It used to be so simple. When the UK was part of the European Union, the nation’s small and medium-sized enterprises could send their goods to consumers in Europe with ease.
Languishing in free-flowing trade with fellow member states – their supply chains slotting neatly into the Single Market – British businesses didn’t need to put considerable thought into additional paperwork or costs in their dealings with Europe until the country’s timely departure from the bloc in 2020.
But the UK is now a third party, and goods entering the EU from the UK are treated just the same as those from other territories. The result is that companies have to fill in much more paperwork about the goods being sent, where they’ve come from and where they’re going to export to one of the 27 countries within the Union.
Although a little admin never hurt anyone, it’s not just Brexit that is giving small businesses sleepless nights. The EU has introduced a new safety and security programme to protect citizens against threats by carrying out checks on imported goods prior to their arrival.
The Import Control System (ICS2) demands that 100% of customs data is entered electronically by the sender and sent to the destination in advance. If a business fails to send the correct information, they risk being charged additional taxes and their goods detained or returned.
It’s a lot of hassle for SMEs already stretched by the energy crisis and inflation. Filling in extra paperwork electronically and navigating new rules and regulations can consume valuable time and amount to significant upfront administrative costs, particularly when plates are full elsewhere.
Many are beginning to question whether it’s worth the trouble. According to the Federation of Small Businesses’ Small Business Index, one in eight small exporters have temporarily or permanently stopped selling to the EU, and a further 9% are considering it.
Give customs all the information they need
But for most businesses, Europe remains a valuable market, EU membership or not. The House of Commons reports that the UK exported £340bn in goods and services to the EU in last year. Understanding how to manoeuvre under the new guidelines is no doubt a priority.
Thankfully, there are several solutions aimed at simplifying knotty bureaucracy between these key trading powers. For goods under €150 (£128), SMEs can apply for an IOSS (Import One Stop Shop) number. This unique number allows them to pay tax on goods sold to all EU countries under one monthly VAT return and deliver goods across the whole bloc without needing to fill out different forms and pay varying amounts of tax for different countries.
For businesses that decide not to register for IOSS and are sending goods valued over €150, Royal Mail has developed a Postal Delivery Duties Paid Solution (PDDP), which covers a growing list of EU destinations. PDDP is a service whereby duties are handled by Royal Mail and the overseas delivery partner so that the customer does not incur further costs at the doorstep. Instead, VAT and duties are calculated and collected at the point of sale and paid to the EU tax authorities via the postal service.
A checklist for successful data capture
UK businesses sending goods to the EU need to record and input various data to ensure parcels are successfully processed by customs and delivered to consumers on time. When in doubt, there are seven things every parcel should account for.
Once SMEs have decided which route to take and a sale is made, they must then provide the necessary data about themselves, their product and the end consumer before shipping to the EU. All this must also be done electronically, which has posed a challenge for some businesses.
“Some SMEs are more developed than others and have stock systems and applications to provide the required data easily,” says David Pilkington, director of customs and international policy at Royal Mail. “But mid-sized SMEs often struggle with the sophistication you get with some of the customs and forms. We’ve spent a great deal of money creating web pages and APIs (application programming interface) to help them submit this data more easily.”
If data is missing, incomplete or inaccurate, then goods may be held or returned and attendant charges incurred, warns Pilkington. “Customers need to be aware of where their commodity is from, provide names and addresses of manufacturers and a clear description of the goods,” he explains. British businesses should also request an Economic Operators Registration and Identification (EORI) number from EU customs authorities before trading within EU customs territory.
Pilkington continues: “They also need an HS code – the product classification code used by customs authorities to identify products when assessing duties and taxes.” But finding the correct HS code can be difficult as it depends on where the product originated and the materials used. “We’re working to make this easier by creating systems that generate HS codes when SMEs input their data,” he adds. The hope is that the digitisation of customs processes will restore confidence in a global United Kingdom that can continue to trade, in many ways, freely with Europe.
While Royal Mail is trying to make it as simple as possible for senders to gather and input data electronically, for some SMEs old habits die hard. “We still receive parcels with written forms inside them,” says Pilkington. The company has created a safety net in the form of optical character recognition (OCR) technology, which scans the information recorded on paper forms. If data is missing and held at customs, Royal Mail works diligently to find a solution. “We are part of a global network within the Universal Postal Union, so we work closely with our partners overseas to try to identify where data is lacking so we can assist customs authorities as quickly as possible.”
Life after Brexit is not what it used to be. But it’s by no means all bad for UK SMEs. With a degree of administrative know-how and the support of a knowledgeable delivery partner, firms that embrace the change are establishing a firm foothold on the Continent.
For more information on how Royal Mail can help you export with ease, visit royalmail.com/exportingmatters