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Briefing

The end of the £135 duty relief: could UK customs reform reshape e-commerce supply chains?

The UK Government has confirmed that the longstanding customs duty relief for imports valued at £135 or less will be abolished and replaced with a new mandatory regime for low value imports by October 2028 at the latest. Sellers and online marketplaces will become responsible for paying customs duty, enhanced data requirements will apply, and many overseas sellers will need a UK fiscal representative.1 This follows similar moves in the EU from 1 July 2026 and in the US from 2 May 2025.

Key takeaways

  • The abolition of the £135 relief is likely to influence supply-chain design as much as customs compliance.
  • The US experience suggests some e-commerce inventory may move closer to consumers, benefitting warehousing and fulfilment providers and customs brokers.
  • The most significant impacts may arise from changes to routing, mode choice, contractual risk allocation and fulfilment strategy.

Much of the commentary to date has focused on customs compliance.  However, the more significant question may be whether the reforms fundamentally alter how e-commerce supply chains are structured.

More than a customs reform

For more than a decade, low value parcel imports have enabled overseas retailers and online marketplaces to serve UK consumers directly from offshore fulfilment centres while benefiting from a customs duty relief unavailable to many UK retailers.

While the change can be seen as a response to widespread concerns regarding undervaluation, consignment-splitting and customs non-compliance, the other element of the Government’s objective is clear: to make the treatment of e-commerce imports more aligned with that of traditional freight imports in order to create a more level competitive environment.2

The practical result may be a gradual shift away from the current model of moving goods from factory via international parcel networks direct to UK consumers towards freight shipments from factory to UK warehouses and then fulfilled by domestic parcel networks.

If that occurs, the effects may be felt well beyond the customs sector.

Lessons from the United States

The earlier US experience provides a useful, although not exact, comparator.  The US withdrew duty-free de minimis treatment for goods from China and Hong Kong on 2 May 2025, before extending the suspension worldwide on 29 August 2025.  The US threshold was US$800 and the change coincided with sharply higher China tariffs, so the scale and speed of the US response should not be treated as a direct forecast for the UK.

The US experience highlights five practical lessons:

  1. The direct parcel model is sensitive to the total landed cost, not duty alone. Once each parcel required customs processing and duty payment, brokerage, classification, data and delay risk became important alongside the tariff itself.
  2. Air cargo adjusted first. Before the US change, e-commerce represented approximately half of China–US air cargo.3 The removal of relief was followed by weaker demand on that route, early freighter cancellations and capacity redeployment.
  3. Adaptation did not mean the end of low value imports. By December 2025, US Customs and Border Protection reported more than $1 billion of duties collected on over 246 million low-cost shipments since the phase-out began, while stating that package volumes continued to grow as importers adapted.4
  4. Scale and integration became more valuable. Larger marketplaces, integrators and logistics providers were better placed to spread compliance costs, control customs data and combine international transport, customs clearance, warehousing and fulfilment.
  5. Policy design and implementation matter.  Abrupt changes created operational pressure for carriers, postal operators, brokers and sellers. The UK timetable to October 2028 offers scope for systems testing, clear liability rules and coordinated implementation before the new regime takes effect.

The US evidence therefore supports the central proposition of this briefing: removing a low value duty relief can alter routing, mode choice and fulfilment strategy.  It also cautions against assuming a simple one-for-one transfer from parcels to conventional freight. Some sellers may localise inventory or consolidate shipments, while others may raise prices, reduce ranges or withdraw from marginal sales.

Implications for overseas retailers and marketplaces

Large online retailers and marketplaces are likely to face higher customs costs, increased reporting obligations and greater compliance scrutiny. That will include the need for tariff classification of goods that previously entered the UK duty free, and will increase the volume of customs data which needs to be submitted to UK customs.

However, the largest operators are also likely to be best placed to adapt.  Many already collect VAT at the point of sale, operate sophisticated customs systems and have significant logistics partners or fulfilment capabilities.

Low-margin products (for example fast fashion, household items etc.) will be disproportionately affected, as the margins will be eroded by the extra costs, unless an alternative model is found (or UK consumers are willing to pay higher costs).

The greater challenge may fall on smaller overseas sellers.  Increased duty exposure, fiscal representative requirements and enhanced data obligations may encourage consolidation around larger platforms that can manage compliance centrally.5

The key commercial question is whether major marketplaces will continue to rely predominantly on direct parcel imports or increasingly localise inventory within the UK.

A potential boost for warehousing, fulfilment and customs brokers

If inventory moves closer to UK consumers, warehousing and fulfilment providers could be among the largest beneficiaries of the reforms.

Demand may increase for contract logistics, fulfilment centres, bonded warehousing, customs warehousing and inventory management solutions.

Whilst the reforms do not require businesses to establish UK distribution operations, removing the customs advantage of direct parcel imports may make local fulfilment more commercially attractive.  This can spread customs-entry, brokerage and international transport costs across many units and avoids imposing an international customs transaction on every consumer order.

For logistics operators, the reforms may therefore represent a growth opportunity as much as a compliance challenge.

Could freight flows increase?

One of the most interesting unanswered questions is whether the reforms lead to changes in freight patterns.

Historically, many low value goods have entered the UK individually through parcel networks.  If overseas sellers increasingly consolidate inventory for UK distribution, some cargo currently moving as parcels may instead move as freight.

That could have implications for container shipping, freight forwarders, ports and airports, air cargo operators and inland distribution networks. The scale of any shift remains uncertain, but the reforms are explicitly intended to narrow the distinction between parcel imports and conventional freight imports.6

The US experience suggests that the first and clearest freight-market effect may be felt in air cargo.  Xeneta estimated that, before the US reform, e-commerce represented approximately 50% of China–US air cargo.  It reported early freighter cancellations and potential capacity redeployment as the exemption ended.7 By contrast, any benefit to sea freight would depend on sellers moving repeat inventory into LCL or FCL shipments for local fulfilment rather than reducing US sales altogether.

What does it mean for parcel networks?

Parcel operators are unlikely to lose relevance. Instead, their role may evolve.

The new regime is expected to require significantly enhanced customs data and closer integration between sellers, marketplaces, logistics providers and HMRC.8

As a result, parcel carriers may increasingly become compliance and technology providers as well as transportation providers. Those able to offer integrated customs, data and fulfilment solutions may be particularly well positioned.

A further lesson from the US is that carriers can become a critical part of the duty-collection and data architecture.  This reinforces the need for the UK regime to identify clearly who must provide tariff classification, origin, value and recipient data, who is liable if those data are wrong, and how charges and rejected shipments will be handled.

Implications for UK retailers

UK retailers have long argued that the existing arrangements place them at a competitive disadvantage because goods imported through traditional supply chains are generally subject to customs duties, whereas many low value e-commerce shipments have benefited from relief.

The reforms should reduce that disparity.  Whether they materially change purchasing behaviour is less certain.  Price, convenience and product choice will remain important drivers of consumer demand but equally some low-margin products may no longer be cost effective to supply.

However, the reforms are likely to increase competitive pressure on overseas sellers to improve compliance, absorb additional costs or rethink fulfilment strategies.

Contractual and legal risks

Businesses should also start considering the contractual consequences of the new regime.

Particular attention should be paid to allocation of customs liabilities, data accuracy obligations, classification responsibilities, fiscal representative arrangements, indemnities and compliance warranties in logistics and fulfilment contracts.

Many of these issues will become increasingly important as responsibility for customs compliance moves closer to the point of sale.

Marketplaces should use this period to map out their risk: what are the volumes of goods shipped directly to UK consumers, what is the value of goods that currently rely on the duty relief for imports valued at £135 or less, and how can they manage the new regime, including seller KYC, product classification and valuation etc.

HFW comment

The abolition of the £135 relief should not be viewed solely as a customs law development.  It may become a catalyst for wider changes across retail, logistics and supply chains.

The largest impact may not be the customs duty itself, but the commercial decisions businesses make in response: where inventory is held, how goods enter the UK, which logistics providers are used and how customs risk is allocated through the supply chain.  The US experience indicates that these decisions can be taken quickly where parcel economics change materially, but that outcomes differ by product margin, scale, mode and fulfilment capability.

The next two years will be an important period in which to assess whether existing operating models remain fit for purpose under the UK’s new e-commerce customs framework, particularly once secondary legislation is published containing key implementation details.9

Footnotes

  1. https://www.gov.uk/government/publications/reforming-customs-rules-for-low-value-imports/reforming-the-customs-treatment-of-low-value-imports-into-the-uk
  2. https://assets.publishing.service.gov.uk/media/6a511a7b1228eb26a4cab7c6/LVI_Consultation_Response.pdf
  3. https://www.xeneta.com/news/how-bad-will-it-get-air-cargo-market-awaits-impact-of-tariffs-and-de-minimis-changes
  4. https://www.cbp.gov/newsroom/national-media-release/cbp-collects-1-billion-end-de-minimis-loophole
  5. https://assets.publishing.service.gov.uk/media/6a511a7b1228eb26a4cab7c6/LVI_Consultation_Response.pdf
  6. https://assets.publishing.service.gov.uk/media/6a511a7b1228eb26a4cab7c6/LVI_Consultation_Response.pdf
  7. https://www.xeneta.com/news/how-bad-will-it-get-air-cargo-market-awaits-impact-of-tariffs-and-de-minimis-changes
  8. https://assets.publishing.service.gov.uk/media/6a511a7b1228eb26a4cab7c6/LVI_Consultation_Response.pdf
  9. https://assets.publishing.service.gov.uk/media/6a511a7b1228eb26a4cab7c6/LVI_Consultation_Response.pdf 
Published
26 August 2026
Reading Time
11 minutes
Authors
Matthew Gore
Matthew Gore
Partner
Daniel Martin
Partner