Retailers urge UK to close import tax gap

Pressure is mounting on the UK government to tighten import rules that domestic retailers say are distorting competition, as calls grow to align with measures already being advanced in the United States and European Union targeting low-cost e-commerce shipments.

Industry groups representing high street chains and independent businesses have urged ministers to reconsider the “de minimis” threshold that allows low-value goods entering the country to avoid customs duties and, in some cases, streamlined checks. Retailers argue that the provision has been exploited by fast-growing online platforms such as Shein and Temu, enabling them to deliver ultra-low-priced goods directly to consumers while sidestepping costs faced by UK-based sellers.

The current threshold, set at £135, exempts imports below that value from customs duties, though VAT still applies at the point of sale. Retailers contend that the model has effectively allowed overseas sellers to bypass regulatory burdens, including product safety compliance and environmental standards, while maintaining aggressive pricing strategies that domestic businesses struggle to match.

Executives across the retail sector have warned that the imbalance is accelerating structural shifts already under way in UK shopping habits. With inflation pressures easing but consumer spending still cautious, price sensitivity remains high, amplifying the appeal of low-cost imports. British Retail Consortium figures have shown continued strain on margins for domestic operators, particularly in apparel and home goods categories where fast-fashion platforms dominate.

Shein and Temu have rapidly expanded their footprint across Europe, including the UK, by leveraging direct-to-consumer logistics and data-driven supply chains. Their model relies on shipping individual parcels from overseas warehouses, often in China, directly to buyers, reducing the need for local inventory and enabling constant price adjustments. Industry analysts say the approach has compressed delivery times while maintaining cost advantages linked to scale and production networks.

Retail leaders argue that the cumulative impact extends beyond pricing. Concerns have been raised over the environmental footprint of high-frequency, low-value shipments, as well as the enforcement of product standards. Some UK retailers have pointed to cases of non-compliant goods entering the market, though platforms maintain that they adhere to applicable regulations and have strengthened compliance systems.

Government officials have acknowledged the concerns but face competing priorities. Maintaining open trade channels and ensuring consumer access to affordable goods remain key considerations, particularly as households continue to navigate cost-of-living pressures. Treasury officials have also indicated that any change to the threshold would require careful calibration to avoid unintended consequences, including increased administrative burdens for customs authorities and higher costs for consumers.

Developments abroad have added urgency to the debate. Authorities in the United States have been reviewing similar exemptions that allow duty-free entry for low-value imports, while the European Union has signalled plans to reform its customs framework, including tightening oversight of e-commerce shipments. Retailers in the UK argue that failing to act in parallel risks leaving the domestic market more exposed to competitive imbalances.

Trade policy experts note that the issue sits at the intersection of digital commerce and traditional regulation. The rapid growth of cross-border e-commerce has outpaced existing customs frameworks, which were originally designed for bulk shipments rather than millions of individual parcels. As a result, enforcement challenges have multiplied, with authorities needing to process high volumes of small consignments efficiently.

Consumer groups have offered a more cautious perspective, warning that changes to import thresholds could lead to higher prices and reduced choice. They argue that platforms such as Shein and Temu have expanded access to affordable fashion and household goods, particularly for younger consumers and lower-income households. Any policy shift, they suggest, should balance fairness for domestic businesses with the need to protect consumer interests.

Retailers counter that the current system undermines long-term sustainability of the sector. They point to rising business rates, labour costs, and compliance obligations that UK-based companies must meet, arguing that a level playing field is essential for maintaining jobs and investment. Some have proposed lowering the threshold or introducing stricter enforcement measures to ensure that imported goods meet the same standards as those produced or sold domestically.