There's a smarter way for Rachel Reeves to solve the Temu problem

Currently, UK imports of goods worth up to £135 don’t typically incur any customs duty. There are calls from some businesses to change this rule to create a more level playing field, arguing that duty exemptions enable the likes of Temu and Amazon to undercut competitors.

Abolishing the £135 threshold could reportedly raise £600 million annually in customs revenue and is a move that seems increasingly likely. Recent days have seen proposals to accelerate similar plans in the EU, where a low-value customs exemption on goods worth up to €150 would be removed in the first quarter of 2026, two years earlier than planned.

All the signs point to the government planning to capitalise on the lucrative flow of so-called ‘cheap Chinese parcels’, while supporting domestic businesses. Sounds great in theory, but it’s nowhere near as simplistic as this. Greater consideration must be given to avoid UK consumers and companies being penalised by duty changes.

Temu in the UK, for example, has previously reported that it’s welcoming local sellers to its platform, with estimations that over half of its UK sales will come from local bases by the end of this year. In the short term, changes to the low-value import threshold could leave these local sellers paying higher supply chain costs and having to pass these on to already squeezed consumers.

There’s also a risk that changes to import duties will make customs clearance increasingly complex. Sellers and shoppers are likely to be hit with more red tape and delays at borders – not conducive to driving retail sales or economic growth.

Although China is a dominant source of the UK’s low-value imports, it’s not the only origin. HMRC data for 2024/25 shows £2.9 billion worth of such goods arrived in the UK from other countries. How will the desire to address ‘cheap Chinese parcels’ affect these imports? And, if the EU changes its low-value import duties, what’s the cost and impact for UK companies selling across Europe? For these reasons, any changes to the UK’s low-value import duties should think about harmonising with the EU.

Thought should also be given to simplifying import duties across the board, especially if the intention is to support fairer competition. A tiered system of import duty based on value bands of goods or introducing a flat handling fee for all imports could create a more efficient, affordable and competitive system for businesses and consumers.

Changes to low-value imports must also think about how online marketplaces are evolving. As we see with Temu and Amazon, marketplaces create vital opportunities for small and medium-sized businesses to operate at scale and connect with shoppers locally and internationally. Growing numbers of local sellers on marketplaces will reshape import strategies and the total value of shipments. Import rates based on value bands and flat rates may prove more futureproof.

Finally, if changes to low-value imports do raise hundreds of millions of pounds in revenue, there should be transparency about how this is spent. At the very least, it could go some way to improving customs processes to support more efficient international trade.

By Stuart Greenfield, European Sales Director at retail logistics company Advanced Supply Chain. Stuart works with major retailers and consumer brands to move hundreds of millions of products around the globe each year.

____________________

Stuart Greenfield is the European Sales Director at retail logistics company Advanced Supply Chain.

LBC Opinion provides a platform for diverse opinions on current affairs and matters of public interest.

The views expressed are those of the authors and do not necessarily reflect the official LBC position.

To contact us email opinion@lbc.co.uk