Shein partly shuts India ops as crackdown against Chinese etailers widens

Shein and Club Factory are accused of dodging import duties by fudging listed prices

Chinese e-tailer Shein has shut operations partially in India and has begun refunding money to customers with pending orders due to scrutiny on their business model by India's customs department over import duties. Earlier this month,  Mumbai Customs reportedly seized around 500 parcels of Shein and Club Factory. The seizure order showed that a Shein warehouse stands sealed in Mumbai after officials found it undervaluing and wrongly declaring goods.

“Major items on shein.in is imported in bulk and then dispatched. Due to customs clearance issue for import, there is no certain release date till now. To protect your interest we will cancel the order ….. & arrange refund at the earliest,” read a message to a customer after the order was cancelled, reported the Economic Times. 

The crackdown on Chinese e-commerce players is a part of Mumbai courier terminal’s crackdown on a dozen Chinese companies for allegedly paying much lower customs duties. Many Chinese e-commerce platforms like Shein, Club Factory and AliExpress were shipping goods ordered by Indians to various cities claiming these were “gifts”. As per the domestic laws, any gifts received by Indians up to Rs 5,000 don’t attract any taxes. The officials found that the companies declared that their packaging was for B2B usage while they are actually conducting B2C business with the items.

“Items are packed and shipped for individual customers, similar to how you get a package from Amazon at home. But these companies act as a bulk purchaser in which the value declared is 300 to 400 per cent less than the actual value of items,” a report said.

Shein’s mobile app and website prominently displayed a message requesting customers to “hold back.” “We are upgrading our systems for newer experience, with fresh looks and exciting offers. Request you to hold back for some time while (you) watch this space for more,” the message reads. 

Chinese e-commerce firms employ importers such as Sino India Etail and Globemax to bring in goods ordered by their customers into India in bulk, allowing them to bypass the cumulative 42.08% duty levied on individual imports, ET reporeted. It added that these firms use the CB-13 low-value consignment route, which calls for very little disclosure.

The Mumbai terminal now alerts other ports to potential malpractice by uploading the details of such firms on the National Risk Management portal, an alert system for evaders.