EU ends tax loophole exploited by SHEIN, Temu, and Aliexpress
The European Union is imposing a new tax on small imports, which will heavily impact Chinese giants like SHEIN, Temu, and AliExpress. What does this mean for European consumers, product quality, and brands?
On July 1, a flat €3 customs duty on low-value e-commerce imports will come into effect. Until now, goods imported into the EU worth under €150 were exempt from customs duties.
This temporary measure means small parcels entering the bloc, largely through online shopping platforms, will face a fixed customs charge. It addresses what the European Council describes as "unfair competition" for European retailers, as well as concerns over unsafe products, fraud and the environmental impact of vast volumes of cheap imports.
The Council also clarifies that this customs duty is separate from the proposed "handling fee" (expected to be €2) currently being negotiated under the EU's broader customs reform and long-term budget plans, another blow to the Chinese e-commerce sector.
"The urgency was so big that there was deep political consensus", Dirk Gotink, a Dutch MEP for the EPP, told Euronews. But the measure was slow to arrive, "because countries were slow to accept that, to do something about the tsunami of non-compliant [fast fashion] products, you need to integrate European customs."
A juicy tax loophole
The EU receives over two billion e-commerce packages worth under €150 annually. This overwhelms customs infrastructure and allows up to 65 per cent of parcels to enter with misdeclared values or unverified safety profiles. The unprecedented volume hampers border inspections and demands regulatory action.
"I think only 0.006 per cent of parcels get checked by customs. The number of products coming into Europe means not all of them can be tested", estimated Laura Clays, spokesperson for consumer organisation Testachats. "Too many non-compliant products can enter the market."
For years, companies like SHEIN operated in a zero-tariff environment by routing individual orders directly from China. This was possible under the "de minimis" loophole, a customs policy allowing low-value shipments (under €150 in the EU) to enter free of customs duties.
Firms used the loophole to avoid up to 12 per cent in import duties, keeping shipping and production costs artificially low while avoiding European oversight. The system also channelled billions in untaxed retail revenue into Chinese logistics.
SHEIN, for instance, used this model to generate over €30 billion in global revenue while bypassing levies on European imports. By avoiding up to 12 per cent in customs duties, foreign platforms could also undercut European retailers, who face higher structural costs (30 to 50 per cent per garment).
Gotink describes it as "tax avoidance on an industrial scale, basically."
Safety and environmental issues
"Fast fashion has destroyed the second-hand market in Europe and caused huge unfair competition for European clothing brands. The taxpayer pays a high price for this trade: fast fashion can contain chemical substances that shouldn't be in Europe, like PFAS", shared Gotink.
Independent assessments by European consumer groups, including Testachats, found that "around 70 per cent of the products did not comply or did not fully comply with all EU safety requirements", said Clays.
A Greenpeace Germany investigation also found that 32 per cent of tested apparel contained illegal concentrations of hazardous substances, including heavy metals, formaldehyde and PFAS "forever chemicals" in jackets at levels up to 3,300 times the legal European threshold.
Safety checks on toys and children's clothing also uncovered serious non-compliance. Certain items had dangerous shapes and loose components that posed a high choking risk.
"International e-commerce offers lots of opportunities for consumers. But any product entering the EU market must comply with safety, consumer protection and environmental standards. That is our goal: to ensure products entering Europe meet the same standards as those made in the EU", said Clays.
The hyper-production of ultra-fast fashion goods also generates a major environmental toll. Flying billions of individually packaged items directly from Chinese factories to consumers greatly increases aviation emissions compared with bulk maritime shipping.
What the EU wants to do
"What the EU and especially member states need to do is invest massively in their ability to control the products that are coming into the European market", said Gotink.
The €3 customs duty applies according to the item's type.
The fee is determined by the specific Harmonised System commodity code of each product. For example, if a package contains a textile item, footwear and a tech product, it will face a €9 charge because three different codes are triggered. If a package contains multiple items of the same type, the €3 charge applies only once.
The measure applies to non-EU sellers registered under the Import One-Stop Shop VAT system, which accounts for 93 per cent of all e-commerce imports into the EU. Enforcement relies on digital sales logs transmitted directly to authorities.
Another change is that, under previous rules, consumers were legally considered the "importer" when ordering a non-EU package. If a dress from SHEIN or a toy from Temu contained illegal chemicals or posed a choking hazard, the consumer technically bore the legal liability. The platforms acted merely as "intermediaries" with no responsibility for the product itself.
As of March 26, the new EU Customs Code Reform removes this shield by legally reclassifying digital marketplaces as "deemed importers". As recognised importers, they are liable under EU product safety laws, including the General Product Safety Regulation. This makes them legally responsible for safety certifications and chemical testing, while exposing them to severe financial penalties or market bans for non-compliance.
The new duty will remain in force until a broader permanent system for low-value imports, agreed in November 2025 as part of wider customs reforms, takes effect. In 2028, the permanent EU Customs Data Hub will go live, removing the €150 threshold entirely and taxing every item dynamically from the first cent.
For consumers: more expensive, less dangerous
Under the new rules, European shoppers will face higher prices and longer waiting times.
A typical low-cost online order worth €20 could easily exceed €30 once the new fees are added. For example, if a customer buys a €10 summer dress and a €10 pair of sunglasses, the order triggers two separate €3 category duties, adding €6 to the bill. Add the planned €2 handling fee and the final checkout price reaches €28, a 40 per cent increase on a basket of cheap goods.
Customs agents must digitally screen every package, and border checkpoints are likely to face backlogs. Shoppers used to receiving air-freighted packages from Asian warehouses within a week may have to wait while customs agents verify product category codes.
This benefits consumers in the long run. "If it makes sure more non-compliant products are rejected, or that producers and sellers increase compliance with European laws before listing products online, then it's a good thing", said Clays.
The changes also provide stronger safety protections. Because platforms are now legally classified as importers, the risk of unknowingly buying dangerous goods, such as children's clothing containing toxic chemicals or cheap toys with choking hazards, should fall. The rules also remove surprise cash-on-delivery charges, as all duties must be paid upfront at checkout.
For companies: a fairer playing field
Once the levy takes effect, marketplace apps such as SHEIN, Temu and AliExpress must either absorb these multi-billion-euro compliance costs or risk losing price-sensitive shoppers through price rises.
To survive, they may be forced to restructure their business models by moving away from direct-to-consumer air mail and investing in large EU-based warehouses. Analysts estimate this shift to local distribution hubs could erase up to 40 per cent of profit margins, while penalties for non-compliance could reach 6 per cent of annual import values.
The policy will also affect China's trade strategy. Cross-border e-commerce exports reached 2.75 trillion yuan (about €350 billion) in 2025, and these online platforms are major drivers of the economy.
For European businesses, however, the new rules level the playing field by removing the artificial price advantage enjoyed by non-EU sellers.
Traditional high street and online retailers can regain competitiveness as the 2.3 billion untaxed parcels entering the bloc each year are brought into standard taxation regimes.
Domestic fast-fashion brands such as Zara and H&M can better exploit their European supply chains, restocking stores faster than overseas rivals facing border friction. Brands emphasising durability and compliance with EU sustainability standards are also likely to become more attractive to consumers.
"The fast fashion sector, as it works now, is simply unsustainable as an economic model. I hope we will be able to stop the non-compliant and overly cheap trade flows, where consumer goods are used once and then thrown away", added Gotink.
