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[2021] UK-Guide: Brexit Trade Deal Impact on eCommerce & Shipping Costs

Updated on: 6th January 2021, 10 min read.

Read our UK-Guide on the Brexit impact for UK Businesses exporting to the EU. Our comparison of shipping costs can be applied to eCommerce, Retail and B2B exports.

Not a business from the UK? Here’s also our Brexit Guide for EU Businesses exporting to the UK.

Brexit impact on eCommerce, Retail and B2B when exporting to the EU – the consequences of the Free Trade Deal in a nutshell:

Brexit Impact - UK Businesses shipping to the EU

How does Brexit Impact eCommerce, Logistics & Trade?

The UK has officially left the European Union on January 1st 2021. A free trade deal between the EU and UK has been agreed upon in order to foster free, fair and sustainable trade. In fact, the current EU-UK trade deal conditions are better than the regular trade conditions under WTO (World Trade Organisation) terms – these would have applied in a Hard Brexit scenario.  But regardless of the good terms of the current free trade deal, the free movements of goods between the two markets end. As a matter of fact, the full impact on eCommerce, supply chains and the way how to move goods between the UK and the EU are already visible.

As of 1st January 2021, there are so called zero tariffs or quotas on goods traded. But these more favorable conditions truly depend on the type of traded goods. On top of that, certain goods such as food products are subject to new labeling and licensing. These new custom formalities and checks are now applied to all exports and imports. What’s more, Brexit and the new trade deal also affect your product distribution and shipments to the EU. So, you can count on increased delivery times and shipping costs for your eCommerce, B2B, and Retail shipments. Plus, you will also have to consider the Brexit impact on your end-consumers in the EU.

That’s why we’ve created this guide. If you have an online shop or work for a company exporting goods from the UK to the EU, keep on reading. Our Brexit logistics checklist reflects official guidelines from the UK and EU authorities. Plus, we consulted with industry expert Taxdoo. This helps you understand the Brexit impact on cross-border taxation and export rules.

To make our findings more tangible, we’ve compared two logistics costs scenarios. In our business case, you will see how much it costs a UK business to export products to the EU. By the end of this guide, you will have a better understanding of how to optimize your logistics operations. With 10,000 orders a month, you can save approx. £58,000.00 on shipping and increase your delivery speed by 3 – 4 days. You’re welcome.

Brexit Impact and eCommerce Guidelines for UK Businesses Exporting to the EU

First of all, there’s no need to panic when it comes to preparing your business for Brexit and the new trade deal. Sure, there is a bit of paperwork to handle for avoiding shipping delays due to the new rules. For example, customs check transit documentation and commodity-specific licenses for your exports. So, you might need to pay extra fees for transition storage as customs need more time to clear your goods.

“After Brexit, your eCommerce business can count on higher export rates, stronger customs duty controls and more administrative work when exporting goods to the EU. Dr. Moritz Lukas

To help you figure out the next steps, go through our Brexit eCommerce checklist below. This will help you deliver your great products on time to your eCommerce, Retail, and B2B customers in the EU. For example, before you ship your products, you need to register for an EORI number. Our checklist also makes you aware about strategic questions that you need to ask yourself now before it’s too late. This will help you prepare for a potential Brexit impact on your logistics and product distribution in the EU.

The table below summarizes our Brexit Logistics checklist in three parts:

  • actions to do right now
  • before international shipping
  • when shipping to the EU
Dr. Moritz Lukas, Power of Attorney at Taxdoo

Dr. Moritz Lukas,
Power of Attorney at Taxdoo

Taxdoo Logo

Our Brexit Checklist for UK Businesses Exporting Products and Shipping Parcels to the EU

Note: This is only UK businesses sending parcels from Great Britain. There are different regulations for shipping parcels from Northern Ireland. Source: UK Government on Brexit

Right Now: Before Cross-border Trading with the EU


Brexit Impact Preparations

Check:
1: Apply for an EORI number starting with GB. You also need a second EORI number specific to the EU country that you’re shipping your goods to.  In case you sell in multiple EU countries, you need multiple EORI numbers.

Brexit Impact Reason: Avoid additional shipping costs and delays at custom checks. E.g. your eCommerce product shipping could be blocked at customs for further investigation without an EORI number. Plus, you would need to pay for storage fees when HM Revenue and Customs (HMRC) clears your goods.

2: Get an AEO status. Check if you can apply for an AEOC and/or an AEOS for simplified declaration procedures.

Brexit Impact Reason: Increase your delivery speed for eCommerce and B2B shipments. Reduce the number of customs checks on your documents and goods. With an AOE status, you receive priority treatment for customs controls.

3: Check new rules for marking, labelling and marketing standards.

Brexit Impact Reason: Comply with EU safety, health, and environmental requirements (e.g. CE marking).

4: Check new rules for export licences and certificates. depending on your product type. [Only applicable if you use wood packaging, sell food, animal products or plant-based products]

Brexit Impact Reason #4: Missing shipping paperwork can cause delays for your shipments. Your products could be stuck at customs if you don’t have all shipping paperwork for these specific product types in place.

5: Check new export rules you need to consider when declaring excise goods. [Only applicable if you  export alcohol, tobacco, and/or certain oils]

The same tip as above: Avoid your eCommerce, B2B and Retail shipments being stuck at customs.

Before You Sell: Logistics Paperwork for the Brexit Impact

Brexit Impact PreparationsCheck:
1: Who are you exporting to (D2C, B2C or B2B)? 

Brexit Impact Reason: In case you export to EU businesses, check if your business customer has the necessary import documentation of the receiving country (e.g. custom declarations).

2: How will you sell in the EU? Are you considering selling through your own online store? A marketplace? A physical retail store?

Brexit Impact Reason: Depending on the way you sell, you need to consider how to handle your logistics; whether you need to consider finding a local warehousing and fulfillment provider or not. For example: selling through Amazon you can either choose between FBA (Fulfillment by Amazon) or FBM (Fulfillment by Merchant).

3: Which Stock-Keeping-Units (SKUs) are you going to sell in the EU?

Brexit Impact Reason: This will determine the amount of paperwork that you need to prepare. E.g. if you only offer certain SKUs on your online shop to customers located in Germany, you only need to check for additional licenses & commodity codes for these articles.

4: How many parcels / pallets are you shipping to the EU?

Brexit Impact Reason: The type of shipment affects delivery times, shipping and fulfillment costs. At a certain monthly order volume you should consider storing your products locally in the EU. Our logistics cost comparison below shows why.

5: Look up your commodity codes, duty, and VAT rates for your type of product and find out your cross-border  trade tariff (e.g. review the full trade tariff list).

Brexit Impact Reason: You could receive duty and VAT reliefs for certain types of products. You can also check if you can apply a zero-VAT rate to your exports for certain products and when exporting to VAT-registered EU businesses. However, an import tax would still apply when the product arrives at the specific EU country.

For private consumers (non-registered VAT), a so-called distance sale would apply: you must charge VAT in the normal way, just as you would for a UK customer until a certain treshold is reached. You need to register for VAT in the EU member state when exceeding this treshold.

6: Does your online shop display all country-specific product information for your target market?

Brexit Impact Reason: Due to tax and liability reasons. For example, you want to avoid displaying the wrong product and tax information on your online shop when selling to a certain EU country.

7: Do you have a VAT registration in the EU country where you sell, receive, or store inventory?

Brexit Impact Reason: You might be liable to apply different VAT-rates depending on: from which country is your product being sold; and where is your product being consumed. There are modern tax registration solutions like Taxdoo that can help you facilitate all administrative work.

8: Do you have a professional logistics service partner for shipping your eCommerce, Retail and B2B products to the EU? We’re glad to help you find the best logistics service provider for your product and business case.

Brexit Impact Reason: This will make a crucial impact on how fast, cost-efficient and professional you will deliver your orders to your EU customers.

When You Sell: EU-Shipping Paperwork


Brexit Impact Preparations

Check:
1: Check custom declarations. When you export products to the EU, you need to declare your goods for customs from 1 January 2021. This can be done either by yourself or by appointing a customs representative to act on your behalf. For example, a freight forwarder or a logistics service provider. If you choose to do it yourself, you need to also register for the National Export System and apply for a CHIEF badge. But we highly recommend not to do it yourself.

Brexit Impact Reason: Save time, liability, and administrative work. Simply appoint a freight forwarder, customs agents, or a professional third-party logistics provider from our network.

2: Check all other shipping documentation and product information. This needs to be available when your products arrive at customs.

  • the total value of your parcel
  • the applied custom tariff for this parcel
  • the country of origin of the goods
  • the packing list including product description, weight, dimensions, the buyer’s information, the seller’s information as well as seller references
  • the waybill (bill of lading)
  • the commercial invoice including the HS-Classification
  • all needed licences or certificates for the shipped goods depending on the product type

Brexit Impact Reason: If you don’t have this information available, you can expect export surcharges and delays due to further customs investigation.

3: Is your parcel stuck at customs? Check the National Clearance Hub: you can speak to their advisor on webchat, email or phone to investigate what’s wrong with your parcel.

Brexit Impact Reason: Your customer service teams might need to investigate the shipping status if your customer’s reaching out to you. It’s always better to be prepared and have all communication lines ready.

This brief Brexit checklist will be crucial for exporting to EU-customers. Now that you have the checklist, you might wonder, how much does it cost to ship parcels from the UK to the EU?

There are two fulfillment and shipping scenarios:

Scenario 01 – international shipping of single parcels from the UK to EU eCommerce, Retail, and B2B customers

Scenario 02 – bulk shipments to EU warehouses to fulfill your customer orders locally

In our checklist above, we’ve already highlighted one very important aspect. Examine the number of parcels that you ship/plan to ship to the EU. This amount will determine how high your logistics costs are. Depending on this number, it’s either EU fulfillment or international single parcel shipment. Let us analyse these scenarios by comparing the logistics costs.

eCommerce Case: Cost Comparison of International Shipping vs Local EU Fulfillment

Before we dive into the Brexit impact comparison, it’s important to consider a couple of factors. These factors might determine how you ship your products to the EU post-Brexit.

First, ask yourself the following. What’s your product type? All specs (price, weight, and packaging dimensions) determine your logistics operations.

Second, how important is the customer experience for you? Do you want your customers to pay for shipping costs? Or to wait for their orders for more than a week?

Third, how many orders are you currently receiving from the EU? And how many orders do you expect to receive per month in 2021?

To demonstrate what’s meant here, we’ve created a concrete business case based on these questions. In our analysis, we do not specify the actual product type on purpose – we want to keep our analysis applicable for most cases. However, you can easily check out the trade tariff for your product type and business case.

Let’s assume: you represent an eCommerce shop selling FMCG products from the UK. The average shopping cart value of your customer orders is £45.00 with an avg. parcel weight of 0.5 kg. Your monthly order volume in an EU country is 10,000 (let’s use Germany as a concrete example). Here is the case specifics in detail – these details will determine your logistics costs:

Brexit eCommerce Case: Amount of Orders & Product Specs

Type of ProductFMCG
Amount of Goods produced (UK-origin)20,000 units
Amount of Orders per month from an EU country (e.g. Germany)10,000 units
Amount of Goods per Order (SKUs)2
Amount of Picks per order2
Good’s Value per unitGBP 13.50
Good’s Price (excl. shipping costs)GBP 22.50
Avg. Shopping Card ValueGBP 45.00
Amount of goods per CCGII Pallet4,500
CCGII Pallet weight (150 boxes)1,080 kg
Weight per Good0.2 kg
1 Order picked & packed weight0.5 kg

Keep in mind that your product type will make a huge difference in planning your logistics for 2021. We’ve already addressed that the Brexit impact brings different rules (VAT, tariffs and other formalities) depending on the product category. In general, products will be categorised into controlled and standard goods. Each category will have different customs regulations for labeling, licensing, and tariffs. Our logistics checklist above already gave you the necessary information on how to prepare your business for Brexit.

So what next? Let’s review both scenarios for the eCommerce shipment case.

Brexit Impact Shipping Costs

How Much It Costs: International Shipping vs Local EU Fulfillment 

Note: The shipping and logistics costs result from our Brexit eCommerce FMCG Case and are broken down per order. Your logistics costs may vary according to your case, product type and amount of orders.

Brexit Impact
Scenario 01:eCommerce UK international single parcel shipping
to the EU
Brexit Impact
Scenario 02:eCommerce bulk shipping with EU fulfillment and national parcel shipping
Transport SpecificsBulk Shipment (CCGII Pallet) from UK manufacturer to UK warehouse, leading to UK fulfillment and international shipping (single parcels) to e.g. GermanyDirect Bulk Shipment (CCGII Pallet) from UK Manufacturer to warehouse in Germany, leading to local fulfillment and national shipping (single parcels).
Avg. Fulfillment Costs
GBP 1.60 – 1.70

(incl. Visual Checks for Incoming Goods, Storage, Pick & Pack)

GBP 1.60 – 1.70

(incl. Visual Checks for Incoming Goods, Storage, Pick & Pack)

Shipping Costs for Transport Route 1:

Bulk Shipment

GBP 0.01

(national, based on industry standard pallet shipping service providers)

GBP 0.12

(international, based on industry standard pallet shipping service providers)

Shipping Costs for Transport Route 2:

Single Parcel Shipping Track & Sign

GBP 7.47

(international, based on Royal Mail small parcel & other shipping service providers)

GBP 2.88

(national, based on Royal Mail small parcel & other shipping service providers)

Export Tariff & Customs
(5% for this product type)
GBP 2.25

 

GBP 1.35

 

Return Rate Cost (10%)GBP 0.75GBP 0.29
Delivery Time
(eCommerce Standards)
4 – 5 days1 – 2 days
Logistics CostsGBP 12.12GBP 6.28
Difference between Scenario 01 & 02– GBP 5.84+ GBP 5.84
Total Logistics Costs Savings (Shipping 10.000 Orders)– GBP 58,411.56

– 3-4 days

+ GBP 58,411.56

+ 3-4 days

Profit
(Sold Price – Good’s Value – Logistics Costs)
GBP 5.88GBP 11.72

What’s the result? When selling 20,000 products to EU customers, international bulk shipments with a local EU fulfillment hub saves you approx. £58,000.00 and speeds up your delivery time by 3 – 4 days. How do we save so much logistics costs on fulfilling your products in the EU?

In a nutshell: there are two different ways to transport your goods. In Scenario 01, you ship your products from your UK manufacturer to your UK warehouse with pallet shipping. Let’s say you receive an order from a customer living in Germany through your online shop. So, this will lead to fulfilling the order within the UK. Next, your order is shipped via single parcel shipment from the UK to the designated shipping address of the EU-customer. Hence the high shipping costs.

In scenario 02, you’ve already shipped your products in bulk from your UK manufacturer to your EU warehouse. So, when you receive an order from a customer in the EU, your logistics service provider would fulfil these orders locally. This leads to saving high amounts of shipping costs and delivery time.

Logistics Cost Explained: Single Parcel vs Bulk Shipping from the UK to EU

UK vs EU Fulfillment Costs

Comparing UK and EU fulfillment costs on an international level, you will realise that these costs are very similar. But on a national level, prices do vary between fulfillment providers and according to your business case. This depends partly on the operational focus of your chosen logistics service provider. Also, on the number of orders being fulfilled, the Stock-Keeping Unit (SKU) picks per order, and the location of the warehouse. E.g. if the warehouse is close to an airport or an urban area, one can expect higher fulfillment rates. To learn more about warehousing and fulfillment costs, refer to our guide on average logistics costs.

In our cost comparison, we’ve chosen Germany as a potential market to store your products locally. When searching for a fulfillment provider in the EU, you need to consider a few market variables. For example, ask yourself which market within the EU is attractive for your business? Clearly, choosing the best location for your warehouses in the EU is not that easy. But no worries, we can help you find the best warehousing and fulfillment partner in the EU.

So what are the main cost differences in our logistics cost comparison case? We see that fulfillment costs are similar in both scenarios. We’ve chosen similar geographic locations within the two countries – that’s why. Also, it’s the same product type, amount of fulfilled orders per month, and amount of picks per order. The costs differences result from shipping costs, export tariffs, return rate costs and delivery speed.

Comparing Transport and Shipping Costs UK – EU

Shipping single parcels from the UK to Germany costs you more than shipping parcels within Germany. In our eCommerce case, you save more than £4.5 per order for shipping. And this already includes the pallet bulk shipment of your manufactured goods from the UK to your EU warehouse. We’ve calculated these costs based on eCommerce best practices to provide a great customer experience. This means, customers can expect free shipping above a certain order value, and shipping tracking & sign on arrival services. Subsequently, your business would bear the transport costs, impacting your margin and profits.

Value-based vs. Price-based Export Tariffs

Now, this is very important to consider. The new free trade deal between the EU and the UK claims that there are zero tariffs and quotas for traded goods. But, this does not apply to all products. Check your export tariff for your product type on the official UK Government website.

In general, depending on the location from which you sell your goods, the export tariffs are applied on either the sold price or the value of the good. When you compare value-based vs. price-based export tariffs in our eCommerce case from above, you can save around 50% with local fulfillment. That’s almost £1.00 on top of your profits for each order.

What About Return Rates?

Each eCommerce business experiences some returns – that’s a fact. Expect for temperature-controlled shipping of e.g. fresh food and frozen products. Here, returns are not an option, but a money-back guarantee might apply.

In our eCommerce business case, one can expect extra shipping costs per order with a 10% return rate. In Scenario 02, you save 0.46p shipping costs per order, when returns are sent to your local warehouse in Germany instead of international shipping to the UK. Plus, it’s also more convenient for your EU customers to send parcels back nationally as they’re more used to it.

Comparing Delivery Speed

You can ship faster and cheaper if you fulfill and send your orders locally. Sure, you could also select an international overnight delivery express service, but this will cost you a fortune. In the second scenario, you can offer next-day delivery to your German customers without high shipping costs – how great is that? Your customers will love it. And it’s also more likely that they order again from your online shop.

Post-Brexit Free Trade Deal: How to save costs and time for logistics

Our costs comparison indicates that local fulfillment in the EU will save you a huge deal of logistics costs. This leads to increasing your profitability. In the first scenario, your profit per order is £5.88, whereas, in the second scenario, profits are £11.72 – almost double! In case you want to prepare your eCommerce business, Retail logistics or B2B supply chain for consequences of Brexit and free trade deal, flexible warehousing and Logistics-as-a-Service providers like everstox know how.

That being said, you need to choose and plan EU-fulfillment in the right way. E.g. the administrative work for VAT-registration in each EU-country can take several months. Fortunately, modern tax solution providers like Taxdoo sort all these administrative topics.

Before looking for a fulfillment provider, it’s best to follow our approach from above. Examine your business case. In other words, check your order volumes, product type, your expected order volumes, etc.

This is the day-to-day business for our team at everstox. We help merchants and brands, e.g. GREENFORCE and vly, to find the right logistics partners in the EU. It’s simple, just reach out to our team.

Did you like our Brexit impact guide for eCommerce UK – EU exports? We also have more Guides and How To’s for Retail, B2B and eCommerce logistics. Here are some tips:

About the Authors

Maximilian Nenning | everstox

Author:
Maximilian Nenning
Marketing Manager
everstox

About everstox

everstox is a technology and Logistics-as-a-Service (LaaS) platform enabling scalable and data-driven fulfilment for eCommerce, B2B and Retail businesses through a European network of independent logistics providers.

We enable transparent, efficient and ecological logistics solutions by forming Europes first tech-driven network of trusted warehousing & fulfilment partners.

Further information about everstox can be found under: www.everstox.com.

Check also our Resources section and our LinkedIn page to keep up-to-date with our recent news, posts and achievements.

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