British retailers are furious as Chinese firms 'use loophole to let them ship goods within the UK for fraction of the cost of a postage stamp'
Cheap products are being sold at knock-down prices in Britain by Chinese retailers exploiting a legal loophole that means they can delivered for a fraction of the cost of a postage stamp.
British sellers say that subsidised postal rates and as well as a 20 per cent VAT exemption have fuelled the boom in Chinese online selling that is driving them out of business.
Chinese retailers use a little known international postal treaty that requires the Royal Mail to deliver packages that arrive from China at a fraction of the cost that it normally charges, The Times reported.
China is classed as a developing country alongside Gabon, Kazakhstan and Cuba and is entitled to a huge subsidy on the cost of delivering all packages.
Though the exact amount of the subsidy is commercially confidential it is understood that Chinese retailers are able to send lightweight packages within the UK for as little as half a pence each.
Examples of the advantage this gives Chinese sellers include a Union Jack flag which can be bought on Amazon for £1.19, including airmail delivery from China.
Royal Mail would charge £1.26 for delivery alone to send the same product to a customer from in Britain.
Richard Allen, a campaigner for small retailers, said: 'It is ridiculous for a Chinese retailer to be able to send an item to the UK for less than it costs a UK retailer to send it domestically.'
The system also benefits Chinese retailers because it is based on weight rather than total number of packages.
They can send thousands of small and lightweight packages via China Post to the UK to fulfil online orders and pay per kilogram.
Most of the goods, sold on online platforms via platforms such as Amazon and Ebay, also avoid paying VAT.
Under EU rules low-value packages worth under £15 are exempt from VAT payments.
Priti Patel, the former international development secretary, said this needed to urgently change, adding: 'Businesses in Britain are being hit hard.'
Royal Mail said they would not be commenting.