How 3PL is solving the Brexit challenges posed by DDP
Since January 2021, one of the biggest challenges faced by businesses that do – or want to do – trade with customers on mainland Europe is the additional paperwork.
It’s now so complex and potentially costly that some businesses have ceased trading in the EU. In particular, B2C trade was hit the hardest.
Many that still do are struggling to make it work, caught between customs and carriers as they endeavour to fulfil orders.
- While we’re all on this steep learning curve, let’s consolidate what we know so far.
- It makes for sombre reading, so let’s also look at what we’re doing to ease the friction and how the landscape might change in the months to come.
DDU is better for businesses
Delivery Duty Unpaid (DDU) is where taxes and other charges are administered at customs – the buyer is asked to pay duty at this stage.
DDU was suspended by carriers in January as it was deemed to be too complex to administer after the UK left the EU Single Market and Customs Union. Carriers wanted a seamless process and didn’t believe that DDU would offer this.
One issue is that DDU is limited – not every country accepts it and there are other constraints. However, in Granby’s opinion, doing away with DDU has forced a one-size-fits-all scenario that’s open to interpretation and even abuse.
DDP is now the default
Carriers opted for Delivery Duty Paid (DDP), which means the taxes and charges are applied up front.
- The seller requires Commodity Codes for the new additional paperwork.
- All paperwork must be 100% correct or the shipment will be returned.
- As a fulfilment partner, Granby pays the tax and charges up front on behalf of clients shipping to the EU, which we then claim back.
How DDP is currently failing
DDP sounds like a simple solution to dealing with the additional paperwork. But in practice it has created uncertainty, bureaucracy and additional costs for the seller.
- Businesses and carriers themselves are still confused about Commodity Codes; how many are required, when they are required, and acquiring them.
- Frustratingly, even when the paperwork is 100% correct, shipments are returned. Sometimes, this is due to misinterpretation of requirements at customs. It might also be because paperwork for other parts of the shipment (i.e. that are out of our control) are incorrect. Returns are clearly problematic for brand reputation, loyalty, sales, profits and cash flow.
- Paying tax and charges up front puts stress on cash flow for our clients as well as creating additional administration.
- Additionally, carriers are adding surcharges, compounding the problem of spiralling costs for international trade with the EU, especially for B2C traders. To many businesses, these surcharges sometimes seem random, unnecessary, and created by an inefficient DDP system.
Returns are clearly problematic for brand reputation, loyalty, sales, profits and cash flow.
Meeting the challenges of EU trade
As a 3PL fulfilment partner, a key objective for Granby is to help our clients find a way forward through an imperfect system.
The good news is that, eight months on (as of writing), we’re all in a better place.
The EU international trade ‘system’ is itself learning and evolving, so we’ve got to keep up.
Also, there are many opportunities, as a key partner in the 3PL fulfilment chain, to influence its development and help remove the blockages.
After decades in this sector, we’ve got solid relationships with carriers and we’ve made sure to keep the lines of communication as open as possible. We’re all still learning and
Commodity Codes are a good example – the rules are open to interpretation, so we get in early to negotiate and confirm the information our client is required to provide.
A great example of this was a POS distribution to a supermarket chain in Ireland from the UK. A misinterpretation of the Commodity Code requirements on the carrier’s side could have meant having to supply 1000s of codes.
In the end, we were able to agree on an interpretation of the DDP guidelines that suited everyone.
Our fulfilment system SCOPe integrates with clients and carriers alike via API – so even if everyone is using different technology, we all know exactly what’s going on.
We’ve enhanced SCOPe’s capabilities to cope with the new requirements for EU trade. It’s critical for the right information to be given to the carriers’ systems – chiefly, the Commodity Codes, but other information too.
SCOPe now records the Commodity Codes for each SKU as part of its job building the data file that it eventually sends over to the carrier.
Internally, everyone has had training in the system changes so we can support our clients and collaborate with carriers more effectively.
For example, Commodity Codes are a pain point of epic proportions for many of our clients, but we’re able to take charge of these completely – a client doesn’t have to worry about them at all; we’ve got this.
To see so many businesses give up on international trading with the EU was disappointing, if understandable.
Now might be the time to give it a second chance though, partly because 3PL partners like Granby worked with carriers to remove the blockages and smooth the path.
It’s also partly because the Import One-Stop Shop (IOSS) is operational. In July, all goods imported to the EU became subject to VAT and this portal allows e-commerce businesses to comply with VAT obligations for imported goods.
It’s possible that IOSS might present a solution in part to rising and unpredictable costs related to EU trading from the UK – by eliminating the ability for carriers to levy a surcharge. Watch this space.
Help to navigate e-commerce international shipping
Whether you want to refine your export process, start trading with the EU, or restart your international trade business, speak with us today.
Photo by Dominik Lückmann on Unsplash