No-Deal Brexit Impact on Cross-Border E-Commerce
Following a month-long contest, Tory officials tallied up the tens of thousands of votes by party members, declaring Boris Johnson as the new prime minister of the United Kingdom. Johnson says he wants a new and better Brexit deal with Europe but has promised to leave the European Union at the end of October “no ifs, no buts.”
The current deal proposed by the EU has the UK leaving on Oct. 31st, 2019 but would keep the UK connected to the EU markets. However, so far, all deals proposed by EU officials have been refused by the British government and with the election of Boris Johnson, the likelihood of the UK accepting it has been reduced drastically. “The one reassurance we can give to businesses worried about uncertainty - is that we are going to provide some finality by coming out at the end of October,” affirms Boris Johnson.
If the UK were to leave the European Union without a deal, meaning without any type of agreement about the "divorce" process, they would leave the single market and customs union overnight. Most economists and business groups believe a no-deal Brexit would lead to economic harm, while the Confederation of British Industry added a warning that neither the UK nor the EU is prepared for a no-deal Brexit. Trade would initially have to be on terms set by the World Trade Organization. If this happens, the movement of goods between the UK and the EU will be subject to customs formalities and tariffs will apply to most goods, which could lead to major delays in transiting goods between the UK and the EU.
With the election of Boris Johnson, many analysts are making a no-deal Brexit their base prediction. Therefore, online sellers should consider if they need to prepare for the worst-case scenario of a no-deal Brexit. So, let’s check out how this would look like.
How Brexit Will Affect British Online Sellers selling to Europe
With Europe being the integral export market for the United Kingdom, it is not shocking that Brexit is expected to affect many British online sellers. For example, online-retailer ASOS took the first hit when business transactions and shipments to Europe started experiencing some changes and difficulties in November 2018.
Should there be a no-deal Brexit, the EU’s distance selling tax and customs regime will apply to the UK. Most UK eTailers would be subject to import taxes when shipping into the EU. Each European Union member state will treat packages entering the EU from the UK in the same way as packages entering from other non-EU countries, such as the United States. Consequently, orders equal to or exceeding EUR 22 will be charged with associated import VAT and additional customs duties for high-value orders equal to or exceeding EUR 150, to be paid when the goods arrive into the EU.
Result: UK Online-Sellers shipping into continental Europe should prepare for a no-deal Brexit.
How Brexit Will Affect US Online Sellers Shipping to the UK
In the case of a no-deal, HMRC promised that e-commerce goods entering the UK will still be cleared under the same legal set up that currently exists under EU law. US online sellers will most probably not experience any changes in their cross-border shipping into the UK even in the case of no-deal Brexit, and the current low-value threshold of GBP 15 as well as the import VAT of 20% for orders equal to or exceeding GBP 15 will remain.
Result: US Online-Sellers shipping into the UK should not be worried about a no-deal Brexit.
How Brexit Will Affect US Online Sellers Shipping to Continental Europe
The majority of e-commerce shipments under DDP (Delivered Duty Paid) terms, which move from the US into continental Europe, are currently routed via the UK. With an abundance of cargo airspace from many US airports into London, and a large number of London customs brokers offering cost-effective DDP clearance for e-commerce, London has been the ideal entry and transit hub for moving B2C e-commerce shipments into the EU.
If a no-deal Brexit becomes a reality, routing e-commerce traffic for mainland EU destinations via London will cause difficulties. Incoming goods will have to undergo customs formalities for transiting through the UK and undergo customs formalities again upon entry into the EU, with any tariffs and VAT’s applicable collected at that time. The transportation infrastructure would be largely affected by cumbersome & time-consuming customs formalities and would rapidly be overwhelmed. This could then cause major delays on highways and ports for transportation companies. The only option for truckers bound for the EU would be to queue at the border and wait, which would lead to severe delays and additional cost of delivering packages to consumers. In case of a no-deal Brexit, it is clear that alternatives to the traditional London e-commerce routing are very much needed.
Result: US Online-Sellers shipping DDP into continental Europe should prepare for a no-deal Brexit
Parcll is Brexit-ready, since we do not arrange any mainland European Union trans-shipments via London. We fly all mainland EU e-commerce directly into continental European airports such as Amsterdam, where we operate one of the largest B2C Customs Clearance Hub’s in Europe dedicated to e-commerce. Furthermore, we operate strategically located hubs in other European countries like France (Paris), Germany (Frankfurt) or Spain (Madrid). With Parcll, your shipments into continental Europe are ZERO affected by Brexit.
- By Vanessa Tran
- Oct 29, 2020
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