Being a non-European retailer who sells into Europe is not without its challenges. There are countless “bad” examples we could site when it comes to Europe’s constantly changing rules and legislations: the recently-introduced GDPR, the new Union Customs Code (UCC), the Universal Postal Union (UPU), and taxation of cross-border delivery of commercial items by the end of 2020 — just to name a few.
Most non-European brands, retailers, and web shops have no idea how this will affect their European business. Not only will their international shipping rates and shipping solutions need to change dramatically, but also their sales into Europe will drop-off their European sales. The lesson here is clear: retailers who continue to operate as if it’s “business as usual” with the new UCC and GDPR in place will miss out on their share of the huge European market and its associated turnover and margin.
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?
- Do I need to maintain an expensive European warehouse for my direct B to C shipments?
- What would be the best solution for my brand and products?
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.
Are you liable for import duties and taxes in Europe?
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.
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 next blog, I’ll address more about taxable items, and look at the advantages (and disadvantages) of maintaining a warehouse in Europe.