Closing the tax loopholes for importation of goods from Shein and Temu
President Donald Trump’s extensive tariff proposals have experienced fluctuations. At present, the 25 percent tariff on imports from Mexico and Canada has been suspended for a month, while a 10 percent tariff on Chinese imports is scheduled to be implemented on Tuesday, following an executive order that raises questions regarding its legality.
On February 1, 2025, President Trump enacted executive orders that impose tariffs on the nation's three primary trading partners. A 25% tariff will be applied to goods imported from Canada and Mexico, whereas imports from China will incur a 10% tax. Additionally, energy resources from Canada will be subject to a reduced tariff of 10%. These duties are anticipated to come into effect on Tuesday.
Included in this order is a significant provision that may alter the way Americans engage in online shopping: the elimination of a lesser-known loophole known as the de minimis exception. According to the de minimis rule, packages valued at less than $800 can enter the United States without incurring duties, allowing recipients in the U.S. to receive up to $800 worth of goods each day without the obligation to pay import taxes.
E-commerce leaders such as Temu and Shein, along with numerous smaller enterprises, have exploited this loophole to deliver low-value packages to consumers, allowing these shoppers to avoid import taxes on their acquisitions. Companies like Temu and Shein, which ship directly to customers, are not required to maintain large inventories in U.S. warehouses; instead, they can dispatch orders directly from manufacturers or warehouses located in China, where a significant portion of their products is manufactured.
More tariffs on products
Andrew Goodacre, representing the British Independent Retailers Association, stated that the organization has already brought this matter to the attention of the government, contending that:
"the UK government should take similar action" following the regulatory changes implemented by the US and EU.
It appears illogical for a government that claims to be financially constrained to forgo a significant revenue opportunity by imposing duties on countless products that do not benefit the UK economy—essentially, all the revenue is leaving the UK."
Julian Dunkerton, the CEO of Superdry, urged the government to revise the regulations, which he argued were intended to assist small businesses and individuals in importing goods, rather than being applicable to large entities like Shein.
He emphasized the necessity for the rules to be modified so that those dispatching thousands of parcels, collectively valued at a significant sum annually, would be governed by different tax regulations.
“This is not about scrutinizing every small parcel, but rather focusing on those who exceed a certain threshold,” he stated. “It would be extremely burdensome for a very small enterprise, for instance in France, to face taxation on every single transaction.”
The European Union has announced its intention to proceed with the elimination of the €150 (£126) threshold for import duties. In contrast, the United Kingdom maintains an import duty threshold of £135, and items valued at £39 or less are exempt from import VAT.
Brad Ashton, a partner specializing in customs and international trade at the advisory firm RSM UK, remarked,
“Should these goods not be imported into the United States, other regions, including the EU and the UK, may experience an influx of inexpensive products in the market.”
He further noted that the potential imposition of 10% tariffs on Chinese imports into the US could have repercussions for UK retailers, particularly if the merchandise is manufactured in China but distributed and shipped from the UK.
“These goods will still incur tariffs based on their origin, which could pose a significant challenge for UK retailers,” he added.
The future of business
The customs and tax framework seeks to strike a balance between alleviating the financial burdens on businesses and consumers purchasing lower-value goods from abroad and safeguarding the interests of UK enterprises.
Shein and Temu have engaged in an extensive digital marketing campaign in recent years to attract more bargain-seeking consumers.
In 2024, Temu ascended to the top position on Apple's list of the most downloaded free applications in the United States for the second consecutive year, whereas Shein ranked twelfth. Representatives from Temu, Shein, and Alibaba did not respond promptly to requests for comments. Temu has previously refuted claims that its growth relies on de minimis factors.
Credit: The icons of Shein and Temu are depicted on a smartphone screen in this illustrative photograph captured in Krakow, Poland, on August 27, 2024. Photo by Jakub Porzycki.
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