Preparing your e-commerce business for a no-deal Brexit
Not a day goes by without news on Brexit. With the agreement Theresa May reached after long negotiations with the EU27 leaders, we thought we might finally have a roadmap to what will happen after March 29th, 2019. But now that the vote for parliament approval has been postponed and crucial points of the agreement will have to be re-negotiated, uncertainty is back and the fear of
So what exactly is ‘No Deal’?
If no agreement can be reached on how to structure the UK’s departure from the EU and the negotiation period is not extended (with the unanimous consent of all EU 27 states if the UK requests it), then from March 29th, 2019, all ties are severed and the EU will have 3rd country status to UK exporters, and vice versa. This means that WTO rules apply, tariffs are charged and export and import declarations between the UK and EU are needed.
If, until now, your business has not traded with 3rd 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 don’t have experience with 3rd country business, it can be a challenge to adapt to these new rules. Both the UK government and the EU know that this scenario would significantly disrupt the life of businesses as well as private citizens, and that is why they will do everything in their power to avoid a ‘No Deal’ or ‘hard’ Brexit.
So while we hope that in the end, you will not need this list, we are there for you every step of the way. If you already use Hermes BorderGuru for shipments to other countries, you will know that we do not leave you hanging and guessing. If you do not: contact us to see how we can help you keep your EU<=>UK business as frictionless as possible, no matter the outcome of the Brexit
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