BREXIT E-COMMERCE AMAZON CHANGES

POST BREXIT SCENARIO FOR SELLING GOODS ON AMAZON

Amazon’s July communication is a reminder to its merchants regarding the Brexit legislation regarding change of the fulfillment conditions. The Brexit policy and its effects are not the topmost priority on Amazon sellers’ minds, but it is high time that they must do something about this changeover and work out the options before them.

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What changes are coming for the E-commerce businesses

The United Kingdom decided to exit the European Union officially and is approaching the fag end of this transition. Consequently, we will see a dramatic shift in the UK and the EU’s business activities after December 2020. Amazon has begun to inform the merchants about the actions needed to make necessary adjustments per their FBA (Fulfilled by Amazon) program.

Brexit VAT
Brexit VAT

There are many repercussions of this Brexit related notice of Amazon. We have analyzed Amazon’s communication on 14 Jul 2020 to understand its exact business implications. We have also tried to address cross-border sales and chalk out the steps after completing the Brexit transition.

The EFN (European Fulfilment Network) of the UK & the EU will not work anymore.

If you served your customers with the help of the EFN, it might not be possible to continue with it, both from the EU to the UK or the other way round.

UK’s fulfillment Brexit changes

Hence, you will not be able to send your products from the UK’s fulfillment center to EU countries. You can not work under the EFN system, and you will need VAT registration in the respective EU countries. Previously, the local fulfillment center shipments were eligible for the local VAT with a threshold of annual distance-based slabs.

In the same way, if you intend to target the UK consumers by using an EU fulfillment center, you cannot do that from the EU now, and you will have to keep products in an Amazon fulfillment center in the UK with VAT registration.

The UK shall cease to be part of a pan EU program anymore.

Earlier with the pan EU program’s help, the sellers could service customers of the EU with quick delivery

schedules. After excluding the UK from these countries, it will have new business implications.

A merchant cannot use a UK fulfillment center to retail the goods in the EU market. Hence, Amazon has made it clear that the merchants will use the other six EU countries to reach the EU market.

These changes could have a cascading effect on your supply-side logistics. Like EFN, the merchants will have to bring goods to the UK or EU or the other way to reach UK markets. There will be a potential surge in your logistics costs, and you will be required to manage your inventories in several jurisdictions. Besides, you will pay VAT on imports twice. However, you can reclaim the import VAT by filing the tax returns.

The requirement of fiscal reps for VAT registration of your UK business

Fiscal reps are local units jointly or severally responsible for VAT payable to a business that is non-EU based. It will ensure compliance with VAT norms for business based outside the EU.

Our Amazon accountants have analysed that the pre-Brexit era meant no need for any fiscal reps. But post-Brexit, you may have to engage fiscal representatives in Italy and Poland. It has additional cost implications for the merchants, and they did not consider that while measuring market attractiveness.

A second EORI code is mandatory for bringing products to the EU.

EORI stands for Economic Order Registration Identification. It is an identification number for traders importing to the EU and the UK and also enables them to claim taxes from the country of VAT registration. A GB EORI code is required to import products all over the EU. It is valid until Dec 2020. With effect from 31 Dec of this year, no merchant can use the GB EORI code to bring goods into the EU. They will stop accepting your GB EORI code from 2021. The merchants will need to get a secondary EU EORI code.

Similarly, This mandatory requirement holds the other way round as well; if a merchant were working with EU EORI codes, you would have to get a GB EORI codes to begin to bring goods in the UK area.

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