August 12, 2020 Guest opinion piece
On the 14 July, Amazon sent a message to merchants selling within the European Union about the changes to fulfilment by Amazon because of Brexit.
The UK officially left the EU earlier this year and entered a transition period. The transition period is set to end on the 31 December 2020, where cross-border trade between the UK and EU will change dramatically.
The notice sent out by Amazon provides enough information for sellers to start preparing their supply chains and adapting their operations to cope with life outside the EU.
Here are the top five things to think about to prepare your Amazon business:
1. The European Fulfilment Network (EFN) will no longer be fulfilled between the UK and EU.
Businesses currently using the EFN programme have always been able to send goods cross-border to customers around the EU. This was covered under the distance selling rules, where sellers could ship their goods cross-border using the local rate of VAT, until set thresholds were exceeded within the calendar year.
Amazon has announced that this will no longer be available after the Brexit transition. This means that those thresholds cannot be used when selling between the UK and EU. Everything will be seen as an export from the UK and an import into the EU. If sellers wanted to continue to use Amazon’s fulfilment services to sell to customers in the European Union, they will need to move their goods into a warehouse in mainland Europe. A VAT registration would then be required in the country where the goods are held.
2. The Pan-EU Programme will no longer include the UK
This impacts a few different things for sellers. Firstly, sellers can no longer send products into the UK fulfilment centres for distribution across the EU. The UK will be removed from the 7-country fulfilment programme. Amazon has told sellers that they will have to import goods into the other countries that are a part of the Pan-EU programme, which they will then distribute their products from.
This will change sellers’ typical supply chains. It means that you will have to look at importing goods into the UK to have access to UK customers but also must import directly into the EU to access the Pan-EU programme. This will increase logistics costs for sellers and will give them more responsibility for managing inventory levels in multiple jurisdictions. Additionally, duties and import VAT will be charged twice, with import VAT being reclaimable upon filing the VAT return.
3. UK businesses may require a fiscal representative when registering for VAT
A fiscal representative is a local representative who is jointly and severely liable for the VAT owed by a non-EU based business and is required by specific EU countries. Up until Brexit, UK businesses were able to register for VAT directly with the tax authorities. After Brexit, UK businesses will need a fiscal representative to continue complying locally. Countries such as Poland and Italy will require these additional assurances and therefore, will create extra fees and/or bank guarantees that need to be factored into your business’ cashflow.
4. A secondary EORI number will be required to import into the EU
When importing into the EU and UK, businesses must use an EORI number – Economic Operator Registration and Identification number – that identifies a business importing goods. By using an EORI number on import documentation, businesses can reclaim the import VAT in the countries where they are VAT registered. Currently, a GB EORI number could be used for importing goods across the EU. After Brexit, importers into the EU will need a local EU EORI number as well as a GB EORI number to import into the UK.
This means if you want to continue to import goods to fulfilment centres in the EU, you’ll have to apply for a second EORI number. When you are ready to get your second EORI, we can help you get registered!
5. Get your stock moving!
Q4 is notoriously busy – but when you add in preparing for Brexit, it is bound to be crazy! Expect to see delays as goods pass through customs borders, extra paperwork, on top of the usual delays of processing stock into fulfilment centres during the lead up to holiday season.
Plan ahead, focus on your best sellers, and move your stock as soon as possible. This will help your business stay ahead of the predicted delays.