Although Brexit is now an established element of the world we live in (initiations started in 2016), the shockwaves it caused throughout the European community continue to affect and have an impact on our way of life. The UK has always been a major player in the international community of European countries and, as a result, a rethink of its relationship with the EU member states is far from simple.
On the one hand, we cannot simply destroy well-structured and historically-rooted international relationships which have been uniting communities and markets across borders for a long time. Nor is it possible to simply turn a blind eye and continue to manage the movement of people and goods as if nothing happened. Many UK e-commerce shops are accustomed to selling cross-border to other European countries and, similarly, Europeans habitually buy from the UK – whether via marketplaces or directly to consumers. The fortitude of this link is evidenced by the fact that 48% of UK exports are destined for European countries.
The consequences of this delicate situation have also significantly affected the world of online sales. So what are the main challenges of selling online from the UK to European countries?
A tricky situation
Several factors contribute to stalling the fluidity of online sales from the UK to Europe. Less freedom of movement of goods has been widely observed, though Brexit may not be solely responsible for this. It is difficult to pinpoint the specific impact Brexit has had, given that the exit of the UK from the EU took place at the same time as the COVID-19 pandemic.From a legal point of view, although the Withdrawal Agreement sought to ensure regulatory continuity, it is likely that over time the two legislative systems will each go their own way: increasing points of distance and calling for new agreements. This, of course, affects bureaucratic aspects, with a decisive impact on the fluidity of consumer-business relations.
It is therefore necessary to identify how exactly the nebulousness and cumbersomeness of the changed international scenario will make an impact.
The VAT issue
VAT cannot be applied to products sold in Europe in the same way as it is applied in the UK. Instead, it must be calculated according to the country of destination. It is therefore necessary to declare the net price of VAT so that this can be calculated and then added to the price of the product at the time of sale. Until 2021, it was necessary to register in each country that sales were made in, but this changed with the introduction of the IOSS (Import One Stop Shop), which simplified the process – enabling sales in all European countries by only having to register with one of the member states. In the case of merchants relying on marketplaces, it is even simpler, as they can rely on the platform’s intermediation for calculation and application of costs at the time of sale. In the event, however, that a transaction exceeds the value of EUR 150, various regimes come into play aside from the IOSS number, such as DDP (Delivered Duty Paid) and DAP (Delivered at Place). In the case of DDP, the seller bears all taxes and charges. These costs, since they cannot be charged beforehand, must be charged at the time of sale. In the case of DAP, on the other hand, the additional costs and fees fall to the buyer, who may end up with unexpected expenses after the purchase has been made. While this is advantageous to the seller, freeing them from any liability, it has a decidedly negative impact on customer loyalty.
Currently, European and British regulations are more or less aligned in terms of product regulations – from labelling to quality certificates, to the supply chain – and this may not change with time. The European Union is particularly concerned about consumer protection and it will be necessary for UK merchants to keep abreast of any new rules and laws in this area should they want to do cross-border e-commerce. The same applies to data protection, although even on this front the legislative systems are currently fairly in tune with one another. For the time being, the General Data Protection Regulation (GDPR) has been incorporated into British law, but this does not mean that a regulatory gap may not arise later on.
Separate consideration should be given to e-commerce companies that use Amazon as an intermediary in order to sell their products. Not only is this an illustrative case of the current situation, but also an unavoidable practical problem, since Amazon is the marketplace of reference in Europe and many transactions pass through its platform. The problem, in this case, is that Amazon will no longer handle the transport of goods across the border between Europe and the UK. The Fulfilled by Amazon (FBA) logistics service operating in Europe is no longer the same as the one that handles shipments in the UK. Merchants selling cross-border will therefore be forced to deal directly with customs clearance, and then return to outsourcing the shipment to Amazon’s logistics.
Navigating uncharted waters
The future of cross-border e-commerce between the UK and European countries is yet to be defined. We are used to selling and buying products as if shipping started from within national borders, and many UK merchants have a strong customer base in one or more European countries. In order not to jeopardise this relationship and for it not to waver, several e-commerce retailers are looking to open in a European location. Whether one chooses to adapt their business model to the new configuration of international business relations, or rather to concentrate their forces on the development of a strategy that means splitting of the company, it is a question of navigating unknown territory.
Central to this issue is having as clear and up-to-date a picture as possible of the regulations and tariffs with which one must comply, so as not to incur penalties and exert unnecessary energy. To this end, it is wise to look to Merchants of Records such as Go Global Ecommerce, who will handle the more cumbersome and complex aspects of what is a risky and challenging scenario, thereby promoting a search for creative solutions and boosting expansion into other markets.