The EU’s new Product Liability act will have a big effect on Chinese ecommerce giants Temu and Shein. Beginning today, the EU will charge €2 on all small packages. This charge only pertains to items drop shipped directly to consumers through these marketplaces. This is a big change in the taxation of low-value items. The new rules do away with the regular “de minimis” exemption which previously let shipments below a certain dollar amount come into the EU without customs duties.
Before now, Temu and Shein were exempt. This made it possible for them to import low-value goods while avoiding duties and import taxes. Instead, they are required to pay a fee for each parcel mailed directly to their consumers. This new requirement only went into effect last week! We’re hearing from European retailers who are growing more alarmed by the news. They claim that Temu and Shein have an unfair advantage by circumventing the EU’s rigorous product standards.
This structure has been intentionally configured to respond to these grievances. For example, packages under €150 will no longer go through customs duty-free. This regulatory change will make things much more difficult on the operational side for Temu and Shein. On top of that, a newly increased tariff on small packages up to $800 has been reduced from 120% to 54%. The flat rate for direct-to-consumer shipments is €2. In comparison, the rate for parcels directed to warehouses is a meager €0.50.
Despite all of this, Shein has established over 130 million users therefore gaining a large priority market share in the EU. All the while, Temu attracts about 92 million users. Both companies have been publicly committed in the past to work with regulators and meet the demands of consumers. Yet European retailers are still worried about their loyalty and adherence to their local rules and regulations.
The implementation of these fees is yet another reminder of the continued strain between European merchants and their foreign rivals. More recently, Temu and Shein have re-formed around a more hostile environment. They will have to reconsider their pricing strategies and measures against fraud in order to defend their market share and respect European legislation.