BREXIT: The 5 Must Do’s for US Retailers selling in the UK

The time has never been better for US retailers to get into the UK ecommerce market. The last minute free trade agreement announced between the United Kingdom and the European Union at the end of 2020, just 7 days before it came into law, was the final act in the UK’s separation from the European Union – the largest economy in the world and world’s largest trading block.


Understandably, with little time to prepare properly, there has been chaos and confusion in goods flowing between the UK and The European Union. With many retailers now refusing to ship to their European or UK based shoppers, carriers loading on additional handling fees and parcels being turned away by customs authorities.


So why should US brands and retailers care?

“In the midst of chaos, there is also opportunity”

Sun-Tzu, The Art of War



23%, or €95bn, of European eCommerce trade is cross border. 55% of that is across European borders and 45% across borders beyond the European Union. In other words, Europeans like shopping far from home.


Whereas previously, it was frictionless for UK shoppers to buy from EU retailers, and vice versa, now customs declaration forms and import duties are required. For the 365m remaining European Union customers, this effectively makes buying goods online from the US just was “easy” as buying goods from the UK. This is also true for UK customers who would have previously bought from EU retailers. Now is the ideal opportunity for US retailers to address the combined 450m UK & EU lucrative customers.


Considering that 370m of the 450m Europeans (including the UK) speak English, the UK & European market is definitely a big opportunity for US retailers.


However, given the current changes and media attention around BREXIT, the remainder of this article will focus primarily on what US retailers must do to take advantage of selling into the UK, which is still the largest eCommerce market in Europe.




1) You must charge sales tax & duties at checkout


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.


Although the buyer is still responsible to pay the local tax for purchases above £135, we highly recommend collecting local tax in the checkout process for both groups. Unlike in the US where product prices are displayed without tax (and then local rates for the 50 states are applied), European shoppers are used to seeing the price displayed online already including tax. Expecting UK customers to pay hidden fees post-checkout, is a sure-fire way to turn them away. Be sure to state on your customs declarations that tax has already been paid, to ensure your customers don’t pay twice.


Lastly, something that you should be doing already today, but many miss out on. For each customer order exported you’ll likely be able to recoup any import duties and taxes paid for stock sourced from non-US countries.


This first step is a huge convenience factor for your customers. If you can implement Duty Paid, do it, and add it to your marketing claims just as you would do for free shipping thresholds or friendly returns policies.



2) Know your Harmonized System (HS) codes & certification rules


HS codes or commodity codes are used by customs authorities to determine the relevant tax and duty levels payable on each product imported. Ensuring that your goods are classified correctly, the relevant taxes have been paid, and paperwork complete, will ensure that you orders reach your UK shoppers smoothly and on-time. The codes that you previously used for your European Union orders are no longer valid, more details about UK specific codes can be found here: https://www.gov.uk/trade-tariff


There are also separate product certification rules which you now must comply with for your UK bound orders. Previously imported goods required a European wide CE mark to confirm they comply with health, safety and environmental standards. Now the UK has implemented their own UKCA version. Although there is a 12-month grace period for many UK bound products to continue using the European CE mark, some already require their own UKCA alternative.



3) Get your local EORI numbers and local tax representation


If you’ve already been shipping goods to Europe, then you will already have a European EORI (Economic Operator Registration Identification) number. But now you’ll need a separate UK version, the number will start with a ‘GB’ prefix, then your UK VAT number, lastly followed by ‘000’. The process is relatively straightforward and can be arranged in a couple of weeks.


Likewise, you’ll also require tax registration directly within the UK. This is something that you will likely have already. But if not, speak with us and we’ll help you manage the process efficiently.



4) Low value tax loopholes have now been removed


One big change under the new rules is the removal of low item value threshold on imports that avoid tax. Previously goods under £15 (approximately $20), were exempt from any additional taxes. This is no longer the case. This ‘loophole’ has been closed due to many non-EU sellers declaring incorrect parcel values below the £15 threshold to avoid paying local taxes. It is estimated that the UK government was missing out on the equivalent of more than $2 billion in lost taxes each year.


(Although a low value threshold of €22 (~$27) remains in place for many items imported into the European Union, where VAT is not payable, this is also expected to disappear from July 2021.)



5) Know where to place your stock in Europe


For those of you serious about the European or UK markets, you will more than likely be looking at local fulfilment centres to serve your shoppers quicker and cheaper. The choice of where to locate has now become more complicated. Each situation is unique and certainly numbers driven. However, here is some general guidance to follow:

  • For those with low SKU counts, consider having two fulfilment centres. One located in the UK, and a second located in the European Union to serve each customer group independently. You’ll not only save on shipping costs and border delays, but you’ll also avoid additional tax requirements and associated costs.

  • Those with higher SKU counts or a customer base predominantly in either the UK or European Union should consider a single bonded warehouse with Authorized Economic Operator (AEO) status. This will not only allow you to defer tax payments from the moment of import, but also reclaim taxes paid when the goods leave the relevant tax area.



While there may be a temptation for some US retailers to simply stop serving UK customers in the short term, this would be a big mistake. Prior to the separation, the UK ecommerce market (with annual sales of $190bn), represented 35% of the European total. While there is much confusion at the moment, there is big opportunity for US retailers.


If you’re struggling to understand the impact on your business, and exactly what changes you need to make – get in touch. Our experts will guide you through the process and help you implement the changes required. Don’t miss out.


There are further changes coming into effect for European based shoppers in July of this year. Getting your business Brexit proof today will make these subsequent changes a breeze.



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