Currently, European mail services and integrators still make use of the former “blueprint” regulation — a tolerance policy construction, now known as the temporary venue permit. This venue permit was invented as a temporary (read: quick fix) solution by European customs and tax authorities, after a lobby from the integrators. The reason was that European Customs and their systems were not ready for their own new (May 2016) Union Customs Code (UCC) — an issue which made sellers, platforms, and logistics companies liable. This still is not the case due to the permit, and there is still not a level playing field between the integrators and the rest of the world.
Level playing field
Luckily enough the European commission wants to create a level playing field which will impact all of us in cross-border ecommerce. That means it will not just affect the logistics companies, customs brokers, fulfillment companies and “last mile” delivery companies, but also (and maybe primarily) the non-European retailer who wants to sell into Europe. So yes: soon everyone will be liable, from the smallest business owner up to Mr. Jeff Bezos himself. By the end of the year 2020, Europe will collect all import duties and taxes for each individual shipment coming into Europe. These import duties will be based on compliant and real-time data per order, and real invoices will need to be provided.
This may feel like a lot of information, but the more you know the better prepared you’ll be to stay compliant and competitive in the evolving landscape of European ecommerce. In my compliancy blog I have addressed more about taxable items, and looked into the advantages (and disadvantages) of maintaining a warehouse in Europe for your direct B-C e-commerce into Europe.
What are the challenges?
Brands & Retailers are constantly being asked to do more for less. Looking for opportunities and making calculated risks is traditionally key to making it in the retail space. To achieve the same goals from your home country (a happy and returning customer, being in control of the customer journey, increase of the conversion rate and finally sales), you need to know the European market. If you’re not thinking about Europe and the possible challenges, it’s likely that you’re missing out.
- Localisation of the brand(s) and product(s) in 26 different European countries
- Return on investment of marketing efforts/cost
- 26 different European VAT percentages and customs authorities
- 26 different European company registrations and thresholds
- Competitive and affordable shipping costs and transit times into Europe
- An all-inclusive and customer friendly checkout for European customers
- Complicated cost-effective European 3rd party fulfilment center(s) or fulfil from your home country
How do you beat the complex challenges?
Here’s a checklist of ways to beat the heat when it comes to transitioning to European markets:
- Carefully consider technology and partner platforms based on your products, market, and competitors in the market you’re tackling.
- Find the right partner and market your product in Europe for affordable and fast shipping.
- Use social media to sell as much directly to consumers to avoid partner revenue drain.
- Focus on products that are unique to your brand to stand out in crowded markets and create demand.
- Small details such as changing from a “.com” to a “.e” or “.fr” make the European market more comfortable with your product’s website.
- Partnering with a localization expert help you ensure that your message is tightly aligned with a target customer’s need from country to country.
Questions to help keep you ahead of the curve
If you are a retailer who does business Europe — or who wants to — you may be asking: how can I increase consumer confidence in cross-border shopping and shipping? And how can I make sure my business is compliant? I’ll answer those questions with some questions of my own: are you looking for a “quick and dirty” fix, or a compliant and sustainable strategy for the long term when it comes to your European ecommerce business? There are many factors to consider when talking about compliance and the best solution for you as a non-European retailer selling into Europe. It’s not easy to stay ahead of the curve, but here are a few more questions you might also have:
- What about my noncompliant and temporary UK or Ireland solution as the gateway to Europe?
- What if I’m “suddenly” liable for import duties and taxes in Europe
- What will happen when all cross-border commercial items will be taxable from the 1st cent?
- Is my integrator service still the best solution? What about a direct bulk infeed connected to domestic European networks?
- Who’s my representor to customs and tax authorities?
- Do I need to maintain an expensive European warehouse for my direct B to C shipments?
The reality is, things are changing fast in Europe with regard to cross-border ecommerce and being prepared is a must. The stakes are higher than ever — no one wants to invest time and money as a non-European retailer, only to run the risk of being accused of fraud due to noncompliance. The UK and Ireland are the first to make changes, with other European countries to follow. Don’t wait until the end of 2020 — or untill you and your current shipping solution get into trouble — the time to start making changes is now.
British ecommerce fraud: a cautionary tale
What happened recently in Britain is a major reason that scrutiny of international sellers is so high right now. In the beginning of March 2018, the European Commission (EC) formally demanded the UK pay €2.7 billion into the EU budget after investigators found that British authorities allowed a massive Chinese fraud network to evade paying the appropriate level of import duties. The EC concluded that British customs allowed those importers to use fictitious and false invoices and incorrect customs value declarations at importation.
The report continued: “Despite having been informed of the risks of fraud relating to the incorrect and/or no European classifications originating outside the EU, and despite having been asked to take appropriate risk control measures, the UK failed to take action to prevent the fraud.” The UK is liable for the financial consequences of its infringements of EU legislations and the lack of appropriate risk controls.
Sound like a lot? That might not be the end of the story: London could be saddled with an even greater bill as the EC also said that the UK infringed on EU laws in relation to the collection of Value Added Tax (VAT). This is related to abuse of Britain’s customs terms on non-European ecommerce shipments — like clothes, for example. In one case, women’s nightdresses (sales value €180) were declared with a sales value of € 40. This allowed them to avoid the 12% import duties and required a lower amount of VAT by undercutting the market price and other compliant European countries. That’s pretty much the definition of fraud.
Do I still need my European warehouse or 3PL?
Why spent a ton of money, time and resources managing two operations, double stock and additional European partners? Registrations, thresholds, clearances, customs and tax authorities can hold a big draw when you want to grow in a European market. Why would you need a European warehouse for your ecommerce shipments into Europe? Especially when you already have your own advanced fulfillment center or local 3PL partner in your home country for your domestic shipments.
So, in other words. If you are already selling into Europe via a platform, shipping via a mail service and or integrator service with the incoterm DDU (delivery duty unpaid), you need to act now. Your sales will stop from the first day the physical customs checks will start and all shipments (platform, mail service or integrator service) need to be cleared as a single shipment as soon as they arrive in Europe.
Do you want to stay in control of your ‘last mile’ and customer journey? Do you still want to be flexible, cost competitive, complaint and would like to get a more in-depth insight for your current and future European sales strategy? Contact us via our website or send an email to email@example.com and we are more than happy to schedule a call how we can help you doing more business in Europe and how to increase your European sales in a compliant way.