Guest blog from Shypple | A three-part series on shipping solutions for Amazon EU | part one
Selling in Amazon Europe is a bit more complicated than simply shipping your products to a European warehouse and watching the sales roll in. For this series, we welcome Shypple, a company whose “shipping made simple” vision is to make global trade virtually frictionless. Shypple is a digital forwarder offering all services from A to Z: door pickups, custom brokerage, ocean/air/rail freight services, on-demand storage options, and more. Shypple makes selling in Europe much easier, but handling shipping or catering shipping options specifically to your business.
To break down the process, our first installment will cover distribution (fulfillment) and financial (VAT) aspects of an Amazon store established in Europe. There are different fulfillment options Amazon Europe offers, and all of these have specifics when it comes to VAT, as well. We will also discuss tariff code and import duties, as they relate to your decisions when it comes to selling in Europe.
First things first: In order to even start importing to the European Union, a complete application for both Valued Added Tax (VAT) and an Economic Operator Registration and Identification (EORI) number is a prerequisite. An EORI number is required by all merchants selling overseas in order to import goods, and unless you’re selling a low-cost product that you believe will have low profit margins then you’ll need to register for VAT, too.
Once you have secured the proper EORI and/or VAT licenses, it’s time to list goods on the marketplace. Finally, a seller must decide how the orders will be fulfilled - how will the goods be delivered to the customers across Europe?
One of the solutions is to arrange your own transport and deliver directly to end customers around Europe, called Fulfilment by Merchant (FBM).
While there are some benefits to doing it all yourself (namely: control of the process) most sellers prefer to take advantage of one of the following three Fulfilment by Amazon (FBA) options:
- Pan-European FBA
- European Fulfillment Network (EFN)
- Multi-Country Inventory (MCI)
Pan-European FBA
Enrollment in this program basically means giving permission to Amazon to transfer inventory all over Europe and fulfill orders from a local fulfillment center. Pan-European FBA helps a store place inventory closer to European customers -- orders will be fulfilled from seven main distribution centers (UK, Germany, Spain, France, Italy, Poland and Czech Republic).
Selling with Pan-European FBA gives you 24/7 Amazon support. When a product is sold in one of Amazon’s European marketplaces via Pan European FBA, only the local fulfillment fee from that marketplace must be paid. As a contrast, when product is sold to customers of other marketplaces via the European Fulfillment Network (EFN), a cross-border fee for each order shipped must be paid.
Using Pan-European FBA immediately makes the seller obligated to be registered for VAT in all seven countries. Therefore, the seller must take into consideration the cost of VAT registration (compliance in seven marketplaces) and weigh it against the fact of fulfilling and delivering orders at lower costs and in less time. That’s the catch! For more information read about Pan European FBA from Amazon.
European Fulfillment Network (EFN)
EFN is a bit simpler than Pan-European FBA. The seller sends products to just one of Amazon's warehouses in one marketplace. Consequently, all orders are fulfilled from that particular country. The downside to this is that delivery times will be much longer. Additionally, delivery costs are much higher when you sell to customers in other marketplaces via EFN, having to pay cross-border fees for each order that is shipped.
The EFN program obligates you to register for VAT in the country of storage. The seller then invoices and collects VAT on sales and passes it to the national tax authorities via VAT tax return filings. EFN is a great service for new businesses who want to benefit from Amazon’s fulfillment networks and businesses that do not need to store their products in several countries.
MCI (Multi-Country Inventory)
MCI enables a seller to dispatch FBA inventory to Amazon fulfillment centers in multiple countries of choice. It’s an alternative to the Pan-European option. Here, the seller can choose the countries to which inventory will be shipped and stored. In this scenario, the seller is only obligated to register for VAT in the countries where inventory is stored (instead of all seven registrations in the Pan-European option). Choosing this option means sellers save on VAT compliance costs. As a result, local fulfillment fees apply when selling on marketplaces where inventory is locally stored. On the other hand, cross-border fees still must be paid when selling to other Amazon EU marketplaces that do not have inventory locally stored.
Learn more about Amazon fulfilment locations.
Tariff codes
Another important facet of shipping within the EU is applying correct tariff codes to ensure your products are categorized correctly. All products are classified under a tariff code that carries information on:
- Duty rates and other levies on imports and exports.
- Any applicable protective measures (e.g. anti-dumping).
- External trade statistics.
- Import and export formalities and other non-tariff requirements.
The EU classification system consists of three integrated components:
- The Harmonized System (HS) is organized in a hierarchical structure by
-
- Sections
- Chapters (2 digits)
- Headings (4 digits)
- Sub-headings (6 digits)
And supported by implementation rules and explanatory notes.
- The Combined Nomenclature (CN) is the EU's eight-digit coding system, comprising the HS codes with further EU subdivisions.
- The Integrated Tariff (TARIC) provides information on all trade policy and tariff measures applicable to specific goods in the EU (e.g. temporary suspension of duties, anti-dumping duties, etc). It comprises the eight-digit code of the combined nomenclature plus two additional digits (TARIC subheadings).
Classification can be determined by a number of factors, including composition, form, and use. As an example, let’s use a pineapple. Pineapple, as an edible fruit, gets the HS code of 080430 under the section “Vegetables” then under the sub-header of “Pineapples.” On the other hand, pineapple juice gets the HS code of 200820 and undergoes additional classification depending on if it does or does not contain added spirit and the type of packaging (exceeding or not a net content of 1 kg). As you can see, this can be rather specific and detailed with a lot of factors.
Customs duties
Import duty on your products is determined on the basis of the commodity code and the customs value. The customs duty is usually an ad valorem duty, calculated as a percentage of the customs value of the goods. The customs duty can also be a specific duty, e.g. euros per kilo or euros per liter.
As a rule, the customs value is the purchase price of the goods PLUS the transport and insurance costs up to the EU border.
In addition to customs duties, Import VAT is something which is normally paid when importing. Importers must pay VAT on top of the total sum of the customs value and the import duties. The VAT is paid to the state in the country of entry and according to applicable local rates. Each EU member state sets its own VAT rate. Each country can also set different VAT rates for different products or services – or even implement exemptions (0% VAT).
For more information on standard VAT rates across EU, please check the following PDF document “VAT rates applied in the Members States of the European Union”.
Example:
Customs Value: EUR 10,000
Import Duty: 10% (EUR 1000)
Sum: EUR 10,000 + EUR 1000 = EUR 11,000
VAT Rate: 20% (DE Rate)
Total VAT: 20% x EUR 11,000 = EUR 2200
Total Amount: EUR 11,000 + EUR 2200 = EUR 13,200
Here is a useful tool from the EU Commission on Tariff Codes.
In summary it is important when importing to Europe that you have applied for an EORI and VAT license and you have decided where you would like to store your inventory and how you would like to fulfil your orders. Your shipping company will be able to assist you with classifying the correct tariff code and calculating the customs duties.
In our next post we will be looking at Brexit and the impact this could possibly have on shipping goods and holding inventory in the UK.
If you are looking for new ways to organize your freight shipments from or to Europe or are planning to start buying or selling goods via Amazon in Europe, get in touch. Shypple’s e-commerce expert, Milan, at m.borkovic@shypple.com, would be glad to help you.
