It is a wonderful thought that a mere 25 miles across the sea, there is a market of 500 million people, many of whom would love to purchase your business’s product or services.
And thanks to the Internet, if you want to trade in say, Austria, you no longer need a physical presence out there.
However, now the UK is no longer part of the European Union (EU) or the European Economic Area (EEA), if you plan to sell your goods and services to the Continent, you must understand the new rules regarding exporting, commercial contracts, and tax.
This initial transition has proved challenging, especially with Coronavirus still around and causing issues regarding supply chains, the availability of lorry drivers and customs personnel. However, new trading conditions are starting to bed down.
In this article, we set out strategies designed to minimise Brexit impact on your eCommerce business. But first, a quick overview of the challenges.
Key issues facing online businesses exporting and importing to/from the EU/EEA
The UK-EU Trade and Co-operation Agreement (TCA) sets out the framework for the relationship between the two parties going forward. The deal does not mean the end of Brexit negotiations - these will continue for many years to come. However, the TCA provides a framework from which the UK and EU can cement a positive trading relationship.
The TCA provided a boost to business confidence and supply chains, with both parties agreeing that there will be no tariffs or quotas on cross-border trade concerning goods transferred between the UK and EU. Furthermore, products that are partly manufactured in Britain and partly in an EU Member State will also be free from tariffs when the completed product is exported from the UK to the EU and vice versa.
You will also be required to pay VAT and customs charges on most imports and exports. As you will see further down, it is these charges, which must be paid by the EU/EEA purchaser (either at the point of delivery or as an added cost to the product), that are causing a big headache for businesses.
Another point to consider is that you will not be permitted to have an .eu domain name as these are reserved for EU businesses. And if you process data from EU/EEA data subjects (which is likely if you are selling goods and services to the bloc) and do not have an office or other form of base in an EU/EEA Member State you must appoint a representative in an EU/EEA Member State.
So, how can your eCommerce businesses minimise the impact of Brexit? Below are five action points:
- Apply for Authorised Economic Operator (AEO) certification
- Decide who will pay additional customs charges
- Update the terms and conditions on your website and your commercial contracts
- Look for alternative providers
- Consider establishing an EU-based subsidiary
1. Apply for Authorised Economic Operator (AEO) certification
If your business is actively involved in the international supply chain, consider applying for Authorised Economic Operator (AEO) certification. This can help you avoid some of the customs delays brought about by Brexit.
The AEO scheme allows you to benefit from streamlined customs procedures and fast-tracked shipments. You will also gain a ‘trusted trader’ status that is highly valued by many international consumers.
2. Decide who will pay additional customs charges
There are two routes to paying additional customs charges:
- “Delivery Duty Paid” (DDP) -where you will pay customs charges for your customers, or
- “Delivered Duty Unpaid” (DDU) -where your customers pay any additional import costs.
The right method for your eCommerce business and its profitability will depend on your internal operations and your customers.
3. Update the terms and conditions on your website and your commercial contracts
To minimise the impact of Brexit on your eCommerce business, it is vital to update your terms and conditions and commercial contracts to reflect any changes concerning shipping, customs charges, delivery times, returns, and VAT. For example, if an EU customer wants to return goods to you, they will have to complete the customs declaration forms correctly, unless you provide a commercial invoice your customers can use when returning items. Don’t risk losing goodwill by ‘surprising’ your customers with this - make it clear on the receipt how returns can be made.
A Commercial Solicitor can draft clear, concise terms for your website and commercial contracts so you can be confident that your customers and suppliers understand how the changes affect your trading relationship.
4. Look for alternative providers
It is also important to establish where your materials are being sourced, manufactured, and stored. It may be more cost-effective to have your products manufactured in the UK as opposed to an EU/EEA Member State. There may also be other international providers that suit your needs better now the UK has left the EU.
5. Consider establishing an EU-based subsidiary
Many businesses have set up operations/fulfilment centres in the EU in order to circumvent all the above issues. This may be the best solution, especially if you plan to increase your growth within the EU/EEA and/or many of your materials are sourced from the bloc or your product is manufactured on the Continent.
Worth over £220 billion, the UK is the third biggest eCommerce market in the world and in 2020, UK businesses saw a 57% increase in global e-commerce sales.
As the demand for online shopping continues to grow, the UK and the EU are likely to negotiate agreements to smooth the process as this benefits everyone. In the meantime, talk to one of our expert Commercial Law Solicitors
about minimising Brexit-related disruption to your eCommerce business’s growth strategy.
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