Monday August 08, 2022

EU VAT changes and the Import One-Stop Shop (IOSS) are an “opportunity for growth”

by Martyn Noble, CEO of Hurricane Commerce

Martyn Noble
Martyn Noble

Postal operators, carriers and their customers are still grappling with the challenges of regulatory events including Brexit and the US STOP Act enforcement. But, in a month’s time, the next major changes affecting the world of cross-border eCommerce will start to take effect.

July 1 will see the introduction of the EU VAT Package and, with it, the Import One-Stop Shop (IOSS). From this date, the EU will remove the exemption from VAT on low value goods with a value of less than €22. The EU is also making third country online retailers and marketplaces responsible for the collection and remittance of VAT.

To support retailers and marketplaces and their delivery partners, the EU has created the IOSS with the intention of simplifying the declaration and payment of VAT on distance sales with an intrinsic value of less than EURO 150.

Under the IOSS, merchants will be able to declare and pay VAT to all EU countries via one member state – the country where the retailer or marketplace registers for the IOSS.

Level playing-field

These are substantial changes and are intended to level the playing field between EU retailers and marketplaces and their counterparts in other parts of the world. It is also intended to have the same impact on postal operators and carriers.

Hurricane Commerce is busy working with customers across the various segments, helping them to be prepared for July 1.

One of the key requirements of the IOSS is the need for efficient declaration via the so-called Super Reduced Dataset including the requirement to provide a valid product description and HS6 code. Successful customs clearance will depend on the quality of the electronic data provided.

Exporters in frontline

Most large retailers and marketplaces will almost certainly use the IOSS. The largest among them, Amazon, has already announced that it will be using the new system with others expected to follow suit.

Exporting postal operators and carriers are in the frontline for declaring goods to customs and for ensuring that the data is complete and valid.

Meanwhile, the importing post needs to ensure that it has the best possible solution in place for the efficient screening of the received Electronic Advanced Data (EAD) that is submitted via ITMATT.

Postal operators, carriers and multi-carrier platforms can also support their customers in various other ways including the classification or screening of their product portfolio, the screening of consignments for prohibited and restricted goods or denied parties and the calculation of VAT – thereby ensuring that the end consumer can pay the correct amount of VAT at checkout.

Opportunity, not threat

The changes to EU VAT and the introduction of the IOSS need to be seen as a huge opportunity, rather than a threat.

Those organisations – whether they are online merchants, marketplaces, postal operators or carriers – which best prepare are the ones which will put themselves in pole position for a land grab in cross-border eCommerce trade.

Just like Brexit and the US STOP Act, the IOSS should be seen as an event, an event that reinforces the importance of having to meet a higher threshold for data provision than was previously the case.

Hurricane now has multiple examples of consignments being held at customs in various locations around the world because of the incomplete data that has been provided.

Among the potential downsides of not being ready for the IOSS are:

  • Higher customs declaration fees
  • Longer transit times
  • The seizing / returning of parcels
  • Additional costs for storage / warehousing
  • Poor customer experience
  • Reputational damage

Crunch year

Hurricane was established in 2016 because we could see the impact that major regulatory change was going to have on the world of cross-border eCommerce. So far, 2021 has proved to be the crunch year with some of the biggest and long-term changes occurring in the space of a matter of weeks.

How postal operators, carriers and their customers respond over the coming weeks and months will ultimately determine which ones are set to grow and thrive.


SourceHurricane Commerce

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