A spokesperson for the UK government recentlystated“that the tariff policy for low-value imported goods is under review”,which also signals that a trade policy transformation is imminent.

According to the Financial Times, UK Chancellor Reeves plans to officially abolish the tax exemption for imported parcels valued at no more than £135 in the budget to be announced on November 26.

This loophole, known as the “small-value import tariff exemption,” has become an important channel for overseas retailers such as Shein and Tuke to sell low-priced goods to the UK.

Image source:The Guardian

01

Tax loophole: £600 million lost annually

The current UK tariff system stipulates that imported parcels valued at no more than £135 are exempt from tax, while goods exceeding this amount are subject to tariffs of up to 25%.

This system may have been reasonable in the era before digital trade was widespread, but in today’s booming cross-border e-commerce environment, its flaws have become apparent.

Chancellor Reeves had already signaled in April this year,clearly stating that the tariff policy for “low-value imported goods” would be reviewed to ensure fair competition between domestic and foreign businesses.

This statement has received strong support from UK domestic retailers.

Image source:The Guardian

It is worth noting thatNext, Sainsbury’s, Currys, JD Sports, and Superdry, among other retail giants, are still putting pressure on the government.

They complain that domestic companies must pay tariffs on imported goods, while overseas platforms can sell tax-free to UK consumers.

JD Sports Chairman Andy Higginson bluntly pointed out: “We don’t want anyone to have an unfair advantage. If you take money from UK consumers to build schools, roads, and other projects, then it is morally right to pay taxes in the UK.”

JD Sports Chairman original text Image source:The Guardian

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Chinese parcels: Surging tax-free parcels and91% share

Under this tax loophole, small parcels from China have flooded into the UK.

According to BBC, in the 2023-24 to 2024-25 fiscal year, the total value of tax-free small parcels sent from China to the UK doubled, rising from £1.3 billion to around £3 billion.

This data reflects the popularity of Chinese low-cost retailers represented by Shein and Tuke in the UK.

With highly competitive prices and social media marketing, they have quickly captured the UK market.

EU data is even more astonishing:In 2023, the total number of small parcels received across the EU reached 4.6 billion, equivalent to 12 million parcels per day. Over 91% of low-value parcels came from China, highlighting China’s absolute advantage in small-value cross-border trade.

After Brexit, the UK faces a unique regulatory dilemma,and if the UK does not adjust its policies in line with the US and EU,the concern aboutthe concentrated influx of low-priced goods from China into the UK marketisvery likely to become reality, making the UK a“safe haven for low-priced goods.”

Image source:BBC

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Global trend: Synchronized action in the US and EU

This policy adjustment by the UK is not an isolated move, but rather reflects the convergence of small-parcel tax policies among developed countries worldwide.

The US has taken the lead by abolishing the tax-free threshold for goods under $800. This measure officially took effect on August 29, marking the end of the US “de minimis” rule.

For low-value imported parcels, the EU also began to gradually tighten regulations from July this year, and by 2028, tariff collection policies will be fully implemented. Notably, the EU has also innovatively designed differentiated fee standards.

According to the new EU regulations, direct mail parcels will be charged a €2 handling fee per item, while parcels sent from local warehouses will only be charged €0.5. This design aims to guide e-commerce companies to adopt more standardized local warehousing and distribution models.

From North America to Europe, global tariff policies are forming new standards. Japan, Brazil, Mexico, and other countries are also planning similar reforms, signaling the end of the era of tax-free parcels worldwide.

Image source:irish times

04

Those who adapt will thrive

The era of price wars fueled by tax-free benefits is coming to an end, and global trade is entering a new phase of greater regulation and emphasis on fair competition. For Chinese companies, this is both a challenge and an opportunity.

In the short term, rising costs will indeed cause some pain; but in the long run, this is precisely a good opportunity to promote transformation and upgrading,shifting from price competition to focusing on product quality and brand building—this is the right path for long-term development.

The doors to the global market remain open, only the rules of passage have changed.

Companies that can quickly adapt to new rules and proactively enhance their competitivenesswill not onlygain a firm foothold in the UK market, but also win more opportunities globally.

In times of change, only those who adapt will thrive, and only those who are fit will survive.