Brexit Tips: How to Handle Post-Brexit Returns

As of January 1, 2020, the United Kingdom is no longer part of the European Single Market. At the time of writing, it looks like we are heading for a No-Deal Brexit, which means quite a few things are going to change for e-commerce with the UK. In short: there will be additional customs checks and extra regulations. Not fun. That is why I have listed a few things to make it all a bit clearer, because Brexit is certainly not a piece of cake.

Below, I discuss a few key concepts that are important for your e-commerce business. Most of this you (hopefully) already know. However, my assessment is that you do not yet have a good answer for what you are going to do with the return flow from the UK. In the final part of this article, you will read what we have come up with for that.

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The topics covered:

• EORI number 
• INCOTERMS
• Commercial invoices
• Prices on your website
• Last but not least: Returns from outside the EU

Apply for an EORI number

If you do not yet have an EORI number and you want to continue doing business in the United Kingdom after December 31, 2020, it is high time to start the application process. The application usually takes 1-2 weeks, so you have no time to lose. Briefly: an EORI number is an identification number for declaring goods and applying for permits with customs. With an EORI number, you save a lot of time and money because customs can efficiently exchange your data with other countries within or outside the EU. You also need an EORI number if you have declarations in the UK handled by a third party, such as your freight forwarder or a British tax consultant.

Use this link to apply for your EORI number.

Review your INCOTERMS

By agreeing on an Incoterm® with your customer, you know who is responsible for arranging transport, who is responsible for the costs, and who bears the risk of damage to or loss of goods.

Your English customers will likely ask for DDP delivery terms because they have no experience with customs formalities themselves and do not want any hassle at the border. With DDP, you provide local delivery in the UK and clear these goods through UK Customs. This has tax implications for you in the UK, and these costs are borne by you as the e-commerce business.

Delivered Duty Paid (DDP) in brief:

• Obligations lie with the seller
• Arranges and pays for transport to the destination
• Responsible for customs clearance and payment of import charges (import duties and VAT)
• Bears the risk of loss and damage
• Best customer experience for the British consumer

Read more about DDP on the KVK website.

Learn more about commercial invoices

In the event of a no-deal Brexit, goods traded between the United Kingdom and the EU will be subject to the same requirements as goods sent to countries like Japan or the United States.

Every shipment requires a commercial invoice containing information for customs authorities. This allows the authorities to determine whether goods may be imported into or exported from a country and what checks, if any, are required. The information is also used to determine import duties and taxes.

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Difference between CN22/23 & commercial invoices

There is often confusion about the difference between CN22/CN23 forms and the commercial invoice. In short: a commercial invoice is always required for all e-commerce shipments sent outside the EU. Strictly speaking, a CN22 or CN23 form is only necessary if you are sending an e-commerce shipment via a postal network (i.e., in an envelope with a stamp). However, as a rule, it is wise to also include the CN22/CN23 for parcels sent via a parcel network (such as DHL or UPS). The more complete the documentation, the lower the risk of delays at the border. Finally, the difference between CN22 and CN23 is clearly explained on the PostNL website.

When generating your commercial invoice and/or CN forms, it is important to be careful with the classification of your products (the so-called HS code). In preparation for Brexit, it is therefore important to take inventory of the HS codes used in your product range. You can easily look up HS codes via the Dutch Customs website. ‍

Show the correct prices for British customers

After Brexit, European products are exported to the UK at a 0% rate. From that moment on, you will be dealing with the British import and tax system. You calculate VAT (the UK equivalent of BTW) based on the product value (excluding VAT, of course) and any import duties that may apply to your products. To show the correct price to British visitors on your website, it is advisable to find out whether your products are exempt from import duties and then apply the correct UK VAT rate (20%). In addition, you may face additional warehouse costs for administrative tasks. Think, for example, of printing the physical commercial invoice document and pre-registering with the carrier.

Important to know for shipments with a value higher than £135 

Customs clearance fees are charged by UK Customs when a declaration is made. For business shipments with a value of up to £135 excluding VAT, you pay the UK tax authorities. For shipments with a higher value, import duties may also be charged.

Returning shipments from outside the EU

When one of your UK customers wants to return a cleared product, they are strictly speaking responsible for it themselves. In practice, returns at the border rarely cause problems. But don't celebrate too soon: shipments can still be held up by customs. This can cause significant delays. In some cases, local customs may even contact the consumer directly. A process you don't want to expose your customers to (if you value them). That is why it is important that you set up your post-Brexit UK returns process properly before it comes to that. There are at least two good routes to take regarding the returns process, the pros and cons of which I have listed below.

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Option 1: Use a UK return address

Pro: The customer can return items domestically and avoids any administrative work and/or communication with customs

Pro: Domestic returns are often cheaper than cross-border returns

Con: Lead times are often long (7+ days)

Con: You need to onboard and maintain a specific partner in the UK to handle your returns flow

Con: Tracking for a consolidated returns flow is usually poor or non-existent

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Option 2: Send returns cross-border to the Netherlands

Pro: Short lead times allow for quick customer resolution, which boosts NPS (2-3 days)

Pros: End-to-end tracking is available, giving you constant visibility into the location of your products

Cons: The price may be higher than option 1

Cons: Without the right preparations, you may burden your customers with administrative tasks

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The golden mean: tracking, short lead times, and no administrative work for the customer

Returnista wouldn't be Returnista if we didn't have a smart solution for cross-border returns. Our focus is on the following: end-to-end tracking, short lead times, competitive rates, and, above all, a smooth return process for the consumer. Starting in the new year, we are introducing an automatic commercial invoice generator for all shipments outside the EU. For convenience, we call it the "Brexit tool." When a customer registers a return from outside the EU—for example, from the United Kingdom—they will receive a custom-made commercial invoice alongside their standard return label. Webshops that handle their international returns through Returnista significantly reduce the risk of customs disputes. And perhaps even more importantly, your non-EU customers can shop with peace of mind, without being burdened by administrative paperwork. Pretty handy, right?

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A quick summary:

• Obtain an EORI number
• Review your Incoterms and determine the appropriate conditions for your business
• Discuss automating commercial invoices and CN22/23 forms for outbound shipments with your freight forwarder, fulfillment center, and/or carrier
• Ensure your pricing is adjusted and compliant with UK requirements
• Research the return flow you can expect from the UK and make an informed choice

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