Jesper Brussee: E-commerce with non-EU countries
In logistics, we are more and more frequently dealing with e-commerce. This brings particular challenges, especially when it comes to shipments between European Union member states and countries outside. In this article, I will first discuss the various problems and challenges of these types of shipments. Then I give some practical tips on how to deal with them.
As a logistics service provider, we categorise two forms of e-commerce: shipments we deliver for retailers to their branches in another country, and shipments we send directly to end users. With the last-mentioned type of shipment, you can think of a customer for whom we send an e-bike directly to, say, Mr Heinrich Müller in Basel. These types of shipments can sometimes lead to some headaches. For instance, private recipients do not have a VAT number for discounting VAT and import duties. We therefore see that quite a few customs agents prefer not to work with private individuals. Companies do not have to pay import duties under certain conditions thanks to trade agreements such as those that exist between the United Kingdom (UK) and the European Union (EU), or between Switzerland and the EU. This also applies to individuals, although complying or proving European or UK origin is more difficult.
More challenging within EU as well
Furthermore, a change in European regulations has also made the situation more difficult within the EU.
Previously, we were able to clear goods on arrival in the Netherlands and then ship them to all private customers within the EU. But since July 1st 2021, new guidelines apply to e-commerce goods. The main change concerns the removal of the import exemption on any package (of any value). As a result, VAT must be charged on imports. If you bring goods into an EU member state while the consignee is based in another member state, these goods must be declared in the destination member state; unless the declaration is made using the import regime. Goods brought in that have not yet been declared for free circulation are transported to the Member State of destination under the Common Transit Procedure.
Another point of concern involves returns, as e-commerce goes hand in hand with returns. If we go back to the bicycle for a moment for Mr Müller in Basel; what happens if he was expecting a different e-bike and he wants to return it? Suppose we use the ICC Incoterms® 2020 Delivered Duty Paid – Basel rule, where all import duties are recovered from the shipper, and the consignee is excused from the bill.
The shipment then arrives in Switzerland as free goods and can be transported further immediately. But the moment a return shipment has to take place, it becomes a tricky story.
Because a shipment that returns unexpectedly can be exempted from import duties but not VAT. Also, a company can recover that VAT, but a private individual cannot. There are all kinds of customs procedures for this, but as soon as a private shipment is involved, a huge ‘hassle’ arises.
So much for a couple of common problems. How can we avoid them?
A piece of advice that is as simple as it is important: be careful. After all, if you do not overlook the process at the front, you will have problems at the back. We too frequently experience documents being incomplete or incorrect, which often results in unnecessary costs. So make sure all documentation is completed correctly and completely.
For example, if the customs documentation contains a direct reference to the serial number of Heinrich Müller’s bike, this makes the process much easier. The chances that returns can be handled properly are significantly higher if the documentation is correct.
ICC Incoterms® 2020
How you apply the Incoterms® rules is also important. As a Dutch shipper, you need to be able to oversee the consequences of your decisions in this respect too. For example, it often happens that a Swiss customs agent does not want to do customs clearance under certain conditions. You may be able to solve such situations by seeing if you can adjust the delivery conditions in such a way that agents are willing to cooperate. This does then affect the speed of a shipment. For example, if the recipient has to pay, that shipment will not be released until those funds are paid. Problems can also be overcome by a shipper from the Netherlands setting up an entity in Switzerland or the UK, where import duties and sales tax can always be settled. This eases delivery processes, but be aware that it also leads to bureaucracy.
In summary, setting up your process correctly is a balancing act. There are plenty of potential stumbling blocks. These may range from not having your own paperwork in order to trade agreements that may or may not apply. The key requirements for shipments between EU and non-EU countries to run smoothly are a grip on the matter and diligence. So make sure you have that grip by either having sufficient knowledge internally or by purchasing those competences from an expert and reliable external partner.
Jesper Brusse co-authored an article for Evofenedex’s Globe magazine.