With a ton of new acronyms flying around the industry such as IOSS, DDP, DAP and others. Today Bobbie Ttooulis, Group Marketing Director at GFS explains what they mean, the impact that they will have on your shipping.
Still confused by EU shipping rules? Here’s what you need to know
Since the removal of the EU VAT de minimis and introduction of IOSS (Import One Stop Shop) many businesses have been left feeling totally confused by which delivery services they should be using to not fall foul of their new VAT obligations, which is a consumption tax that must be paid. And, do those services also cover them (or not) for addressing their other obligations such as import duties if the goods have been sold and fulfilled from outside of the EU?
Yes, one of the benefits of shipping under IOSS (Import One Stop Shop) is that parcels are VAT exempt at border. This means you can avoid significant clearance fees from carriers and parcels can be sent swiftly on their way to the happy customer, who also won’t be getting any unexpected demands for upfront payment of VAT. However, although the EU went ahead and pulled the trigger on the launch of the VAT changes and IOSS changes on 1st July, the reality is many businesses, carriers and EU member states were not quite ready!
It’s therefore understandable that many businesses are nervous about shipping to the EU. In fact, when we speak to retailers, we’ve found that some were considering halting sales to the EU for fear of unknowingly making the wrong decisions and sending parcels that are non-compliant. But with the EU being our single biggest trading partner with exports to the EU making up 43% of the UK’s exports (UKandEU.ac.uk, 2021), it’s a market that can’t be ignored especially if you have ambitions to grow sales.
Of course, great effort is being made by all to have everything in place. But this is of little consolation for the 1000s of UK-based sellers who are still getting to grips with post-Brexit shipping requirements, disruption to service levels and higher costs of delivery.
In the meantime, the world of cross-border delivery is a minefield! There are wide variances in terms of carrier terminology and readiness – which carriers are prepared for IOSS? is it DAP or DDU? Which carriers can ship DDP? Can they do so for all EU countries? ROW?
So, what delivery services should you be looking for to overcome compliance hurdles?
The good news is there are options!
IOSS, DDP, DAP…SOS?
- IOSS
Of course, IOSS is the most simple and cost-effective way to manage your EU VAT compliancy. This electronic portal will give you a single IOSS number for VAT registration in all 27 EU Member States, making it easy to collect, declare and account for VAT in the EU and you can pay via a single monthly payment. You will need to provide your IOSS number to your carrier and parcels will then be VAT exempt at the border for faster Customs clearance and the end customer will not have to pay anything when they receive their parcel.
What’s the catch?
IOSS can only be used for B2C orders not exceeding €150 and it requires you to appoint an EU-based intermediary so you may need to seek professional tax advice if you don’t know where to start.
- DDP – Delivered Duty Paid
DDP (Delivered Duty Paid) means that any Duties & Taxes revert back to the sender. Typically, they’re paid for by the carrier at Customs and then you will be invoiced by the carrier to make payment. Like IOSS, parcels sent under DDP are cleared at Customs and because the seller is responsible for paying Duties & Taxes and the customer will not be asked to pay VAT and import duties in order for their parcel to be released. This is a good option for the customer experience and also for you if you if you send goods valued above the €150 IOSS threshold, or if you haven’t yet got yourself set up with IOSS.
What’s the catch?
Not all carriers offer a DDP option and some only offer it to a few countries, so there is no one-size-fits-all DDP service. You will likely need to use multiple carriers and determine the best service for each parcel on a case-by-case basis.
- DAP – Delivered At Place (Formerly DDU – Delivered Duty Unpaid)
This is usually the default shipping term and means that the end receiver is responsible for any Duties & Taxes, so your customer will be expected to pay any applicable charges before they can have their parcel delivered.
What’s the catch?
Although perhaps the easiest option, it can have a negative impact on the customer experience and be a stumbling block for customers who may be concerned about what they’ll be expected to pay and therefore choose not to buy at all, or if they do buy and receive a bill for unexpected costs, may not buy from you again.
Although ecommerce continues to grow at an exponential rate, it’s been a tough 18 months for online retailers who have had to navigate the complexities of Covid, Brexit and now the new EU VAT reform. And it’s not easy to keep on top of changing rules and regulations while managing carrier services and costs with variable demand and customer expectations.
Experience a one-of-a-kind One Stop Shop Delivery experience
In response to this, GFS have expanded GFS International ecommerce Services to cover every possible scenario for Europe and worldwide. GFS International supports delivery worldwide to 220+ countries and territories and supports ALL shipping optoins such as IOSS, DDP, DAP delivery options. With 3 service levels – Express, Plus and Economy – GFS can cover all scenarios and tailor a delivery solution for Europe that meets the exact needs of your business, whether you have registered for IOSS or not.
GFS are also offering a free Virtual GFS Warehouse Tour to demonstrate best IOSS, DDP, DAP practises. You’ll see how solutions can address IOSS, DDP, DAP in the way that works best for your business so if need advice on what to do next, contact them to book your free Virtual GFS Warehouse Tour, or visit their website.
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