BREXIT - THE IMPACT ON US D2C BRANDS
From the start of 2021 the United Kingdom is no longer part of the European Union. New rules and regulations have cause chaos. With carriers refusing to ship orders, customers being overcharged additional taxes, and parcels being refused at customs.
"In the midst of chaos, there is also opportunity" - See how we can help accelerate your UK and European sales.
UNDERSTAND THE NEW TAX RULES
Low value tax loopholes are no more
The low value tax exempt threshold has now been removed for UK bound orders. Previously goods under the value of £15 (around $20) were exempt from additional duties and tax. This is no longer the case - all your UK orders, whatever their value will now incur local tax and duties. The threshold for European Union bound orders still remains at €22 (approximately $27). However, this is expected to disappear from July 2021.
New sales tax and duty rules
One of the biggest changes is how duty and taxes are collected. It is now the responsibility of the seller to charge the appropriate local (i.e. UK) tax for every sale under £135 (approximately $185) shipped to a UK address. Previously, it would have been the buyers responsibility to pay the appropriate tax. For orders under the £135 threshold, it is the seller who is responsible for the payment of local duty and taxes.
For your European Union based shoppers there are no major changes in the tax rules. Business as usual!
If you're struggling to understand how, where and just how much tax you should be applying to your orders - we can help. It's important that you not only apply the correct taxes, your tax declarations and paperwork must match. Otherwise your customers will be facing additional costs and your carriers applying additional charges.
RULES OF ORIGIN EXPLAINED
Goods sourced from outside the UK & European Union
If your goods are sourced from outside Europe (for example from China) and are not 'significantly modified' within the region then they will fall outside the new Free Trade Agreement. Any such goods being imported into the UK will now require additional paperwork to determine the tax and duties due based on their country of export. Your suppliers will need to classify your goods clearly to ensure they clear customs properly.
To further complicate matters a double set of duties may be payable if the goods move between the UK and European Union. For example if you stock sourced from China is sent to your UK based fulfillment center, if an order is then sent to a customer based in the European Union, then and additional customs charge is due.
If you're struggling understanding exactly what you need to declare or what constitutes 'significantly modified' - let us know, we can help you avoid paying unnecessary costs, double duties, and potentially reclaim some duties you've already paid.
HS CODES & DOCUMENTATION EXPLAINED
Harmonized System Codes
HS codes (sometimes known as commodity codes) are used by customs officials to determine the taxes and duties due on each product entering a country. Since the 1st January the UK has now developed their own HS code system separate from the European Union's. You will be responsible for applying the correct HS code documentation for each item being sent to a UK customer.
Are you struggling to find your HS codes? Get in touch, we can point you in the right direction.
YOUR EORI & TAX REQUIREMENTS
Economic Operator Registration Identification numbers
This is your own personal account or identification number that must be included on all customs forms and declarations. If you've already been shipping goods to Europe then you should already have an EORI number. Under the new Brexit rules you will also need to register for a specific UK EORI number for all UK bound shipments.
Local Tax Requirements
In order to continue serving your UK based customers you'll also need to register with the local tax authorities to submit local paperwork detailing your goods imported and exported into the UK. Further changes are also expected in the European Union later this year. It is advisable to get ahead of the curve and ensure you have your local tax requirements met before the new rules come into force.
Are you having difficulties registering for an EORI number or finding a local tax expert who can help you with your local filings? We can put you in touch with local, trusted experts to take care of this quickly and easily.
CHANGES TO PRODUCT CERTIFICATION
CE and UKCA marks
CE marks are widely used to determine that a product complies with local health, safety and environmental standards of the country they are being imported to. Prior to Brexit, goods imported into the UK were covered under the 'CE mark' scheme. The UK has now introduced its own UKCA alternative. There is currently a 12 month grace period in place for many items to continue using their CE mark accreditations. However, there are already goods requiring their own UKCA version today. With the list expected to grow during the grace period.
Are you having difficulties understanding which of your products will require a new UKCA mark? or need a local certification body to ensure your products conform to the new rules? We have experts on-hand who can quickly and cost-effectively ensure your products are compliant.
LOCAL FULFILLMENT OPTIONS
Know where to place your stock in the UK or European Union
If you already have a sizeable UK or European customer base, or you are serious about growing in Europe, then you'll likely need a dedicated local fulfillment base. With the new rules in place that decision has become more complicated.
We can help you with a dedicated network analysis to take into account the P&L implications of where to place stock and when to reduce costs in what is normally the largest single cost center. Our goal here is to reduce your costs as much as possible while providing a local experience to your consumers.