On January 1, every e-commerce business that ships items to and from the UK will have to navigate new post-Brexit rules. Ingrid De Swert, VAT and customs manager at bpost, explains how e-tailers can prepare for this changed business reality.
From a trade perspective, the UK’s departure from the European Union means that the UK will leave the EU single market and the EU customs union. “This means that businesses that trade goods between the UK and the EU will now have to meet customs requirements,” says Ingrid De Swert, VAT and customs manager at bpost, Landmark Global’s parent company. “In essence, you’re going from a free trade situation where lorries full of goods could freely cross the border, to an export situation with border checks and border procedures. It’s why fears have emerged that long queues of lorries will start developing close to the border. Because all those lorries will have to declare their goods.”
In the absence of a trade deal – and that is looking increasingly likely – cross-border shipments between EU member countries and the UK will revert to World Trade Organisation tariff rules. “That’s the fall-back scenario – if there’s no agreement, if there’s no deal, you fall back on the WTO standard. And depending on the product, those tariffs could be high,” De Swert says.
She advises businesses that ship goods from the EU to the UK and vice versa to start taking action now. “If you don’t start planning for these new import and export requirements, customer orders simply won’t get across the border,” she explains. And that, in turn, could have a devastating impact on your customers’ experience.”
The good news is that businesses can significantly mitigate the impact of this new situation by beginning to assess and prepare for the new rules now.
From the UK to the EU
When it comes to VAT, UK businesses that send goods to European shoppers will no longer fall under the EU distance sales rules for B2C commerce starting Jan. 1. “This may impact the VAT rates that UK businesses have to apply to their products,” De Swert explains. The value of e-tailers’ goods will be decisive here, as many EU countries have import VAT exemptions for items with a value up to €22. As for customs duties, an exemption applies for goods with a value up to €150. For shipments with a value of more than €150, the applicable import duties will depend on the product category.
This leaves e-tailers with an important choice to make between Delivered At Place and Delivery Duty Paid, De Swert says. “Businesses should decide now whether they want to charge online shoppers an all-in price including any import tariffs and VAT. Or, will they instead leave it to customers to pay import duties and VAT when the parcel is delivered to them?”
E-tailers with customers in EU countries may equally have to reassess their returns policies, De Swert says. “When it comes to returns, it’s very difficult to claim back refunds of VAT and customs duties.” UK companies that currently offer free returns for EU customers might for instance wish to switch to customer paid returns. On the other hand, UK companies that ship many items with a value of more than €150 – so with import duties – to EU shoppers may want to consider opening a continental warehouse to ship items from there. “These decisions will really depend on companies’ individual situation,” De Swert stresses.
From the EU to the UK
As a result of Brexit, shipments to UK customers with a value up to £135 will fall under a new special regime starting Jan. 1, 2021. EU companies will have to register for VAT in the UK and charge UK VAT on any items sold to customers in the UK. These shipments with a value up to £135 will, however, be exempted from import duties. “But customs procedures will apply and companies will have to supply e-data so an import declaration can be submitted,” De Swert explains.
For items with a value of more than £135, the UK’s standard import and VAT rules for e-commerce will apply. “This means that EU online retailers will need to look for partners who can handle the import procedures and submit the import declaration for them,” De Swert says. “Otherwise, it will be impossible for you to get your goods out of Europe. And the same thing goes for entry into the UK; you’ll have to mandate a company to take care of the import declaration for you.”
It’s why De Swert advises EU companies selling to UK customers to assess the impact of these new obligations on their business. “What impact will the customs obligations, import duties and VAT rate have on your price? These things will all depend on the transport flow you decide to use.”
A fulfilment alternative
Local fulfilment alternatives could be an interesting solution for companies wishing to avoid border checks and additional procedures. “A UK company could for instance move part of its UK stock to a warehouse in an EU country and deliver to all EU countries from there,” De Swert explains. “In this scenario, all customs will have been handled before items are shipped to customers, making it easier to plan for everything.”
Conversely, she adds, EU online retailers may also wish to open a warehouse in the UK. “But whether or not that’s a worthwhile option will again depend on multiple factors such as the fulfilment fees and the value of the e-tailer’s products,” she says.
To-do list for e-tailers shipping from the UK to Europe or vice versa:
- Assess impact of new VAT and customs obligations on prices of goods
- Assess impact of new VAT and customs rules on your returns policy
- Choose a delivery option: an all-inclusive price or duty and tax collection upon delivery
- Look for a business partner who can handle import and export declarations for you
- Make a cost-benefit analysis to determine whether it’s worth your while to open a warehouse in the EU/UK
Are you looking for a partner who can help you navigate this new Brexit reality? Thanks to our extensive range of shipping and fulfilment solutions, you can rely on us to get your cross-border parcels to shoppers whatever the next months bring. Get in touch to learn what Landmark Global can do for your business.
TIP: Still confused? Be sure to check out the Brexit infographic we created. It has all the key dates and figures online retailers must remember to continue shipping after Jan. 1, 2021.