These tax breaks are crucial for Shein and Temu as they allow them to sell clothing, accessories and gadgets at deep discounts compared to their EU competitors.
The detractors of Shein and Temu in the United States they have already complained that they use a import tax exemption to undercut their rivals and avoid customs inspections of their products.
Germany recently revealed that supports the removal of some EU import taxeswhich could mean the end of tax exemptions for cheap packages. Currently, packages purchased online from a non-EU country are exempt from customs duties if their total value is less than 150 euros.
These tax exemptions have been crucial for Chinese online retailers like Temu and Shein, as they have allowed them to charge much lower prices than their European counterparts and gain a large following. These retailers typically sell clothing, gadgets, and accessories with great discounts.
Shein and Temu have also benefited from import tax exemptions in the United States, which has allowed your packages to not necessarily have to go through customs. Likewise, due to the current EU tax exemptionspackages entering the EU are also currently not inspected, making it increasingly difficult to determine whether they comply with import regulations.
These changes could be part of a broader reform plan suggested by the European Comissionwhich will take a closer look at EU customs legislation as a whole.
Shein plans to go public and has chosen to list in New York. However, if the EU ends up removing these import tax exemptions, things could change significantly for Shein and other foreign low-cost retailers wanting to trade in the EU.
It could also mean that Shein is subject to considerable scrutiny by the content of its packaging, as well as controls to check whether it complies with import regulations on production and labor legislation.
Shein and Temu face more pressure in the US
In recent months, both Shein and Temu have been subject of criticism for various reasons. 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 that are mandatory for companies wishing to trade in the bloc.
Not only that, but the app makes it difficult to delete consumer accountswith cases of untraceable suppliers and complaints of misleading prices. It is also often not sufficiently transparent why certain products are recommended.
According to Rocío Concha, from the consumer organization ‘Which?’, “it is positive to see that other consumer associations from all over Europe are coming together to hold Temu accountable for not preventing unsafe products from ending up in homes.
“However the UK risks being left behindas weak consumer protection laws make it difficult to take effective action against Temu and other online marketplaces,” he adds.
Shein has also faced criticism, especially in USAwith a recent report from the US-China Economic and Security Review Commission noting that “numerous controversial practices have supported the rapid growth of Shein and other Chinese e-commerce companies.” 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 Labor Prevention Law.
“These allegations are compounded by other reports of illegal working conditions among suppliers to Chinese fast fashion companies, as well as findings that Shein products present health hazards and environmental risks“.
“Shein and several other Chinese fast fashion brands have also faced a high volume of infringement accusations of Copyright and lawsuits for violation of intellectual property rights (PI)”.
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