On the 23rd of June 2016, the UK voted to leave the European Union. Since then, two prime ministers have tried their hand at negotiations, and the withdrawal from the union has seen delays and uncertainty across the continent for the past four years.
On the 31st January 2020, however, the UK officially left the EU through the terms of the Withdrawal Agreement. This covered the terms of the transition period and provided the UK with eleven months to negotiate a trade deal with the EU. However, with the agreed transition period coming to its end, a deal has yet to be agreed.
Regardless of whether this deal comes to fruition, the UK will leave the Customs Union and the EU Single Market at the end of this year. And, as far as UK-EU trade is concerned, this will have quite an effect, with customs procedures for import and export of goods coming into effect from the 1st January 2021.
In this article, we take a look at how it will affect retailers who currently export to the EU from the UK, and how they can prepare for the changes that will take effect in just under two months’ time.
How will it affect retailers exporting from the UK into the EU?
Whether you hold stock in your own warehouse, use a 3PL, or utilise Amazon’s FBA service to fulfil and despatch your products into Europe – if your stock is held in the UK, then you will be subject to the new customs regulations for importing goods into the EU.
This means that you’ll need to provide data on every parcel that is shipped containing items with a commercial value, and you will require HS commodity codes for all of your products – as well as a host of other requirements that you weren’t previously required to provide. We return to these in our Brexit Checklist.
One of the most prominent changes will be the introduction of customs duty imposed on goods imported into the EU. This is a form of taxation imposed on the consumer who has purchased your product. It is typically a percentage of the value of the product sold, depending on that particular product’s HS code – which is why HS codes are so important.
Retailers exporting outside of the EU will know Canada is notorious for its customs duties, and the challenges they can experience trying to access the Canadian market. This is often where a DDP (duties pre-paid) solution comes into use – but more on that later.
Anyway, this situation is about to occur in trade with all EU countries. Whether a trade deal is agreed with the EU or not, the additional requirements for data and paperwork will still be necessary. The obvious value of a deal is the potential reduction of customs duty, meaning that customers based in the EU can purchase your products without incurring the cost of an expensive customs duty along with it.
The first big news this summer came from Amazon: With the UK operation of Amazon FBA splitting from its EU operation. Come the 1st January 2021, retailers who hold stock in the UK, but sell into Amazon EU, will no longer be able to do this. Instead, they will have to hold stock in at least one EU country in order to fulfil and despatch to the rest of the EU.
This will pose a problem to a lot of UK sellers who do not wish to make the commitment of splitting Amazon stock between the UK and the EU. And for retailers in this boat, MHI have a solution.
What are MHI doing to prepare for Brexit?
With our retail clients trusting us to continue delivering their items to their EU customers, it is our job to make the process as simple as possible for them. Currently, MHI have direct injection contracts with numerous local couriers within Europe – whether that’s GLS in Italy, Correos in Spain, Asendia in France – and these contracts will remain in place.
However, to account for our retailer’s battle with duties, we are splitting our delivery options into two products: DDP & DDU. Much like you might have two delivery services for Canada, one with delivery duties already included in the delivery, one without – that is what we’re offering our client’s for delivery into the EU.
- Premium DDP Delivery…
This service utilises ten of our best-performing carriers in ten European countries, and offers you a delivery rate which includes the cost of customs duty that your customer would otherwise have to incur. In short, you’re footing the bill for your customer and saving them the hassle.
- Standard DDU Delivery…
Like our premium service, Standard will also offer you tracked delivery, but it will be DDU (Delivery Duties Unpaid – also known as DAP). This service will almost certainly be a more cost-effective option than a DDP service, as you pass the cost of customs duty onto your customer – however, it may negatively harm your customer experience and deter customers who do not wish to pay the duty when they receive the item.
For those who sell products B2B, we offer a slightly different DDP product which is subject to different regulations. Feel free to get in touch about this for more information.
Finally, our Postal Saver option will also be available through our global network of postal authorities. This is an untracked option that will also be DDU.
Your Brexit Checklist…
So, there you have it, as briefly as possible, we’ve tried to sum up how Brexit will affect retailer’s exporting into the EU – and how MHI can offer them a solution to continue exporting successfully for years to come. Let us just re-cap on your Brexit Checklist and what you need to have prepared by the 1st January 2020:
- Data Transfer and Requirements: via API or SFTP
If you are already exporting items outside the EU, it’s likely you are providing most of the data already. But if you are not, there are number of new fields you will need to include. We won’t go into them here, but please do get in touch if you want to know them all.
A final point here is that retailers should be using Brexit as an opportunity to improve the way they transfer data to their delivery carrier. We have discussed previously, about the value of automatic data transmission via API, versus CSV upload to the SFTP. Use Brexit to modernise your operation.
- Labels for CN22 and CN23
There are two types of labels that your products will require for goods imported into the EU. You will require a CN22 label for items with a value below £270, and a CN23 label for items with a value above £270. Both labels require additional customs information, but the CN23 requires more. Ensure that you can accommodate the production of both labels at fulfilment stage.
- Apply for an EORI Number
Trading businesses require an EORI as an identification number in all customs procedures when exchanging information with Customs administrations. You can apply for an EORI number here.
- Know your HS Codes
HS commodity codes aid customs authorities to assess risk and charge appropriate duties. You can look up the relevant HS commodity codes here. You don’t want to use the wrong HS code and incur a higher level of duty than you need to. Know your HS codes!
Manage the Brexit transition safely with MHI…
Whether the UK government negotiate a trade deal in the coming months or not, change is afoot where trade between the UK and our closest neighbours are concerned. 44% of our client’s eCommerce volumes go the way of the EU and it is absolutely critical that they are able to continue promoting themselves in this market of 446 million customers. MHI feel confident that we can continue helping them do this, and scale their volumes in Europe despite Brexit.
If you’re concerned about the transition and don’t feel prepared, please do get in touch with us here at MHI and we will be happy to provide a free consultation on preparation, and how our delivery services can help you to continue selling your products to a European audience.