Online Giants and Tariff Loopholes Crush Competition
In a first-day bankruptcy declaration, Coulombe pointed to an uneven playing field created by import tax loopholes benefiting online competitors.
“Certain non-U.S. 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,” he said.
Under U.S. trade policies, foreign online retailers can avoid import duties on goods valued under $800, giving them a massive price advantage over traditional brick-and-mortar retailers like Forever 21. The fast-fashion chain, which relies on importing large volumes of inventory for its physical stores, has struggled to compete with these cost savings.
What’s Next? Store Liquidations and Court Battles
Despite the bankruptcy filing, Forever 21 plans to keep its U.S. stores and website operational—at least for now—as liquidation sales loom. The company’s international locations are not included in the proceedings, leaving a glimmer of hope for its global footprint.
The retailer has already secured a “plan support agreement” with its secured lenders, signaling that asset liquidation is likely the next step unless a buyer swoops in.
A first-day hearing is set before U.S. Bankruptcy Judge Mary F. Walrath on Tuesday at 11 a.m. EST.
