EU Targets Chinese E-commerce Platforms Temu and Shein: End to Tax Exemption and Imposition of Handling Fees

New Measures to Address Low-Cost Goods and Improve Consumer Protection

The European Union (EU) has initiated a crackdown on Chinese e-commerce platforms, particularly Temu and Shein, with new regulations aimed at ensuring safer and more sustainable online commerce. The European Commission, which functions as the EU's executive body, unveiled its comprehensive strategy on February 5, 2025, aimed at enhancing the safety of e-commerce transactions across the EU.

A central component of the EU's updated policy is the enforcement of stricter customs and consumer protection regulations. This includes the introduction of a new "handling fee" for e-commerce products arriving from outside the EU, particularly those from countries such as China. This fee is being considered to help cover the immense costs of monitoring compliance with EU regulations for billions of products. The European Commission emphasized that specific fee amounts will be determined in consultation with individual customs authorities.

Additionally, the EU is pushing for the swift adoption of reforms under the "Customs Union Reform Package," which includes the elimination of tax exemptions on low-cost goods valued at under €150 (approximately $160). The proposed tax change could result in a potential increase in annual tax revenue by €1 billion (around $1.5 billion).

The EU's approach is focused on enhancing the regulatory framework to prevent the influx of illegal, harmful, and non-compliant products through e-commerce platforms. This includes utilizing artificial intelligence (AI) to monitor and remove illicit products from the market and implementing targeted actions to eliminate goods that fail to meet EU standards. The Commission emphasized that this plan would apply to all goods entering the EU, regardless of the country of origin. However, it is expected that Chinese e-commerce giants such as Temu, Shein, and AliExpress will be the most affected by these regulations.

In 2024, approximately 4.6 billion low-cost parcels, each valued at less than €22 (around $23), were imported into the EU. Notably, 91% of these goods were sourced from China. This influx has prompted concerns about the dominance of Chinese platforms in the EU market, raising questions about consumer protection and fair competition.

The EU's stance is notably similar to the recent measures introduced by the United States under the administration of former President Donald Trump. Trump had signed an executive order eliminating tax exemptions on goods imported into the U.S. valued under $800 (approximately €750). Similarly, the U.S. Postal Service briefly announced the suspension of international parcels coming from China and Hong Kong, a decision that was later rescinded.

Maros Sefcovic, the EU's trade and economic security commissioner, clarified that the EU's actions were not coordinated with the U.S., emphasizing that the changes would go through proper legislative procedures. While he acknowledged that the EU’s plan is neutral, he pointed out that the influx of low-cost goods from China, along with their impact on EU, U.S., and other countries, substantiates the need for regulatory changes.

In addition to these broader trade measures, the European Commission has also launched an investigation into Shein for suspected violations of EU consumer protection laws. The investigation will focus on potential issues related to unfair contract terms, commercial practices, and misleading price labeling.

The EU's actions are part of a broader effort to maintain a fair and competitive market, ensuring that all products sold within the Union adhere to strict safety and consumer protection standards. As China continues to dominate global e-commerce, these measures reflect growing concerns in the EU about the impact of unchecked imports on local businesses and consumer welfare.