How to prepare your e-commerce business for a no-deal Brexit
More than three years have passed since the UK Referendum on their EU membership on July 23rd, 2016. Yet, the Brits are still on board. But, as postponed is not abandoned, the new due date is set: October 31st, 2019. Until now, the British government has refused all withdrawal agreements proposed to them and no agreement has been reached. With the appointment of right-wing Tory Boris Johnson as UK prime minister, the likelihood of a no-deal Brexit increased drastically. Therefore, it is vital for businesses to prepare for the likely scenario in order to avoid serious disruptions of everyday operations.
So what exactly is ‘No Deal’?
If no last-minute deal will be agreed on how to structure the UK’s departure from the EU, the UK will leave the EU on October 31st, 2019, without a smooth transition period. As of November, Britain will overnight leave the single market and customs union and then have third country status to the EU and vice versa. This means that WTO rules apply, tariffs are charged, as well as export and import declarations between the UK and EU are needed.
If, until now, your business has not traded with third countries and you wish to continue serving customers in the EU/UK, then this scenario will bring some added burden. Here are the main topics you will need to keep in mind
Rules of Origin: In short, you need to know where your products and their parts were produced and be able to prove it. In a free trade agreement, for example, these rules will become relevant for customs authorities to determine whether a significant part of the product originates from a country for which tariffs apply.
Customs declarations: All goods for export, import or transit need to be declared to customs. You can file your own customs declarations if you arrange the transport of your products yourself, but
Tariffs: From the data provided on the customs declaration, the applicable tariffs for your products will be calculated. In e-commerce, it is usually the end customer that gets stuck paying these, which can be an unexpected hassle. But don’t fret: we have developed a solution that lets your customers see and prepay all duties and taxes when they place an order, and then we take over all customs proceedings for you. If tariffs should become a relevant topic, talk to us to find out how our cross-border solution can save both you and your customers time and nerves.
What information and documents do we need for your customs declarations?
- Your EORI1 number (if you don’t have one yet: apply once it becomes clear that you will need it)
- Power of attorney (so that we can resolve potential customs issues on your behalf)
- A proper commercial/proforma invoice, including:
- Shipper and recipient address
- Documentation of where your goods were manufactured
- Correct description and classification2 of goods
- Value of goods (the price you’re selling them for separate from any freight or export insurance that you have included in the price)
What you should also consider:
- Your contracts and INCOTERMS3 should reflect that you are now an exporter
- If you do choose to take care of your customs declarations yourself, make sure you have the necessary software and authorisations. (Due to the workload and expertise required for this, it is not recommended, especially for Small to Medium Sized Businesses, to do this without an experienced logistics partner.)
- Does it make sense for you to become a B2B importer? (You will need a legal entity in both the EU and UK. If you already have both, or do not mind going through the hassle of creating them, this may be a good option: ship your bestsellers ‘B2B’ in large quantities at lower internal prices, and only individual orders ‘B2C’. Returns may be facilitated using Duty Drawback. However, keep in mind that there are restrictions to what you can import on a B2B
route,and that you need to be selling large volumes in the EU market for this to make sense.)
- How will you handle returns
? (It may be complicated to reclaim duties paid on your returned products. The importer/your customer would need to take action for this, and this is normally not realistic when dealing with private consumers. However, some service providers will offer you returns solutions with temporary storage in the destination country from where you may resell returns or get them back in bulk to minimise costs. If you have considerable cross-border volume and are a B2B importer, you can handle returns internally with your entity abroad and profit from Duty Drawback.)
We know this may sound like a lot, and for merchants who do not have experience with third country business, it can be a challenge to adapt to these new rules. This scenario would significantly disrupt the life of businesses as well as private citizens. After all, the jury is still out. Hopefully, a ‘No Deal’ or ‘hard’ Brexit can be avoided.
If you already have Hermes BorderGuru as your logistics partner, you will know, that we do not leave you hanging and guessing. If you do not: contact us to see how we can help your EU <-> UK and transit business as frictionless as possible, no matter what will happen after October 31st!
1 EORI number: Economic Operator Registration and Identification number. This can easily be obtained from your national customs authority (e.g. HMRC in the UK or the Generalzolldirektion in Germany).
2 Classification of goods: You need to assign codes to your products to classify them based on the Harmonized System (HS). You can find a handy guide for classification on www.gov.uk/trade-tariff
3INCOTERMS: International Terms and Conditions of Service