Brexit will affect the Ecommerce market in Europe. A strong Brexit strategy for your Ecommerce business requires knowing the potential impacts and how to prepare your business, particularly for shipping after Brexit. In this article, we take a look at how Brexit could affect day-to-day operations and provide a step-by-step guide on how to ship post Brexit. Whether you’re a UK ecommerce store selling into Europe, or you’re a European store selling into the UK, don’t let Brexit stop your products reaching your customers.
We will take a look at the following questions.
- What is Brexit and who will it affect?
- How will Brexit affect e-commerce in Europe?
- Who will Brexit affect?
- Shipping after Brexit: How to send packages post-Brexit?
- Bonus: 4 steps to prepare your Ecommerce store for Brexit
On the 31st of January 2020, The UK (England, Scotland, Wales, and N. Ireland) departed from the European Union. The UK left with a pre-negotiated Withdrawal deal negotiated by the current Prime Minister, Boris Johnson.
Although the UK has formally left the EU, there is a transition period set to last until December 2020. During this transition period, essentially everything will remain the same. The UK will still be a part of the EU’s Customs Union and Single Market, but it will have no place in the political institutions and so have no members of the European Parliament.
The UK’s departure from EU laws, regulations and trade deals will be negotiated and determined during the transition period. Therefore, it is still unclear what Brexit will fully look like once this transition period is over. The transition period will be used by the UK and the EU to negotiate their future relationship, including how both parties will operate regarding trade, business, laws, and migration.
If no formal agreements are ratified into law by the end of the transition period, the UK will cut ties completely with the EU at the end of 2020. This will result in the UK immediately leaving the Customs Union and Single Market, reverting to World Trade Organization rules. The EU will treat the UK as a non-EU country. There will be no trade deals or partnerships established. Although the UK will be free of EU regulations, they will also have to face the EU’s tariffs and other restrictions and regulations immediately.
The UK is Europe’s current leader and biggest market for Ecommerce. 93% of Brits shop online and spend on average +900 euros per person, per year.
UK shoppers aren’t afraid of purchasing overseas either. 52% of overseas ecommerce orders are from the US and China. And Europe isn’t far behind, with 9% of European purchases coming from Germany.
With the UK’s ecommerce market being so developed, residents from the European Union also like to shop at British webshops. Britain is the second most popular ecommerce destination for Europe (after China). After Brexit, 70% of European e-shoppers may stop buying from UK websites. And 69% of UK shoppers could stop buying cross-border altogether.
Brexit could affect ecommerce in Europe in the following ways:
Customs and Longer Shipping Times
It is likely that Britain will no longer benefit from the open borders that enable the freedom of movement of goods and people. This means stricter customs regulations for packages entering and leaving the UK and EU. It’s even possible that some British products could even be restricted or prohibited.
Longer shipping times are a likely outcome for packages crossing from either side.
Tariffs and VAT:
This depends on the future trade deals and relationships determined in the coming year. However, it could transpire that both the UK and the EU will impose tariffs on each other’s imports. This could result in prices rising and risks sparking a trade war between the two entities.
VAT laws are a major point of contention for the Brexit negotiations already. If the UK cuts ties with the EU completely after the transition period, UK businesses will no longer have to collect any VAT on products sold to EU customers. This is a plus for lowering prices, but Britain will also no longer be able to use the EU VAT refund system.
How much Brexit could affect your business depends on the future relationship that is negotiated between the EU and the UK, and the trade deals that are determined.
However, it is important to be prepared. Brexit could affect you if you fall into the following categories:
British online stores selling anywhere (whether domestically, globally or into the EU)
Whether you are a UK business shipping domestically or internationally, you could face a multitude of changes.
Firstly, if you import any of your supply chain or products from outside of the UK, your process may be affected, including an increase in time and costs.
Another issue could be sourcing enough workforce for your order fulfilment. The current free movement of EU nationals into the UK is something that could change. According to the BBC, 19% of EU migrants work in warehousing, meaning it could become more difficult in the future to source employees.
British businesses selling into the EU could also face a lot of changes. If future relations with the EU do not include the freedom of movement of goods, then shipping to the EU could become the same as shipping internationally across the globe. This includes customs forms, import and export duties, and stricter regulations. It will become a more complex process than the current situation. Therefore, it’s important to have a strong international shipping strategy.
Even British companies that sell globally could face new regulations with shipping and trade. At the moment Britain trades with the rest of the world as an EU member. If the UK reverts to WTO terms, some 40 existing trade agreements between the EU and dozens of countries would no longer apply to the UK. We therefore don’t know what the new trade deals will be and how the UK will handle trade with countries across the globe. This could mean restrictions or prohibitions with new trade barriers like tariffs and import duties could arise.
Foreign companies selling into Britain and within the EU
Global companies that sell into both the UK and the EU will need to adjust their shipping and selling policies. It’s most likely the UK will have separate shipping and selling rules from the rest of the EU. That means the two will need to be dealt with separately.
Ecommerce stores from EU nations that also sell products into the UK will also be hit. The disappearance of the freedom of movement of goods and people could mean big changes to operations. The UK will likely be considered as a non-EU nation, so the same rules will apply (more on this later in the article).
Shipping to the EU after Brexit (and vice versa) in the future will depend on the future deal determined between the two. However, no matter what the future will look like, it’s important to prepare a strong international shipping strategy. This will help you be ready for any Brexit scenario. And an added bonus – it can help you ship to anywhere else across the world!
If the EU and UK determine that the freedom of movement of goods should end, then UK goods will need to be treated with the same rules which apply to non-EU goods. All imports and exports crossing between the two entities will act as international shipments, and the requirements for international shipments will become mandatory.
If you currently either send goods from the UK to any EU country, OR if you send goods from an EU nation to the UK, it’s a good idea to formulate a strong international strategy to prepare. The most important things to consider are:
- Custom forms
- Custom costs
- Shipping costs
Custom declaration forms:
When the UK formally leaves the EU and the transition period is over, it’s good to know what customs forms you will need to ship to countries within the EU (or to ship from an EU nation to the UK). If the UK is considered a non-EU country, there will be no free movement of goods between the two entities, and if you don’t complete customs forms correctly, your package could be delayed or blocked.
It could be possible that a Commercial Invoice, a CN22 or CN23, and a Certificate of Origin are required when you deliver your products from the EU to the UK, or vice versa.
If you’re not familiar with these forms, then check out the following:
Customs declaration CN22 | Customs declaration CN22
A CN22 is needed when sending goods weighing up to 2 kg and up to 425 euros in value. It should be the CN22 customs declaration to the outside of the package.
Customs declaration CN23 | Customs declaration CN23
A CN23 is needed when sending goods weighing over 2 kg and/or more than 425 euros in value. The CN23 declaration is larger than the CN22 declaration and must be attached to the outside of the package in a clear envelope. You will need to include a second copy inside the package as well.
Want to know more about the CN22 and CN23? Read our complete guide now.
Despatch Note CP71
This is a mandatory document that accompanies the CN23 declaration.
Commercial Invoice | Commercial Invoice
A Commercial Invoice needs to be attached to any commercial shipment going abroad. The commercial invoice is a mandatory customs document which includes information about the contents of the package and any agreed terms, such as who pays the customs charges (the Incoterms).
Normally you need to attach three copies of the Commercial Invoice; one for the country you are exporting from, one for the country you are sending to, and one for the recipient. Attach two copies to the outside of the package in a “packing list envelope”. Then we advise putting one Commercial Invoice inside the package for your customer.
Certificate of Origin (CO)
The Certificate of Origin shows the origin of the product and therefore certifies in which country a product was made. This is required when importing goods from a number of countries outside the EU. A CO can be requested from the Chamber of Commerce website, and you can check whether a CO is required for your shipment using this link.
Brexit & Sendcloud
Use Sendcloud with DHL Express or UPS to automate the process of your customs forms. DHL’s Paperless Trade allows you to electronically send customs documents. This eliminates the need to print and physically attach the forms to your shipments. Through Sendcloud, the Customs documents will be automatically forwarded digitally to the carrier. Enter the information for your customs documents and print the label then your form will be forwarded automatically.
If you’ve never shipped outside of the EU, then you might not be aware of Incoterms. But they are necessary for international shipments. So if the UK becomes a non-EU country with the same shipping rules, you will now need to use Incoterms to ship from the UK to the EU and from the EU to the UK.
Incoterms (International Commercial Terms) are a set of standardised international arrangements for transporting goods. They serve as a contract between seller and buyer and describe all tasks, risks and costs associated with the transactions of goods. They were developed to avoid misunderstandings.
It’s important to choose which Incoterm(s) you will use for which products and to which countries before you start to ship internationally. Incoterms are used to:
- State who is responsible for the cost of the shipment, insurance, import and customs costs of the shipment.
- Determine who is responsible for the transport and where to.
- Allocate when the risk and costs of delivery pass from seller to buyer.
Customs charges and other fees
With the eradication of freedom of movement of goods, there could be an introduction of customs charges and other fees when shipping between the UK and the EU.
If this arises, make sure to clearly communicate the situation to your customers. You will need to decide whether you will absorb these costs, or whether your customers will need to pay for them. This is why it is vital to determine your Incoterms, as they will stipulate who is responsible for these costs in your policies.
Whatever you choose to do, make sure to keep your customers informed. If your chosen Incoterm means the customer will face custom or transport fees, make sure they are aware of this. If your customer is not aware, they could refuse the package. This means you could end up paying for the custom costs and the return of the package.
Current EU law protects EU citizens’ right to return a product within 14 days. However, it isn’t mandatory to offer returns to products shipped outside of the EU. So if you’re a business on either side, it will now be up to you to decide what you offer your customers.
However, our advice remains the same for any international shipment: It is a customer-friendly strategy to offer your customers the option to return if they want to.
Of course, offering returns will not be as easy as before. If you do decide to create a returns strategy, then you could choose from the following options to help your process:
- Outsource your returns to a local partner: Customers can return cheaply to their own country, then the partner can handle the return to your warehouse.
- Collaborate with an international logistics party: Make ready-made labels for the return shipments by making price agreements for both shipments and returns.
- International return solutions: Choose a party that offers a complete return solution on an international level.
Again, no matter what you choose, make sure to clearly communicate what you decide in your Returns Policy so they are aware of the terms they need to follow, and any costs they may incur.
Learn more about international shipping in our extensive Whitepaper.
Taking proactive steps to prepare for a post-Brexit world can help manage the impact. Preparing will help put you in front of your competitors and avoid any disadvantageous situations. As well as initiating a strong international shipping strategy, consider the following to continue ensuring your ecommerce store can keep operating effectively.
1: Check Suppliers
Arguably the most important thing to consider is to check your supply chain. Currently where do your products – or parts/materials to make your products – come from? If you predict Brexit could impact your supply chain then begin researching alternative or extra suppliers. This way you avoid any complications like tariffs or custom changes post-Brexit.
2: Stay Informed and Update Policies
Keep informed with the latest news to better assess the impact Brexit will have. Although there’s still uncertainty, keeping track can help you judge the current forecast and help you prepare.
You will need to update shipping and tariff policies to reflect specific Brexit details. Of course, it is not currently possible to tailor new policies as Brexit is not finalised. But beginning to contemplate draft policies will help get updates ready once things become concrete.
Train staff with these changes in advance to avoid bottlenecks in operations once things change. Pre-warn customers that things are going to change so people aren’t caught off-guard.
3: Currency and Shipping Options
Offering multiple currency options can help reduce any Brexit-induced confusion. This can help accommodate online shoppers who have access to use more than one currency.
Offering several shipping options can also help accommodate both UK and EU customers. Giving customers the choice will help to push users through the checkout process.
As mentioned, many of the new changes – shipping, supply chain, VAT – could result in needing to change prices. Whether deducting VAT or increasing the price due supplies costing more, make sure to prepare this in advance to reduce risks of loss.
As soon as the Brexit negotiations are complete, we will have more concrete knowledge of how trade will continue between the two entities. The required Customs documents will become known, and you can find these on the MADB (Market Access Database).
If you have any further knowledge or advice, then please leave a comment to share with the rest of the community.