The EU Commission has stated that the new EU VAT ecommerce regulations will now apply from the 1st of July 2021 rather than the 1st of January 2021 giving member states and businesses more time to prepare, but should not be seen as a “breathing space” by postal operators.
Martyn Noble, CEO of Hurricane Commerce says the EU VAT ecommerce regulations package is just one of a plethora of new regulations hitting or about to hit the parcel and packet industry.
Other major events impacting cross border ecommerce trade include:
- The US Stop-Act which requires the provision of valid electronic advanced data for custom clearance purposes;
- Norway, Australia, and New Zealand implementing a solution that is comparable with the EU VAT solution with the likelihood that other countries will follow suit;
- The UK having advised that the VAT low value threshold will be removed on Brexit day, currently set for 2300 hrs on the January 31 2021. As of February 1 2021, EU countries will be treated as third countries, therefore requiring import and export as per all other third countries;
- Some countries have already gone their own route on
VAT low value thresholds. Examples include France (€1), UK (£15), Cyprus (€17.05), Denmark (DK80) and Sweden (€0);
- As of March 2021, all posts will have to comply with the requirement to provide an Entry Summary Customs Declaration when importing packets and parcels into the EU and the UK. Postponement of the introduction of ICS2, the system that is supporting this, is not expected;
- A significant increase in international distribution costs resulting from the new international (UPU) agreements that regulate these costs. Estimates are that Terminal Dues will increase on average between 20% and 30% in 2020. Expectations for 2025 are between 165% and 300% depending on country of origin.
“Posts will need to adapt to this new reality if they want to maintain their current 70% market share in the distribution of cross border ecommerce parcels and packets.
The Coronavirus pandemic has triggered a rapid growth in domestic ecommerce trade and a temporary slowing of cross border trade due to the closure of borders and the lack of air transport capacity.
We expect the global parcel delivery infrastructure will be restored quickly because of the need to make up for the current economic losses. Cross border will grow even faster by leveraging on the new online demands.
Postal operators that are not already preparing for the revival of cross border ecommerce will most certainly miss the boat. It is vital they seize the opportunity created by the delay in implementing the VAT ecommerce package.”
– Martyn Noble, CEO, Hurricane Commerce
Martyn says that elements that will support the future position of postal operators in the international ecommerce arena will include:
- The development of a service offering that supports the introduction of new VAT and Import Tax changes. Efficient full landed cost concepts based on delivered duty paid solutions will be an absolute requirement from an operational and consumer satisfaction perspective;
- A valid and complete pre-alerting (Electronic Advanced Data) of postal consignments supporting access to fast track and efficient customs solutions. The provision of EAD is already an obligation for some destination countries like the US and will become the standard for all postal operators in the exchange of packets (mail parcels) in 2021;
- Shipping compliant consignments by performing standard prohibited, restricted and denied parties checks avoiding customs spot checks, blockages and fines.