Sellers on Temu are reportedly bogged down by high compliance in European markets.

PDD Holdings' (PDD) Temu e-commerce site, which grew by offering heavy discounts and bringing cheap Chinese goods to global markets, is facing a precarious situation.

With higher tariffs and the scrapping of an exemption on low-cost goods in the U.S., Temu had already begun nudging sellers to other markets like Europe. 

It now finds that merchants feel bogged down by higher compliance and product checks in the region.

In recent months, Temu has increased product prices for U.S. customers while diverting ad spending from the U.S. to Europe. It is also offering sellers subsidies for select products sold in the region.

However, according to a Bloomberg News report based on interviews with merchants, the push and incentives aren't enough for the seller to divert their focus to non-U.S. markets.

Furthermore, the European Union and the UK are looking to strengthen their anti-dumping rules and considering altering their own de minimis policies.

The EU and UK generally enforce stricter product standards and consumer protection rules than the U.S., requiring market-specific registrations, local compliance, and multilingual product disclosures.

The European Commission has started probing Temu for potential breaches related to the sale of illegal products and manipulative user interface designs, according to Bloomberg News.

It has launched a new initiative called Priority Control Areas to conduct surprise cross-border checks and introduced a web crawler tool to identify potentially harmful products sold in the region.

Experts told Bloomberg News that it could take Temu and other Chinese commerce players a year or more to figure out how to navigate tariffs and tailor their offerings to European markets.

Meanwhile, the loss of business in the U.S. could also be significant. Daily U.S. users of Temu were down 58% year over year in May, according to a Reuters report that quoted data from Sensor Tower.

PDD’s U.S.-listed stock is up 2.2% this year, and the iShares China Large-Cap ETF (FXI) is up 16%.

For updates and corrections, email newsroom[at]stocktwits[dot]com.<