July 5, 2024, 11:10 am | Read time: 6 minutes
Anyone who occasionally orders goods from outside the EU must pay customs duties on packages over 150 euros. However, this threshold is set to be lowered. TECHBOOK explains what this means and why the EU wants to reduce the exemption limit.
More and more people are shopping online, which is convenient and often cheaper for many. While more stores are closing on shopping streets, online shops like Temu or Shein, which offer products at particularly low prices, are booming. Often, the goods come from abroad, usually China. However, the abolition of the customs exemption limit is intended to curb the flood of cheap products being imported.
Overview
Why the EU wants to abolish the customs exemption limit
Whether customs duties are charged on shipments depends, among other things, on their value. Up to a value of 150 euros, recipients generally do not have to pay customs duties. However, the European Commission sees the customs exemption for low-value goods as a thorn in its side. It leads to numerous cheaply made and often inferior products flooding the European market. Therefore, the EU Commission already presented a draft in May 2023 to abolish the exemption limit by 2028. It now wants to bring this date forward, as reported by the “Financial Times” citing three people familiar with the matter. The abolition of the customs exemption limit for goods from abroad is to be discussed this month.
The decision is primarily for financial reasons, as reported by the newspaper “FAZ.” Many traders from third countries split their shipments into small parcels to stay within the customs exemption limit and thus avoid customs duties. This not only excessively burdens customs authorities and distorts competition with European companies, but the EU also loses revenue in the hundreds of millions.
The European Commission also expects better control of goods imported into the EU from this decision. “More and more products that do not meet our standards are arriving individually packaged from third countries directly at the doorstep of European consumers,” criticizes EU Parliament member Anna Cavazzini (Green Party).
Also read: Official customs app provides information on duty-free allowances and import bans for foreign purchases
New customs authority also planned
In parallel with the abolition of the customs exemption limit, the reform draft from May 2023 also envisages the establishment of a new EU customs authority. According to current plans, this authority is to standardize and improve coordination and communication between national customs authorities. All customs authorities would then have access to a central information pool. If, for example, an unauthorized shipment is discovered in one country, other countries could access this information. This would make it significantly more difficult for such shipments to enter the EU through detours.
However, it will take several years before the new EU customs authority can actually be deployed. It is not until 2037 that the various states will be able to fully access the information pool.
Read more from our colleagues at STYLEBOOK: “I shopped online at Shein – and this is how it was!”
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It could get expensive for online shoppers
Following the arguments of the European Commission, the plans sound quite sensible and important. Not only to enable fair trade between the EU and third countries but also to better control which goods enter the EU. However, for online shoppers, the removal of the customs exemption limit can have costly effects, as the change applies equally to private individuals and commercial recipients. Since it would be legally anchored, it would also apply to all shops offering deliveries from countries outside the EU. Even though the change is likely to be primarily due to shops like Temu, Shein, or AliExpress, which import goods from China on a large scale.
Customers would have to pay not only the import sales tax of 7 or 19 percent but also customs duties on orders of goods under 150 euros that they order from outside the EU. For the shops, it would no longer be worthwhile to split shipments to stay below this amount and avoid customs fees. Many of them already pass on the fees incurred to the customers. In the future, many goods are likely to become more expensive.
Shipments from third countries must generally be declared to customs. This is usually done by the transport company, which also advances the import sales tax. Upon delivery, the suppliers recover the costs from the recipient, often with a surcharge as a service fee. If customs costs are added, these are also billed. The fees are calculated from the customs value (value of the goods and transport costs to the EU external border) and the respective customs rate according to the customs tariff. The latter depends on the purchased product. Whether it is charged at all and, if so, at what rate, can be queried on the customs website.
However, it may be that the contents and costs of a shipment are not sufficiently listed. In this case, the post office usually forwards the packages to the customs office. Here, letter shipments are stored for 7 days and packages for 14 days before being returned to the sender. Recipients must pick up their goods during this time and pay the costs incurred. It should be noted that the customs office charges storage fees of at least 5 euros if the storage period exceeds 10 days.
How online retailers are reacting
Not only the trade association HDE supports the European Commission’s plans to abolish the customs exemption limit, but also Federal Finance Minister Christian Lindner backs the initiative. As reported by the “tagesschau,” the value of goods in about 65 percent of packages from Temu or Shein could be set too low to avoid customs fees. Recently, for example, Temu has repeatedly had trouble with consumer protection agencies. However, both retailers deny this and emphasize that they neither misrepresent goods nor split shipments.
Both retailers have seen a significant increase in popularity. “More and more people are turning to Temu and Shein. This is mainly due to the low prices,” says IFH Managing Director Kai Hudetz. The abolition of the customs exemption limit is unlikely to change this. For example, Temu explains that the growth of its shop is not due to the duty-free import of many goods but to efficient supply chains. Shein also emphasizes that it complies with all rules, laws, and customs regulations and that any new regulations would not affect prices.