Core Viewpoint - The European Union has officially approved new regulations for small package import duties, eliminating the tax exemption for packages valued under €150 starting July 1, 2026, with a two-year transition period until June 30, 2028. This marks the end of the small-value tax benefits that have supported cross-border e-commerce between China and Europe for years [1][5]. Transition Period Details - During the transition period (July 1, 2026, to June 30, 2028), packages valued at €150 or less sent directly to EU consumers will incur a fixed duty of €3 per package, with different product categories taxed separately [3][5]. - For example, a package containing both a silk top and a wool top will incur a total duty of €6, as each item belongs to a different category [3][7]. Industry Impact - The new regulations are expected to have a profound impact on the industry, with 87% of packages sent to the EU from platforms like Temu and Shein being valued below €150. If the new regulations are fully applied, it will significantly increase costs for these platforms [5][9]. - Shein's annual expenses are projected to increase by €240 million, which is 18% of its net profit in the European market. Temu anticipates a 15-20% increase in average costs due to the new regulations [9]. Challenges for Sellers - The most challenging aspect of the new policy is that duties will be assessed based on product categories rather than per package, eliminating the previous strategy of splitting items to avoid taxes [7][10]. - Sellers will face dual pressure from increased costs and the need to shift from a "price war" to a "value war," necessitating the establishment of core competitiveness through overseas warehouse layouts and compliant operations [7][10]. Advantages of Overseas Warehousing - The advantages of the overseas warehouse model are amplified under the new regulations, including reduced logistics costs, improved delivery times, and the ability to avoid repeated duties on individual packages [8][11]. - Shipping from local warehouses can reduce handling fees to €0.5 per item, compared to €2 for direct shipping, and local dispatch can achieve delivery within 48 hours, enhancing store ratings and reducing customer complaints [8]. Compliance and Operational Adjustments - Sellers must ensure compliance by registering for VAT, upgrading product quality inspections, and providing transparent supply chain information to meet EU standards [12]. - The transition period allows sellers to reassess their European market costs and adjust their product categories accordingly to maintain profitability [12]. Strategic Responses from Platforms - In response to the new regulations, Temu has initiated a local warehouse plan, aiming to shift 80% of its European orders to local shipping from warehouses in Poland and Germany. Shein is also expanding its local inventory capabilities to reduce the proportion of direct mail packages [11][12].