Against the backdrop of months of speculation about what post-Brexit trade could look like, retailers and shoppers are still getting to grips with the new rules and how it affects business at a practical level, whether you’re a business selling to customers or a consumer just trying to find the best – and easiest – deal. The start of the year showed that firms were struggling with the new rules with a spill over effect for consumer behaviour and sentiment. Latest ONS figures are reassuring and indicate that trade is starting to bounce back given the reported 46.6% increase (£3.7bn) in exports to the EU.
This is encouraging news in a market more hungry than usual for positive news. But there’s still a continued need to provide retailers with more support and education on how these changes affect their business models and what they’ll need to do to keep goods moving as the trade landscape continues to evolve.
Consumers, too, need support to understand what to expect when it comes to post-Brexit deliveries. Accustomed to a more streamlined process that they want to see remain fast, hassle-free and low-cost, customs and border control changes which have resulted in increased and, for those not properly informed by the seller, unexpected fees. Expectations need to be managed, information needs to be shared and changes need to be communicated simply and clearly. The challenge isn’t small but the opportunities remain large, forcing a healthy focus on how to keep forward momentum.
Another milestone year
Alongside the changes brought about by Brexit, it’s impossible to ignore the indelible mark the pandemic has left on the retail and e-commerce sectors. Years of growth have been packed into little over a year. Change has not just been great, it’s been faster than anyone could have possibly predicted. Challenges and complexities are impacting businesses big and small in an increasingly competitive market. Many are linked to the lurch to just how much shopping has gone online as quickly as it did. With an end to the pandemic in sight, research suggests that customer behaviour is not likely to go back to the old normal as quickly as the pivot to shopping online occurred.
Our recent Smart E-commerce Report shows a 50% rise in the number of European shoppers that intend to do ‘majority of their shopping online. These changes may seem daunting, but they present a huge opportunity. Retailers who have successfully pivoted their business model towards e-commerce are poised to take full advantage. For those who thought 2020 was a game changer, 2021 is here to remind us that the transition isn’t restricted to a calendar year.
The implications for retailers
The significant levels of paperwork and administration that retailers now have to manage when shipping is contributing to increased costs and adjustments to supply chains. Carriers are also incurring additional costs to process cross-border shipments and additional customs entry requirements. These fees account for brokerage operations that help ensure shipments meet the new rules and requirements, allowing them to clear customs.
The reality today is that while most tariffs have been eliminated, fees are dependent on the proof of origin of the goods. If you are importing goods from outside the UK and shipping them to the EU, businesses do not benefit from the no-tariff deal.
To benefit from preferential tariffs, retailers must hold proof that the goods comply with the rules of origin. This means a product will need to meet the relevant requirements to be classed as originating from the UK. They’ll need to include a certificate or proof of origin of goods in or with the commercial invoice or other commercial documentation (excluding a bill of lading). It’s worth noting that businesses can self-declare the origin of goods for the first year but that proof will be required in future.
Get familiar with the commercial invoice
For all goods moving between the UK and the EU, retailers need to declare the goods they’re sending by completing a commercial invoice and follow the rules of the importing country. Supplied by the retailer, the commercial invoice (or, in cases where imported goods are not sold into the destination country, the pro forma invoice) is a requirement for all non-document shipments and is used for importation control, valuation and duty determination. Retailers are responsible for the completeness and accuracy of all information about the shipment and we encourage them to provide as much detail as possible to prevent delays and additional costs.
Navigating the new rules
If retailers haven’t already registered for an Economic Operator’s Registration and Identification (EORI) number, they must do so in order to trade between the UK and the EU. Just one is needed per legal entity (not per country) and they can then use the number for customs in every EU country. Without an EORI number, goods won’t clear customs and will be held until the complete paperwork is supplied, which could mean significant delays and additional charges.
Noting changes at the VAT level is also important – especially from a customer perspective. Retailers selling goods valued at or below £135 into the UK are now responsible for collecting and paying UK VAT for these shipments, with monies collected at point of sale and paid to HMRC through the UK VAT registration. However, for goods sold into the UK valued above £135, the importer remains responsible for paying the UK VAT. This can be paid by the importer via postponed VAT accounting or through the customs declaration.
Understanding the experience of your customer and the rules they face helps unveil an essential ingredient to success in the current trading environment: Transparency. It’s also the most effective way to avoid something that shoppers don’t want anywhere when it comes to the shipping of their goods: Surprises. Ensuring that processes and costs are clearly visible in transaction and customer communications is not optional (it never was, but especially not now!). We also encourage retailers to create a dedicated Brexit FAQ page to give customers clear guidance on what to expect and ensure this across social media.
No one debates the fact that Brexit is changing the way retailers operate. But with the right information, support and tools, they can navigate this new landscape – and keep their customers informed – and be empowered to keep goods moving. Happy customers who are protected from surprises during their shopping experience are good for the bottom line.
Oliver Horne, E-Commerce Marketing Manager, UK & Ireland at UPS