Brexit confusion
There is a lot of confusion amongst not only online retailers but anyone shipping to the United Kingdom, European Union, or between the EU and the UK post-Brexit. Consumers are being surprised by unexpected duty and tax charges upon delivery. In turn, merchants are receiving a large number of returned orders from customers who refuse to pay the clearance charges. So let’s talk about importing and exporting after Brexit.
What has changed since Brexit?
Before Brexit, there was no need for customs clearance between the UK and the EU; now that the UK has left the European Union, customs must be cleared for shipments being sent from the UK to the EU, or vice versa. In addition to the customs clearance requirement, there are also new value-added tax (VAT) laws governing imports into both places.
So, let’s clear up the confusion and look at some of the changes to the following types of shipments:
What does Brexit mean for shipping?
Shipping from EU to the UK after Brexit
To understand the requirements for imports into the UK from the EU, you need to be aware of three factors:
- Customs declaration: Customs declarations are required between Great Britain (England, Wales, and Scotland) and the European Union; therefore commercial or pro-forma Invoices are needed.
- UK VAT law: Zero-Tariff agreement (preferential origin) must be a statement on the commercial invoice stating that a specified percentage (this varies by item type) of the materials used to make the goods are of EU or UK origin.
Customs declaration
When you sell into the UK from a European country, as of January 1, 2021, the shipment is now required to clear customs. This means that these types of shipments might be subject to duty and tax. Therefore, you need to ensure that your commercial invoice is accurate in order to avoid issues at customs, e.g., if the value of the items or shipping on the commercial invoice is inaccurate, the amount of UK VAT charged will be inaccurate, or the shipment will be held for inspection.
UK VAT
Speaking of UK VAT, this tax scheme is another outcome of Brexit. In addition to now having to pay VAT on exports to the UK from the EU, there is another change for EU merchants to be aware of: For low-value orders (valued at less than £135) entering the UK, the merchant must collect this VAT (20%) at the time of checkout rather than the consumer paying after delivery; otherwise, the shipment will be held until VAT is paid.
Zero-Tariff Agreement (preferential origin)
Here’s some news that might bring EU merchants and UK consumers some solace: Per an agreement between the UK and EU, goods of UK or EU origin are not subject to duty charges once it can be proved that a specified percentage (this varies by item type) of the materials used to manufacture the goods are of preferential origin. Your commercial invoice is your golden ticket here; you must note and prove on the CI that the goods are of preferential origin.
Shipping from the UK to the EU after Brexit
Now that you know the key factors of importing goods into the UK from the EU, here’s the good news: The process for shipments entering the EU from the UK is very similar. The customs declaration and Zero-Tariff Agreement (preferential origin) are mutual; so the process is the same. However, the VAT rules are a little different, as the UK and the EU each have their own VAT schemes now.
EU VAT
When importing into the EU from the UK, the EU’s VAT laws must be followed. VAT for EU imports, prior to July 1, 2021, has been the responsibility of either the shipper/merchant at checkout or by the carrier upon delivery.
Effective July 1, 2021, however, the merchant has to choose between two options for collecting EU VAT on low-value orders (valued under €150):
- Special Arrangement
- IOSS (Import One Stop Shop)
Each method has its pros and cons, so you can choose what best suits your business! Also, there has been a VAT exemption on orders under €22 which will no longer apply starting July 1.
Shipping from anywhere to the UK
Once again, we have comforting news: The process for shipments entering the UK from anywhere is similar to shipments from the EU to the UK. The only difference is that there is no Zero-Tariff agreement between the UK and non-EU countries, which means that goods above the duty de minimis value of £135 may be subject to their UK duty rates.
Shipping from anywhere to the EU
Likewise, the process for shipments entering the EU from anywhere else is similar to the process for shipments leaving the UK to enter the EU. The only difference is, you guessed it, the absence of the Zero-Tariff agreement; hence, all goods above the EU’s duty de minimis value of €150 in these shipments may be subject to EU duty rates.
Feeling overwhelmed?
While gaining clarity on the requirements for these shipments lessens the confusion around the “surprise” charges from customs, we know that managing your orders moving into the EU and UK can still be a hassle. Let Zonos manage these charges for you!
Why Zonos?
Zonos Landed Cost will calculate import duty, taxes, and carrier fees, with the ability to prepay them from within your platform or checkout, providing a seamless cross-border experience for your customers.
Any merchant currently using Zonos Checkout or Landed Cost can sign up for our Landed Cost Guarantee. Zonos stays on top of the non-resident country taxation for Landed Cost guarantee customers by tracking country thresholds and collecting taxes for you only when the threshold is met, so you never over-or-under collect on taxes.
Contact Zonos and cross-border experts to learn more about which services are best for you. For Brexit-related questions, email brexit@zonos.com
Post-Brexit shipping cheat sheet
Welcome to Zonos' Brexit cheat sheet blog series! This post is a quick breakdown of how Brexit affects imports and exports between and to the United Kingdom and the European Union. Look out for more upcoming, in-depth blog posts in this series!