently transparent why certain products are being recommended.
Rocio Concha of the consumer organisation Which? said: “It is positive to see other consumer groups across Europe joining together to hold Temu to account for failing to prevent unsafe products ending up in people’s homes.
“However, the UK risks being left behind as weak consumer protection laws make it more difficult to take effective action against Temu and other online marketplaces.”
Shein has also faced criticism, especially in the US, with a recent US-China Economic and Security Review Commission report saying, “Numerous controversial practices have supported Shein and other Chinese e-commerce firms’ rapid growth. Investigations in 2022 alleged that Shein failed to declare that it had sourced cotton from Xinjiang for its products, a violation of the Uyghur Forced Labour Prevention Act.
“These claims are exacerbated by further reports of illegal labour conditions among the suppliers of Chinese fast fashion firms as well as findings that Shein products pose health hazards and environmental risks.
“Shein and several other Chinese fast fashion firms have also faced a high volume of copyright infringement accusations and lawsuits for intellectual property (IP) rights violations.”
