In a post-Brexit Europe, selling online means facing a changing scenario and the risk of running into unpredicted obstacles
While Brexit has become an established element of the world we live in (it was initiated in 2016), the shockwaves it sent across Europe continue to affect and impact our daily lives. The UK has always been a big player in the international community of European countries and, therefore, reevaluating its relationship with the EU member states is incredibly complex.
Firstly, breaking down such well-built and deeply-rooted international relationships, which have united communities and markets across borders for a significant amount of time, is simply not feasible. Neither is it possible to ignore the situation and manage the movement of people and goods as though nothing has changed. Many UK e-commerce stores are used to selling cross-border to other European countries and, equally, Europeans regularly purchase from the UK, using marketplaces or directly to consumers. This strong link can be demonstrated by the fact that 48% of UK exports go to European countries.
The consequences of this tricky situation have also had a significant impact on the world of online sales. So what are the main challenges when selling online from the UK to countries in Europe?
A tricky situation
A number of factors are responsible for interrupting the ease of online sales from the UK to Europe. Less freedom of movement of goods is one of the main factors, although Brexit might not be completely to blame. It is hard to say with precision exactly what impact Brexit has had, due to the UK exiting the EU at a time when the COVID-19 pandemic broke out.
Legally speaking, although the Withdrawal Agreement set out to guarantee regulatory continuity, it is probable that both legislative systems will go their own way with time: increasing the points of distance and making new agreements necessary. Inevitably, this also has an effect bureaucratically, having a decisive impact on the fluidity of consumer-business relations.
As a result, it is necessary to identify how the ambiguity and cumbersome nature of the changed international scenario will take effect.
The VAT issue
VAT cannot be applied to products sold in Europe exactly as it is in the UK. Conversely, it has to be calculated according to the country of destination. As a result, the VAT net price must be declared in order for it to then be calculated and added to the price of the product at the time of sale. Until 2021, it was necessary to register in all the countries that sales were made in. However, this changed when the IOSS (Import One Stop Shop) was introduced, making the process easier by enabling sales in all European countries because of only having to register with one of the member states. With merchants being able to rely on marketplaces, the issue is even more straightforward, as they can also rely on the platform’s intermediation for the calculation and application of costs at the time of sale.
Nevertheless, if a transaction is higher than the value of EUR 150, other regimes aside from the IOSS number come into place, such as DDP (Delivered Duty Paid) and DAP (Delivered at Place). With DDP, the seller takes on all taxes and charges. These costs, which cannot be charged in advance, must be charged at the time of sale. However, in the case of DAP, the additional costs and fees go to the buyer, who could incur unexpected expenses following the purchase. Although this can be advantageous to the seller, as they have little liability, it can affect customer loyalty in a negative way.
European and British regulations are currently fairly aligned when it comes to product regulations – labelling, quality certificates, supply chain – and this may not change over time. The European Union is especially interested in consumer protection and UK merchants will need to to keep themselves up-to-date with any new rules and laws concerning this if they are looking to do cross-border e-commerce. The same goes for data protection, though on this front the legislative systems are currently quite compatible. As things currently stand, the General Data Protection Regulation (GDPR) has been incorporated into British law, but this does not mean that a regulatory gap will not arise later down the line.
E-commerce companies using Amazon as an intermediary to sell their products is another matter entirely. This is not only illustrative of the current situation, but also an unavoidable practical problem, given that Amazon is Europe’s marketplace of reference and lots of transactions take place on its platform. The issue, on this occasion, is that Amazon is no longer going to manage the transport of goods across the border between Europe and the UK. The Fulfilled by Amazon (FBA) logistics service operating in Europe is not the same as the one that handles shipments in the UK anymore. Merchants selling cross-border will now be forced to deal directly with customs clearance, and then return to outsourcing the shipment to Amazon’s logistics.
Navigating uncharted waters
The future of cross-border e-commerce between the UK and European countries is uncertain. We are accustomed to selling and buying products as though shipping comes from within our own borders, and lots of UK merchants have a solid customer base in more than one European country. So as not to damage or break down such relations, a number of e-commerce retailers are looking to open locations in Europe. Whether you choose to adapt your business model to the new configuration of international business relations, or develop a strategy that could mean dividing the company – both will involve navigating unknown territory.
A key part of the issue is to have as clear and up-to-date an idea as possible of the regulations and tariffs you must adhere to, in order not to incur penalties or waste unnecessary energy. With this in mind, it is recommended that retailers use Merchants of Records such as Go Global Ecommerce, who are equipped to handle the more cumbersome and complex aspects of what is ultimately a risky and challenging scenario. This, in turn, stimulates a search for creative solutions and boosts expansion into other markets.