International ecommerce will carry on after Brexit

At Webinterpret we’ve been following what Brexit can mean for ecommerce since 2016 when the UK was preparing for the historic referendum. We’ve created guidelines and articles to answer many questions from our sellers and help them navigate the murky waters of the unknown.

We still believe there’s no need to panic. Brexit won’t be easy for all sellers, but cross border trade will carry on: changing trade agreements doesn’t mean cancelling UK-EU trade.

According to Mike Bishop, CEO at Webinterpret:

Commerce and collaboration between the UK, the EU and the rest of the world will continue. It may start off with a period of disruption and a degree of chaos, but it will work in the long-term.

2021 is here. As of 1 January there is be a customs border between the UK and the EU, which impacts businesses operating across this border.

The free trade deal announced in December 2020 injected a dose of optimism, yet it won’t eliminate all new checks.

The bottom line:

Brexit will bring about changes, such as currency fluctuations or new trade deals. Some changes will be negative for sellers and some may be positive. But still, a number of sellers will be hardly affected at all.

To get a personalised list of actions for you, your business and your family, use the official Brexit checker.

With time, there will be more certainty and direction. The moment the new rules of the game are known, sellers should be able to make informed decisions and better focus their future investments and daily activities.

Brexit & final trade agreement

As of January 2021 there are border requirements placed on the movement of goods between the EU and UK. There is no major change for the movement of goods between Northern Ireland and EU countries, including Ireland.

The UK-EU Free Trade Agreement announced in December 2020 covers trade in goods and services, but also a broad range of other areas, e.g. investment, competition, tax transparency, data protection and so on. The agreement provides for zero tariffs and zero quotas on all goods that comply with the appropriate rules of origin.

With this agreement, tariffs or quotas on goods may be avoided, but problems at the border could still emerge. For example, increasing checks or traders having to complete new customs declarations. In general, commercial relations will face more restrictions and changes, e.g. associated import VAT will be due when the goods arrive in the EU.

Useful links:

How to import and export goods between Great Britain and the EU from 1 January 2021

Agreements reached between the United Kingdom of Great Britain and Northern Ireland and the European Union

The final trade agreement is a key point for many online sellers. Marketplaces, such as eBay, constantly monitor the situation and provide updates on the latest advice from the Government.

Ecommerce after Brexit: what comes next for UK sellers?

Sellers that may be affected by Brexit should take a proactive approach to protect themselves against any potential disruption, e.g. by ensuring that they have enough/excess stock. If they trade across borders, relocating inventory to warehouses closer to their customers may make sense, too.

If you’re established in the UK, check for any legal requirements and regulations in any EEA countries you operate in, e.g. rules relating to online information, online advertising, online shopping, etc.

In case of any doubts, it’s always good to seek legal advice and follow relevant official websites.

UK online service providers may also become subject to “prior authorisation” schemes, for example licensing requirements in given EEA countries.

Businesses which undertake the import or export of goods into or out of the EU need to register for a UK EORI number (Economic Operator Registration and Identification).

They also need to use HS Codes to classify their products. Every imported or exported item is assigned an HS classification code that describes basic product parameters to calculate customs duties & taxes.

Brexit & Ecommerce Directive

The EU Ecommerce Directive applies in all EU countries, Iceland, Norway and Liechtenstein. EEA online service providers can operate in any EEA country if they only follow the relevant rules in the country in which they’re established.

The EU Ecommerce Directive applies to “information society services”, i.e. any service that is normally provided:

• For payment, including indirect payment such as advertising revenue
• “At a distance” (customers can use the service without the provider being present)
• By electronic means
• At the individual request of a recipient of the service.

This covers the vast majority of online service providers, such as online retailers, video sharing sites, social media platforms, search tools and Internet service providers.

After Brexit, the Ecommerce Directive no longer applies to the UK. However, you still need to ensure that you’re compliant with the relevant requirements in each country in which
you operate.

Thus, ensure you have processes in place for ongoing compliance in case individual countries change their requirements over time. To stay on the safe side, consider seeking legal or professional advice.

Here’s more information about the Ecommerce Directive after the transition period.

Brexit & EU-UK border and customs changes

As of 1 January 2021, sellers are no longer able to ship products freely between the UK and the EU. For this reason, you need to be aware of customs and excise rules for goods moving between the UK and non-EU countries.

You need to supply a customs declaration that includes:

• VAT number for the country where you’re storing the product
• EORI number for the UK and any EU country you will be shipping goods to and from
• Amended contracts and Incoterms to reflect that your business is now an exporter
• Country of Origin information
• HS Codes to determine the level of duty and import VAT on your products
• Licenses and certifications.

For more information, follow UK government publications.

The EU won’t replicate the UK’s phased plan, so as of 1 January, declarations are needed for exports. Exporters can use the new ‘Check duties and customs procedures for exporting goods’ tool on gov.uk to identify what additional paperwork, quotas and tariffs are applicable.

Check duties and customs procedures for exporting goods.

Businesses can also apply to HMRC for an advance ruling on the commodity code that should be used for their goods and the origin of their goods.

Border posts receiving goods from the EU will use one of 2 models:

• Traditional Temporary Storage model (imported goods can be stored at the frontier for up to 90 days before being declared to customs)
• Pre-lodgement model (a customs declaration will be submitted in advance of boarding on the EU side).

Up to 10 inland sites, e.g. for Birmingham, are planned to alleviate congestion at ports.

Brexit & VAT changes

• VAT will be levied on consignments of EU goods exceeding £135 in value. The same rates and structures can be expected as are applied for the Rest of the World imports.
• VAT-registered importers will be able to use postponed VAT accounting.
• Different rules will apply to consignments valued less than £135.

Postponed accounting will be needed for import VAT on goods brought into the UK. UK VAT-registered businesses importing goods to the UK will be able to account for import VAT on their VAT return (as opposed to paying import VAT on, or soon after, the time when the goods arrive at the UK border).

LVCR (Low Value Consignment Relief) will no longer apply to any parcels arriving in the UK. All goods entering the UK as parcels sent by overseas businesses will be liable for VAT. Overseas businesses will charge VAT at the point of purchase. They will be expected to register with HMRC digital service and account for VAT due.

VAT-registered UK businesses will still be able to zero-rate sales of goods exported to the EU but will not be required to complete EU sales lists.

VAT changes are related to selling on marketplaces. For instance, as of 1 January 2021, eBay started to collect and remit VAT for UK imports on all consignments with a value of up to £135. There is no longer a VAT exemption for small consignments up to £15.

Brexit’s impact on Amazon UK FBA

Amazon has already announced big changes to its UK FBA operations starting 1 January: a split between UK and EU operations. As a result, sellers won’t be able to fulfil all of their European marketplace operations from a single UK warehouse.

As Pan-European FBA will no longer transfer inventory between the UK and EU countries, you’ll need to ship inventory to another EU country to distribute your stock there. Pan-European FBA will continue to transfer inventory within the EU region, supporting your sales on sites in Germany, France, Italy and Spain.

With Amazon’s previous EFN (European Fulfilment Network) system you were able to sell your products across all 5 EU marketplaces while VAT-registered in just 1 country (usually the UK if you’re a UK seller). As of 1 January, you need separate VAT numbers for every country where you store your inventory.

Sellers can still use the same merchant stockkeeping units (SKU) for the UK and the EU. However, to ship into both sides of the border, you’ll have to switch on Multi Country Inventory to inbound your FBA inventory to Amazon fulfilment centres in multiple countries of your choice across Europe.

After switching this on, you can choose the country you want to ship into. For your UK and EU shipments, you can use the same SKU (Amazon will treat them as two separate inventory pools).

The FBA Exports programme still operates after 1 January. However, sales generated via Export will probably be limited as most Amazon customers shop in their domestic store. Sending inventory to both sides of the border is the best way to protect EU sales after Brexit.

It’s worth following advice from Amazon with their “Prepare your Amazon Business for Brexit” help page via your Amazon Seller Central account.

Brexit is also about ecommerce opportunities

The mere thought of Brexit becoming a fact can give some people the shivers. However, many reactions are exaggerated or miss the bigger picture. Above all, sellers are encouraged to prepare for different scenarios, but also look for opportunities, especially in cross-border trade.

Many manufacturers will have a chance to become competitive abroad. Some sellers can improve profitability if they watch the currency situation closely and use the right moment to sell with a higher margin. There may be further benefits, depending on pricing.

Furthermore, during challenging times, such as Brexit or the coronavirus pandemic, selling on international markets often allows sellers to plan and balance the sales between markets, spread their risk and make the most of diversification.

For instance, after losing revenue in one market at any point, for any reason, sellers can put in more effort in countries that can offer them the best possible ROI. Thus, marketplace sellers should definitely consider expanding their country portfolio.

For example, UK sellers can consider markets with some level of similarity and/or that have eBay and Amazon national sites, e.g. the USA, Canada, Australia, or China and emerging markets in Asia and South America.

Conclusion: keep calm

The actual impact of Brexit on ecommerce is still unknown. However, things are clearing up and certainty levels are going up. By staying proactive and considering various ecommerce opportunities, sellers can increase their chances of staying on the safe side.

Finally, ecommerce between the UK, the EU and the rest of the world will continue to grow strongly. Webinterpret will also continue to be central to this growth for marketplace sellers. At the same time we will do our best to support international sellers trading across the UK/EU border.

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