With the dust settling on Brexit’s impact on UK and EU shipping, now’s an appropriate time for us to revisit topics like customs after Brexit and what businesses should consider when shipping to the EU.
This short guide pulls together official information and best practice to explain clearly what you need to do and how to do it.
Any UK business that’s shipped anything to the EU since 1 January 2021 has likely experienced one or more of the following:
- More paperwork
- Longer delivery times
- Customs charges and duties
- VAT headaches
- Misinformation online or outdated guidance
Dealing with Brexit shipping varies from business to business. Some have abandoned returns policies; others have cut off European customers entirely.
Just because something’s new or a little more time-consuming doesn’t mean you need to abandon it for your business. Once you understand the basics, you can focus on the trickier specifics that need a little more energy all the while knowing that you’ve made the majority of your European customers happy by staying open for business.
There’s no one-size-fits-all for Brexit trade but there are fundamentals that every business has to follow as we outline.
The Basics of Brexit Shipping
All businesses need to provide the following information for items to pass smoothly through customs.
- UK EORI Number
- The importer’s EORI Number (if sending to another business)
- Sender and recipient’s name, address and contact details
- Item details (quantity, weight, value and description)
- Country of origin
- Harmonisation code (typically an eight-digit number)
- Recipient VAT number (if applicable)
These specifics are non-negotiable and missing information will lead to delays, fines and additional duties, or failing to clear customs entirely.
Collectively this information tells the customs professional what an item is, its value, where it’s come from and who it’s going to.
For example, an EORI number helps identify the sender while harmonisation codes are in place to standardise how customs operate across the world.
Getting an EORI number
Gaining an EORI number is simple and applying for one takes minutes via the UK Government’s dedicated portal at gov.uk/eori. Everyone from sole traders to global enterprises require an EORI number if you are sending an item to the EU commercially.
Your EORI number should start with the letters GB. If you are located in Northern Ireland, things are slightly different as we explain later.
Harmonisation codes can be searched for at gov.uk/trade-tariff. Simply describe what the item is and its code, VAT rate, duties and other information comes up.
Prior to Brexit, businesses didn’t need to worry about customs paperwork for items shipped to the EU. Now they do.
Forms vary slightly depending on your courier.
- Royal Mail and DPD use two types – a CN22 or CN23 form
- DHL, Fedex and UPS use an EDI form
The CN22 form is used for items with a value up to £270.
CN23 forms are for items valued above that £270 threshold and require additional accompanying paperwork such as a commercial invoice, appropriate licence or necessary certificates.
EDI forms operate in the same way.
Make sure you know when a commercial invoice is required on your shipments. Some countries accept electronic commercial invoices, others do not and expect three copies to be included. It’s often better to be safe than sorry.
If using ShipStation to fulfil international orders, our customs declarations are equivalent to commercial invoices and our solution automatically populates all the information required.
EU Import VAT
VAT is where things become more complicated.
Prior to Brexit, UK businesses didn’t need to worry about EU import VAT on exports to the European Union. Since Brexit, VAT is applied.
This is different to UK VAT. Currently UK businesses only need to collect VAT on sales after they surpass a £85,000 threshold. These domestic limits do not change, though all businesses should ensure they understand what their UK VAT obligations are.
EU import VAT varies from country to country and its collection depends on how you operate as a business, the value of the item you are sending, and the item’s country of origin.
It is important that you seek official tax advice when necessary to ensure your business is charging VAT appropriately and meeting its legal requirements in every country you sell into.
Some Member States do have different thresholds to those outlined in the next section so do check where appropriate what the current rate is if you are going to collect EU import VAT from customers.
Do I need to pay EU Import VAT?
- First, is your item valued less than €22?
Your item is not subject to EU Import VAT.
This threshold may change after 1 July 2021 as currently there are low value consignment relief thresholds in place.
- Is your item valued between €22 and €150?
EU import VAT is due.
This is often charged at 20% but can vary country to country.
- Is your item valued more than €150?
EU import VAT is due, and additional import duties may apply.
- Additional excise duties
Important: If the item is alcohol, perfume or a specialist product additional excise duties may apply no matter what the item’s value is. Always check first.
How do I pay EU Import VAT?
There are two ways. One option is often simpler for you, the seller, but can lead to extra charges for the customer. The other benefits the buyer and ensures there are no nasty surprises for a customer.
- You leave EU import VAT unpaid
Your customer sees your item’s price without VAT. You complete the necessary paperwork and ship. The courier charges the recipient the EU import VAT and releases the item to them.
While seemingly easier for you, this can lead to delays at customs, customers refusing to pay and therefore items being stored at a cost or shipped back to you, and additional accounting.
Check whether you need to register for tax in the countries you are operating in.
- You collect EU import VAT and pay the courier
As before, your customer sees the item price, but this time VAT at the appropriate rate for that country is added and collected by you.
You choose to pay the VAT and other duties to the courier. The buyer pays nothing more.
This is often called Delivered Duty Paid (DDP).
Delivered at Place (DAP) or Delivered Duty Unpaid (DDU) is what occurs in scenario one – where to release the item, the customer is asked to pay EU import VAT.
Again, check whether you need to register for tax in the countries you are operating in.
Some marketplaces do provide shipping programmes that simplify this process further by paying EU import VAT on your behalf, although using those services d come with their own pros and cons – for example, shipping can be more expensive and delivery times are sometimes slower.
Northern Ireland has different rules.
If you are located in Northern Ireland and shipping to the EU, you require an additional EORI number starting with XI.
Duties do not apply if you are shipping from Northern Ireland to the Republic of Ireland. The shipment is treated as “intra-community” and not subject to extra charges.
Northern Ireland to Great Britain exports are considered domestic shipments even though they require customs information.
Extra Tips for Brexit Shipping
For many businesses, the above might be as complicated as things get and while it can appear daunting once you understand what is expected of your business, adjust to new systems and check with a tax professional, things become easier as time goes on.
- Be detailed – it’s better to add too much information than not enough
- Be aware – additional measures may prompt carriers to increase pricing, monitor the situation
- Be truthful – specifying gift on a customs form is illegal
- Be considerate – the more complicated you make life for customers, the less likely they will buy
- Be patient – shipping will take longer than before Brexit, communicate that carefully
ShipStation makes EU shipping easier by managing much of the new administrative procedures but even if you decide to go it alone, remember that Brexit has happened and now is the time to act. Brexit related EU import VAT, customs charges and changes to how you ship items are here to stay.