The ecommerce industry is one of the many sectors that had a turbulent year due to a combination of global Covid disruption, Brexit, and IOSS, which has brought new challenges and set of requirements for businesses that want to sell to international customers.
Against this backdrop, George Trantas, senior director, global marketplaces at Avalara, today sets out Six ecommerce predictions for 2022 as the ecommerce and retail sectors continue to grapple with the impact of the Omicron variant.
The tax compliance burden will take centre stage
Retailers that went online or expanded their ecommerce operations during the pandemic and those selling omnichannel will face a mounting tax compliance burden from tax authorities to refocus on enforcement of compliance as the economy, and consumer behaviour begins to adjust to the new normal.
Supply chain will continue to cause major disruptions
Retailers will have to prioritise and rethink how they manage their inventory and set expectations with customers to prevent poor experiences due to continued delivery delays.
Inflation will drive adjustments to pricing for retailers to remain competitive
Due to inflation, sellers will face higher costs across brick-and-mortar, ecommerce, and marketplaces and will have to adjust pricing in the buy box to convert and keep customers.
Supply chain issues and inflation will disproportionately impact small businesses
Supply chain challenges and inflation will create higher costs for retailers, but small businesses with smaller budgets and teams will be more heavily impacted.
Ecommerce growth will normalise; Omnichannel will soar
With the continued uptick in COVID-19 variants, we will continue to see the adoption and expansion of omnichannel commerce grow in 2022 as consumers seek convenient, hybrid shopping experiences across in-person and online channels
Ecommerce-first retailers will seek alternative channels for distribution
With the rise of omnichannel commerce and continued supply chain woes, ecommerce-only sellers will look to other channels with robust distribution networks to offset the impact.
Post-Brexit, the UK have been made aware that trading, customs and duties are expected to have a slight twist with fees despite the Brexit free-trade deal. You can see more about the effects in our article ‘Brexit: How will this impact my business?’. But for now, I’m going to discuss the rules on goods that are set to cross the border.
The ‘rule of origin’ is a new key feature of trading which essentially determines whether an export is considered British or not. Sadly, it seemed that goods sold into the EU wouldn’t face custom duties, but it turns out that doesn’t apply to all goods, making it quite costly where this new set of rules is concerned.
All products must be made entirely in the UK or EU or transformed in such a substantial way that some type of value is added. An example would be if a British retailer imported goods from somewhere outside of the EU – we’ll use Asia as an example – then the retailer would need to pay a customs charge if they were to then export it to the EU again to sell.
Considering a huge proportion of sellers import from outside the EU for better quality and costs and then export to EU destinations, if they’re going to continue then they’ll have to pay custom duties.
Businesses do have every right to be miffed as they have essentially been blindsided by the rule of origin; they now have a major disadvantage when it comes to selling in the EU and had no time to prepare.
Now that we’ve left the EU, we understand that it’s going to be extremely hard to wrap your head around the madness that’s unfolding. Most of the products that retailers use to sell in the UK come from beyond the border, and amidst the chaos, the last thing you want to be doing is worrying about whether your business can still function. You might be wondering how Brexit is going to affect your imports? Or how the marking on your products will work? Don’t threat, we have the simplified answers you’ve been looking for.
For those looking to move goods permanently to England, Wales, Scotland and Northern Ireland, this is a process for you to make note of. To break it down:
The business that’s sending your goods may need a license so watch out and check that they can export to the UK
Allocate the role of making the customs declarations and arrange for the transportation of the goods to their final destination whether you collect them yourself or you use a service who can do it for you
Include the commodity code on your import declaration to work out the rate of duty you need to pay and work out the value of the goods to find the VAT price
Look to see if the country has a preferential trade agreement where you can reduce the amount that you’ll need to pay
Check if you need a license or certificate which is needed for importation of certain goods
Have a look at markings, labelling and marketing rules
Receive the goods through customs with the declaration
Keep records because you may be asked to show them for up to 10 years
If you haven’t got a clue what an EORI number is- it’s the Economic Operators Registration and Identification Number. All business owners wanting to move goods between the UK, EU and non-EU countries need one of these starting from January 1st 2021. It’s a 12-digit number which begins with a two-letter code that signifies the country code; it looks similar to a VAT number if you’re unsure. Any goods that you don’t label are probably going to face additional costs so make sure you apply sooner rather than later! It should take upto a week to process.
Claiming Preferential Rates of Duty
Claiming a preference means that you can get goods cheaper because countries have been kind enough to set up such preferential trade agreements that influence international trade. The goods that are being re-imported or returning from the EU can receive tax and duty relief but remember that returns have a three-year expiry date. You will need to provide entries at customs for your returns at the EU and UK borders.
The rate of duty payable is dependent on the type of products, whether you’re importing or exporting and where they’ve come from. To claim a preference, you need to check that the preferential trade agreement is in place with the country that you’re importing from and that the goods are covered by it. Read all the rules for the specific country!!
Another term which you may be unfamiliar with is the UKCA marking which stands for UK Conformity Assessed. This is alike the CE markings which products have on them that get sold in the UK market. You might already have existing stock which was fully manufactured, CE marked and ready to be placed on the market before January 2021; in which case this doesn’t apply to you.
However, for those of you that have newly decided to introduce your creativity to the business world, you’ll need to understand this next lot of information. It applies to those whose goods would have previously been CE marked, but because of the chaotic transitions, you have until January 2022 to switch to UKCA marking.
TIP: UKCA isn’t used in the EU market so you still need a CE marking if you’re selling in the EU.
How do you use the UKCA marking I hear you ask? The zip files are available on the Government website but if you’re changing the dimensions of the marking then it has to be at least 5mm and easily visible. The marking should be placed directly on the product or packaging and there must be no other markings obstructing the view of it. There are a few cases where the marking can be on manuals or supporting materials, so check the regulations for the products first.
Documentation is a big YES. After using the UKCA marking you need to keep records to prove that the product follows the UK legislation and keep it for up to 10 years because you can be asked at anytime by market surveillance for them. See the Government website for more details on what to include on your UK declaration of conformity.
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