European Cargo: grounded by financial pressure and an unforgiving market
European Cargo’s collapse appears to have been driven by a combination of rising operating costs, ...
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By Alex Lennane
Forever 21, the US clothing retailer, has gone down shouting: it has squarely blamed its latest Chapter 11 bankruptcy on de minimis exemptions creating unfair competition.
Owing its transport and logistics providers some $2m, it filed a Chapter 11 petition on Sunday, noting it operates in a “highly competitive retail environment”.
Stephen Coulombe, the co-chief restructuring officer noted: “The debtors’ business has been materially and negatively impacted by the ability for online retailers to take advantage of the “de minimis exemption” which exempts goods valued under $800 from import duties and tariffs.
“Certain non-US online retailers that compete with the debtors, such as Temu and Shein, have taken advantage of this exemption and, therefore, have been able to pass significant savings onto consumers.
“Consequently, retailers that must pay duties and tariffs to purchase product for their stores and warehouses in the United States, such as the company, have been undercut.
“Despite wide-spread calls from US companies and industry groups for the US government to create a level playing field for US retailers by closing the exemption, US laws and policies have not solved the problem.”
Mr Coulombe added that an investor group, SPARC, which took over after the company’s 2019 bankruptcy, had tried to partner with Shein in 2023, and also sought “relief form the exemption”, but he said “these efforts have not resulted in any changes to the exemption nor stemmed the company’s losses.
“The ability for non-US retailers to sell their products at drastically lower prices to US consumers has significantly impacted the company’s ability to retain its traditional core customer base.”
Forever 21 is hoping to continue to sell its stock, before the planned closure of all its 350+ stores, and asked the court to allow it to pay its freight forwarders and carriers, otherwise its stock was at risk of being held.
“The debtors estimate that approximately $2,000,000 is owed on account of claims, all of which will come due on or before 30 days from the date hereof for shipping, freight forwarding, and customs duties. Payment of the foregoing Transporter Claims will avoid disruption in the Debtors’ business…”
The court has authorised the payment, in what will be a relief to the more than 20 logistics companies, including AIT Worldwide Logistics and Apex Logistics, listed as creditors.
The majority of the creditors appear to be clothing suppliers, mostly based in China, Hong Kong and Korea.
“The Debtors rely on a comprehensive network of primarily foreign vendors for manufacturing and production of their merchandise. The Company has, in the last five years, worked with well over 1,000 vendors and suppliers to manufacture and deliver merchandise to customers in the United States and internationally,” noted the court filing.
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