International logistics remains one of the most significant challenges for e-tailers growing their business at a worldwide scale.
The regulations for specific goods crossing the border are more or less complicated, depending on their final destination.
When preparing for international growth, it is essential to understand the complexities of global logistics. Which territories are concerned by specific regulations? How is transportation outside the European Union regulated? What is the applicable VAT?
1. International logistics: Which territories are concerned?
Countries of the European Union and the European Union Customs Union (EUCU)
If you want to export your products to the European territories, you are in luck.
You benefit from the free movement of goods, a fundamental principle of European law. If you are exporting from France, it being part of the European Union (EU), you will ship to 26 EU member countries without undergoing any administrative export formalities.
This rule is also applicable within the Customs Union, including all EU members and four other countries: Turkey, Monaco, Andorra, and St Martin.
In other words, if you send a package to one of these countries, no customs duties will be applied. And even better, this allows shorter delivery times. A customs control delays the delivery from 12 hours to several days.
What happens when you venture beyond European borders?
The first obstacle to overcome is customs. Once the package is on foreign territory, it can be controlled, opened, and handled carelessly.
To avoid that, your best bet is to make your customs declarations correctly.
Finally, the most significant disadvantage when shipping outside the European Union is the customs fees. They vary according to the country of origin mentioned in the customs declaration, the type of product determined by the HS code, and even the invoice value of the shipment. Would you like to estimate the customs fees? You can use a simulator.
The same applies to overseas countries and territories. Even if they are part of an EU Member State, their ultraperipheral nature subjects them to specific customs duties.
The particular case of the United Kingdom
We cannot talk about international logistics without discussing our British neighbors. The Brexit has complicated the logistics for e-tailers who want to sell in this territory.
The re-establishment of EU-UK borders
As any country that is not part of the EU or the Customs Union, the merchandise must cross a customs border. You guessed it: forget about the free movement of goods principle.
The United Kingdom is setting up a "smart border.” The goal is to offer a "simplified" administrative process for goods entering the British territory.
It is a logistics envelope that allows transportation companies to group several customs declarations - for both import and export - under a single document to save time when crossing the border, especially at the Calais/Dover Strait.
How does it impact e-tailers? The re-establishment of customs means more paperwork, and your carrier may charge you about 5€ extra to handle this new administrative formality.
Customs fees and VAT
The good news? There are no customs duties or VAT on entry into the UK. Therefore, goods entering the territory are not taxed as such.
However, the VAT applies:
- When the goods are worth less than £135, the customer pays the VAT (20%) to the merchant. The e-tailer must have made the necessary arrangements with HMRC to obtain a UK VAT number. This number and the EORI number will appear on the invoice. It is the responsibility of the e-commerce to remit the VAT to the UK authorities.
- When the goods are worth £135 or more, e-commerces do not pay the VAT directly. Parcel Force recovers the VAT from the final customer.
There are two scenarios:
- If the shipment falls under the DDP incoterm, the sender pays the buyer’s customs fees and the VAT. It is fully transparent for the latter.
- If the shipment occurs under the DAP incoterm. Then the customs fees are paid by the buyer, and the sender is charged about €6 / package. It covers the administrative costs of processing the parcel while waiting for the payment of the customs fees of the recipient.
2. International logistics outside the European Customs Union
HS Code + EORI number: the basic requirements for international logistics
1. EORI (required)
What is the EORI number?
EORI stands for “Economic Operators Registration and Identification number.” It is a unique reference number attributed by a customs authority to identify the economic operators within the EU.
The EORI is listed on all customs declarations.
2. Harmonized System (HS) Codes
It is also mandatory. Developed by the World Customs Organization, it is an international product nomenclature that describes the type of shipped goods.
How to get an HS Code? You will have to be patient, and look it up on RITA, the French customs application.
3. Specific process for exporting to the United Kingdom
Do you plan to ship to the UK? Then you should get familiar with the specific requirements:
- You must have a UK EORI. Visit this website to request it.
- Be registered on the HMRC, the British authorities, and obtain a UK VAT number
To master the post-BREXIT rules, we encourage you to read this guide.
International logistics and which documents to submit
1. Invoices, three printed copies
If shipping a package were just a matter of obtaining international HS and VAT references, it would be so simple!
Unfortunately, this is not the case. When shipping abroad, you will have to print three copies of the invoice on your company letterhead. Some carriers digitize invoices, but this is not a widespread practice yet.
2. CN23; 4 printed copies
The internationalization of a business requires compliance with certain formalities. For example, the CN23 is a mandatory document to inform authorities about the contents of a package.
It includes describing the products contained in the package, their value, who are the sender and the buyer, and the parties involved in its transportation.
The CN23 only concerns commercial shipments. A SAD (Single Administrative Document) must be completed and attached, for all parcels valued over €8,000, instead of the CN23.
3. The packing slip
The packing slip, or shipping label, contains the delivery instructions. It indicates to whom and where the package must be delivered. It is, therefore, different from the invoice.
Once the packing slip is printed, you stick one outside the package and leave one inside it.
As you can see, international logistics requires expertise in customs law. Bigblue makes it easy to ship abroad by providing and placing all the necessary documents on the package.
3. International logistics and VAT: the rules to master
Reclaiming import VAT in France on consignments valued at 1€ or more
Until July 1st, 2021, consignments valued at 22€ or less were exempt from import VAT.
This exception was removed, and all products entering the French territory are subject to it. This change responds to the EU’s ambition to regulate dropshipping and consequently reduce unfair competition from companies that used to ship directly from China, under-declaring the value of their products to avoid import fees.
There is a new process for imports of less than 150€ to simplify VAT collection. If the supplier is registered in the IOSS (Import One Stop Shop) system, they are no longer required to register with the tax authorities of each Member State. With this one-stop-shop system, VAT is declared and paid to a single Member State.
It is the responsibility of the marketplace to collect, declare and pay the VAT on behalf of the merchants. The goal is to prevent any risk of fraud.
Uniform VAT thresholds for intra-Community trade
The EU-wide threshold of €10,000
- If the sellers’ revenue from distance selling within the EU is less than €10,000 (excluding VAT), then the VAT is due to the sellers’ country. For example, imagine a transaction of €65 for a pair of jeans bought from a French e-commerce shop by clients in Spain. If there are 139 similar transactions made, the total sales value of €9,035 will be subject to 20% VAT in France.
- If the sellers’ revenue from distance selling within the EU surpasses €10,000, the VAT is due to the final clients’ country. Imagine a transaction of €65 for a pair of jeans bought from a French e-commerce shop by clients in Germany. If there are 231 similar transactions made, the total sales value of €15,015 will be subject to 19% VAT in Germany.
How to declare the intra-community VAT
The One-Stop-Shop System (OSS-IOSS)
As mentioned before, this one-stop-shop system is available for distance selling within the EU of goods worth less than €150, coming from another EU Member State or a third country.
The rationale is that transactions are taxable in the Member state where they are purchased.
To simplify VAT payment by the vendors, the One-Stop-Shop makes it possible to simplify the procedures by declaring and paying the VAT via a unique portal.
Risks in case of error
We do not mess around with fiscal matters! VAT errors generate penalties for up to 240% of the tax and block access to OSS-IOSS for two years.
You will have to file for re-registration in all the countries in which you are selling.
BtoB: handling the VAT
How does it work when you have a BtoB model?
For clients outside the EU Customs Union, you do not need to invoice the VAT. For customers within the Customs Union, if they have a valid VAT number, you are not required to invoice the VAT. However, special notice must be in the invoice.
Nevertheless, let's imagine that your BtoB customer is exempt from VAT. You will have to invoice him for the latter.
4. International logistics: the importance of reassuring your international clients
Checkout: an educational approach
Depending on the country of destination, international clients will be subject to additional customs fees. Your job is to inform them beforehand, the exact amount to avoid unpleasant surprises.
The Shopify apps allow you to estimate the customs fees at checkout.
To demonstrate your professionalism, you can offer the same shipping options abroad and France: express, standard, or relay.
To reduce transportation costs related to international shipping and encourage greener deliveries, use the least polluting and cheaper option. Promote relay or standard delivery.
The package: prepare it carefully for shipment abroad
International shipments must comply with strict formalities. So make sure that all customs documents are up to date to prevent the package from being opened or blocked at the border.
Additionally, shipping abroad can be chaotic due to the distance involved. We advise you to use double flute packaging and additional protections according to how fragile the goods are.
Make sure to choose optimized packaging to reduce the volumetric weight and consequently reduce the shipping costs.
Follow-up: Reassuring the customer
It is not easy for a foreign customer to place an order for a product that is in a country other than their own.
To reassure them, be very transparent about the shipping of the package. Try to anticipate questions to remove all purchase objections.
It is even more critical when you are a small brand. The post-purchase service must be flawless. The follow-up must reassure international clients: keep them informed on each of the shipping stages.
Returns: Be transparent about the conditions and customs fees
45% of buyers say that the return policy was a determining factor in their online purchase.
The return process must remain straightforward. The most important thing is that they know, from the moment of purchase, how they can return the products if they are not satisfied:
- Clarify the conditions for international purchases on your T&C and at checkout.
- Publish an FAQ explaining all the steps to return a package in their native language if possible.
- Offer reasonable return costs. High prices will dissuade customers from purchasing.
- Facilitate the return, set up a process on your website, either directly from the client account or the follow-up emails;
- Make sure you can arrange for transportation within the specified geographic area. Failure to do so can make the return process difficult, which can ruin the customer experience.