SHEIN IPO
15/07/2024
EU's Planned Customs Duty on Low-Value Goods
The European Union is planning to impose a customs duty on low-value goods, a move that is likely to impact imports from online retailers and affect companies like Shein, which is eyeing a £50bn listing in London. This initiative arises from increasing pressure by retailers in Europe, the UK, and the US, who face rising competition from Chinese-linked marketplaces such as Shein and Temu.
Current Import Duty and VAT Thresholds
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EU: Goods valued below €150 (£127) are exempt from import duties.
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UK: Goods valued below £135 are exempt from import duties, and items valued at £39 or less do not attract VAT.
Proposed Changes
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Removal of Exemption: The European Commission has proposed removing the exemption for packages valued below €150. This reform is part of broader efforts to simplify and secure the customs union.
Legislative Process
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European Parliament Review: The proposal must be discussed and accepted by the European Parliament, which will reconvene later this month.
Platforms like Shein and Temu benefit from the current low-value exemption, allowing them to ship products directly to customers without paying import duties, thereby maintaining lower prices. Removing this exemption could raise the cost of goods for these retailers, affecting their pricing strategy and market share. This might also impact Shein’s planned £50bn listing in London. The reform could create a more level playing field for European and Western Retailers by ensuring all retailers are subject to the same tax obligations, benefiting local businesses that compete with low-cost imports.
Shein’s CEO, Donald Tang, supports the reform and advocates for fair competition globally. He asserts that the tax break is not essential to Shein’s success. Shein attributes its growth to its on-demand business model and efficient supply chain, which reduces waste and keeps prices low. Industry leaders, such as Sainsbury's CEO Simon Roberts, have called for the closure of tax loopholes to ensure fair competition. Roberts emphasized the importance of creating a level playing field where all businesses pay their fair share of taxes.
The EU's proposed customs duty reform aims to address competitive imbalances by removing tax exemptions for low-value goods. While this could increase costs for online retailers like Shein and Temu, it may benefit European and Western retailers by ensuring fairer market conditions. The outcome of this proposal will depend on the upcoming discussions and decisions by the European Parliament.