Shein, Temu Face End of EU Tax Breaks as Germany Pushes for Reform

Shein and Temu, facing scrutiny in the U.S., now risk losing EU tax exemptions as Germany backs abolishing import duty limits, potentially increasing costs.

Shein is presently intensifying its preparations for a London listing, following opposition from U.S. legislators during its endeavor to float in New York.

Germany Pushes for End of Import Exemptions

Recently, Germany disclosed its support for eliminating certain EU import taxes, potentially resulting in the termination of tax benefits for inexpensive packages. Shipments purchased via the Internet from a non-EU country are exempt from customs duties provided that their overall value does not exceed €150.

Euronews reports that tax exemptions are of utmost importance for Chinese e-commerce platforms, including Temu and Shein, as they have enabled them to establish a substantial customer base and charge considerably less than their European rivals.

These stores usually offer huge discounts on clothes, electronics, and other items. The above practice enables the two corporations to provide smart watches for $25 and outfits for as little as $8 to customers worldwide.

Impact on Shein and Temu's Pricing Strategy

Additionally, Shein and Temu have been granted import tax exemptions in the United States, eliminating the need for customs inspections of their shipments. Likewise, the ongoing EU tax cuts have resulted in the omission of package inspections upon entry, exacerbating the challenge of verifying compliance with import regulations.

These revised regulations are part of a broader reform initiative proposed by the European Commission, which will scrutinize all EU customs legislation.

Shein Pledges Compliance Amid Germany's Support for Ending EU Duty-Free Limit

Handelsverband Deutschland (HDE), the principal retail association in Germany, has lodged lobbying efforts with the German government.

The HDE informed Reuters that German Finance Minister Christian Lindner "has signaled that Germany will support the abolition of the 150-euro duty-free limit at the European level."

The European Commission's "proposals to adapt European customs law to the challenges of e-commerce" were welcomed by the German finance ministry. The proposal suggests a broader reform plan that eliminates the duty-free limit.

Shein responded to Reuters by saying, "We seek to comply with all relevant local laws and regulations of the countries in which we operate, including in relation to customs and tax compliance."

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