Rachel Reeves is to review the tax regime for imports of low-value goods in an effort to prevent Chinese companies undercutting British retailers by dumping cheap items on online marketplaces.
The chancellor is considering changes to rules which allow goods valued at £135 or less – often listed on sites such as Amazon,Sheinand Temu – to be imported to the UK without any customs duty having to be paid.
The review follows pressure from leading retailers, including Sainsbury’s and Next, who have argued that the tax break has been hijacked by fast-growing retailers such as Shein and Temu who send small parcels direct to shoppers.
Announcing the review in Washington on Wednesday, Reeves said: “I think that retailers can see, through the actions we’ve taken today around low-value imports, that we are absolutely standing up for the British high street against the dumping of cheap imports of products that undercut British retailers.”
There are growing fears of dumping in the UK by Chinese retailers and manufacturers just as the USlooks set to revokethe “de-minimis” exception for Chinese-made goods under which parcels with a value of less than $800 (£600) shipped to individuals are exempt from import tax and do not pass through normal customs checks.
That scheme, originally designed to help make online shopping smoother, is being ditched after it emerged that the number of shipments under the de-minimis rule had ballooned to more than 1bn items, valued at $54.5bn by 2023 – most of them from China or Hong Kong.
The EU also said in February it wouldjoin the US in phasing out its exemption on customs duties for low-value parcels.
Helen Dickinson, the chief executive of the British Retail Consortium trade body which represents most major retailers, said the UK government review was “most welcome and shows that the government has listened to the concerns and representations of retailers”.
She said: “A review of this policy, which was designed to reduce the burden on low-volume, low-value imports, was already needed.
“With retailers seeing a rise in the number of potentially noncompliant products entering the UK market, it’s even more critical now.”
Theo Paphitis, the retail entrepreneur who owns Ryman, said retailers had been “crying out to level the unfair playing field” and the review was “a commonsense move to protect the UK economy” and “a strong step in the right direction by the chancellor”.
George Weston, the chief executive of Primark owner Associated British Foods, said: “The abolition of the favourable tax treatment of low-value imports would be a significant step forwards in the government’s support for British businesses.”
Sign up toBusiness Today
Get set for the working day – we'll point you to all the business news and analysis you need every morning
after newsletter promotion
The British Home Enhancement Trade Association (BHETA) has called on the government to reduce the threshold for duty to £40.
Will Jones, the chief operating officer of BHETA, said an estimated 100m small parcel shipments arrived in the UK from overseas sellers in 2023 due to the rise of online sellers such as AliExpress, Amazon,eBay, Shein and Temu.
He said the rules disadvantaged UK suppliers and retailers and raised potential safety issues, with more than 95% of goods going unchecked for safety standards.
The group said more than 98% of fake iPhone chargers bought through the tax-exempt route did not meet UK safety standards, for example.
“It’s vital the government levels the playing field for UK and overseas producers,” he said. “Cheap products might seem like a short-term win for consumers but the safety issues are scary.”