KnowTheUK

Getting the goods to your customers

PREPARING YOURSELF FOR THE LOGISTICAL CHALLENGES

  • Ranked 4th out of 160 countries in the World Bank’s 2014 International Logistics Performance Index.
  • Relatively small country with a total surface area of 243,610 km2, a logistical infrastructure amongst the best in the world and a multitude of competent third-party delivery partners on hand to help.
  • Largely unchallenging climate and topography.
  • In 2014 almost half (48%) of UK online shoppers made a purchase from an online retailer based outside the country, with prices and availability driving this spending. However, delivery charges and timescales remain the biggest barriers to UK consumers purchasing overseas.

THE UK’S LARGEST CITIES

DELIVERY STANDARDS, SERVICES AND SERVICE TYPES

% of parcels and orders distributed by particular services and service types, May 2014 – April 2015.

In May 2015, on-time delivery in the UK stood at over 94% of parcels delivered. With the exception of the busy Christmas period, where in December 2014 on-time deliveries fell to 85.2%, successfully timed deliveries tend not to stray far from this impressive proportion.

PERCENTAGE OF CONSUMERS USING DIFFERENT DELIVERY METHODS FOR GOODS PURCHASED ONLINE OVER THE PAST 12 MONTHS

Click and Collect as a delivery method has experienced dramatic growth in the UK during the past few years. It is estimated that, where offered, retailers will experience a 20% per year growth rate in orders delivered via this method.
UK consumers also anticipate that they will use locker collection services more frequently in the future.

MOST IMPORTANT FACTOR FOR CONSUMERS WHEN CHOOSING A DELIVERY OPTION

 

CUSTOMS CONSIDERATIONS

Many factors influence the procedures and requirements for bringing goods across UK borders – notably the nature of the goods, modes of transport, final destination and the purpose of the goods concerned. The UK’s status as a European Union (EU) Member State is also a highly significant factor; whether goods are dispatches from other EU Member States or exports from non-EU countries is of the utmost importance when it comes to the applicable customs process.

In relation to the UK, the customs territory of the EU includes the United Kingdom of Great Britain and Northern Ireland, the Channel Islands and the Isle of Man.

BRINGING GOODS INTO THE UK FROM WITHIN THE EU

By and large, intra-EU movements of goods are unrestricted, with minimal internal trade barriers. This means that in most cases European goods need not comply with the onerous customs documentation and border controls associated with exports coming from outside the EU. Goods are deemed to be in ‘free circulation’ and will not require a commodity code. Quantities of exports will also not be limited.

Practically speaking, however, some restrictions do apply to intra-EU dispatches and acquisitions, and specific rules must be observed where certain goods and/or excisable products are concerned.

Some goods are considered restricted imports across the EU, regardless of their country of origin. These include:

  • Medical products;
  • Chemicals;
  • Cultural assets; and
  • Plants and products containing vegetable substances.
    Such goods require special customs documentation, such as import licenses.

Excise goods also attract special procedural rules. Across the EU, alcoholic drinks, tobacco, and energy products are carefully monitored and require official accompanying documentation. Excise duty must also be paid.

BRINGING GOODS INTO THE UK FROM OUTSIDE THE EU

EU countries implement trade defence instruments which can mean additional procedural and documentary requirements for certain categories of good and countries of origin, or altogether prohibition. Examples include:

  • Mandatory import licences issued by Member State authorities for particular categories of goods;
  • Import quotas on certain products exported from non-EU countries;
  • Temporary, emergency restrictions of some specific imports.

All goods imported into the UK from non-EU countries must be cleared by customs, and unsurprisingly the restrictions that apply to categories of goods imported from outside the EU are broader than those that apply to goods dispatched within. Additional restricted items include:

  • Agricultural products;
  • Iron and steel products;
  • Food and animal feed;
  • Goods subject to strict product safety requirements;
  • Textile products and clothing;
  • Animals and products containing animal substances.

ECONOMIC OPERATORS’ REGISTRATION AND IDENTIFICATION (EORI) NUMBER

An EORI number is a unique identification number assigned by a Member State customs authority to an eligible economic operator (EO). This number:

  • Is a prerequisite for import clearance in the EU, though will only be required by a company based outside the EU where they are involved with import activity;
  • Does not have to be applied for in each individual Member State in which customs activity is undertaken by an importer; registration in one Member State is sufficient for the whole of the EU.
  • Will be registered to an EO outside the customs territory of the EU by the customs authority of the Member State where the EO first lodged a summary or customs declaration, amongst other things.
  • Must be quoted in all communications with EU customs authorities where an EU-based identifier is required. Those established outside the EU only need an EORI number if they lodge a customs declaration, an entry summary declaration or an exit summary declaration.

ENTRY SUMMARY DECLARATION (ENS)

Submitting an ENS is an EU customs requirement. An ENS provides information on cargo entering the EU, and must be lodged at the first EU customs office encountered by a carrier of goods/importer/representative before these goods are moved into the customs territory of the Union. Deadlines for submission depend upon modes of transport.

Importantly, some of the information that a carrier/importer is obliged to include in the ENS originates from documents submitted by an exporter.

Following submission of an ENS, goods for import are placed into temporary storage under customs supervision until they are assigned a customs-approved treatment – such as the release of goods for free circulation – and all regulatory requirements are met.

SINGLE ADMINISTRATIVE DOCUMENT (SAD)

Goods are released for free circulation (or other customs-approved treatments) upon the presentation of a SAD, which is either submitted electronically or delivered directly to a Member State’s customs office by an importer/representative.

This document is the equivalent of an import declaration and is the common form for all EU Member States. Its completion is necessary whatever the mode of transport used for imported goods.

DUTIES AND TAXES

A customer/importer may have to pay VAT, customs duties and/or excise duties on goods imported into the UK before he can obtain them. Applicable taxes and duties depend upon whether such goods are dispatches from other EU Member States, or exports from non-EU countries.

TAXES DUE WHEN GOODS ARE DISPATCHED FROM WITHIN THE EU

No customs duties must be paid when goods are dispatched to the UK from other EU countries. With VAT, however the situation is more complex.

A seller may have to:

Record all goods sold to other EU countries on his VAT return;

Fill in an EC Sales List where purchasers are VAT-registered businesses;

Fill in an Intrastat Declaration if the seller’s total dispatches to the EU exceed the threshold of the Member State in which his organisation is registered.

Applicable rules depend upon whether or not buyers in the UK are VAT registered:

 

Customer is VAT-registered in country of residence Customer is not VAT-registered in country of residence
The seller will not pay any VAT, as goods sent to someone who is registered for VAT in another EU country are zero-rated.

A seller will require a buyer’s VAT registration number for his VAT return, as well as paperwork proving that the goods have been sent within specified time limits.

‘Distance selling’ occurs when a VAT-registered business in one EU country supplies and delivers goods to a customer in the EU who isn’t VAT–registered (i.e. a private individual).

When distance selling into the UK a seller has to register for UK VAT if the annual value of his distance sales exceed the UK distance selling threshold of £70,000.

If the annual value of a seller’s distance sales into the UK are <£70,000, he must charge VAT at the rate that applies in his own EU country and account for VAT there. If the value of a seller’s distance sales goes over this UK limit then he will have to register for UK VAT. He must then charge VAT on his VAT-taxable distance sales at the UK rate (20%) and account for it in the UK.

 

If excise goods are sent to the UK by an EU seller, the excise duty must be included in the price of goods. If not, the goods may be seized at customs.

TAXES AND TARIFFS DUE WHEN GOODS ARE EXPORTED FROM OUTSIDE THE EU

Whether it is a commercial entity or a private individual importing goods into the UK from outside the EU, duties and taxes will likely become due.

Under usual circumstances, a product’s commodity code must be identified. This code determines the level of duty and tax that must be paid, and identifies whether a license is required. Regulations, trade measures and product standards are harmonised across most EU member states

CUSTOMS DUTY

Where duty has already been paid and other import conditions have been met, goods that have been produced outside the EU and brought in are in free circulation. Where this is not the case, the rules for importing goods from non-EU countries must be followed.

Where duty has already been paid and other import conditions have been met, goods that have been produced outside the EU and brought in are in free circulation. Where this is not the case, the rules for importing goods from non-EU countries must be followed.

The EU operates a common external customs tariff based upon the harmonised system of the World Customs Organisation to goods that are imported from non-EU countries. Applicable tariff rates can be researched at the Integrated Tariff of the European Union database.

Duty rates applied typically range between 0% and 17%. Some products – e.g., many electronics – are duty-free. Some goods can also be subject to additional duties depending on their country of origin.

Most import duties are calculated ad valorem, meaning they are expressed as a percentage of the CIF (cost, insurance and freight) value of the imported goods.

VAT

An importer/customer may have to pay ‘import’ VAT on goods imported into the EU from outside the territory before they are released from customs. The standard rate of VAT for importing products into the UK is 20%, however certain products attract a reduced rate of 5% and some goods, e.g. children’s clothes and shoes, are exempt from VAT altogether. VAT is calculated on the CIF price of goods plus any import duty due.

EXCISE DUTIES

Excise duties will also become payable on the import of certain goods into the UK, including alcohol and tobacco.

DUTY-FREE THRESHOLD

Fortunately for consumers buying relatively inexpensive goods, the UK imposes duty-free thresholds below which imports into the country have customs duties and VAT waived.

Customs duty will not be payable if either:

  • The value of the goods imported (excluding shipping and insurance costs) does not exceed £135;
  • The calculated customs duty is equal to or less than £9.

VAT will not be payable if the value of the goods imported (excluding shipping and insurance costs) does not exceed £15.

Other areas of interest

Meeting your regulatory responsibilities

The legislation and tax applicable to you when selling to UK consumers will vary depending on whether you are an EU entity or operating outside of the Union.

Reaching and engaging your consumers

Mobile devices now account for over 50% of all traffic to UK e-retail sites, so optimising for this channel is key.

Receiving payment from your customers

Bank cards are the preferred e-payment method for a massive 75% of UK consumers.

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