9 step guide to post Brexit UK-EU exporting for Shopify merchants
- Jo Silverwood
- Read time: 21 minutes
It may come as no surprise that exporting goods from the UK to Europe and the rest of the world post-Brexit has become even more complicated than before we left the EU. It can be a minefield for eCommerce merchants to navigate the rules and regulations successfully, regardless of whether you are just starting out on your journey to going global, or setting up in a new territory.
But if you have identified potential in an overseas market for your product (and if you haven’t we can help you with that research), you should absolutely consider exporting to maximise your eCommerce potential - if you overcome the barriers to exporting with the right help and guidance, the benefits of going global will help to future proof your business, increase productivity, and reap those all important ROI rewards.
According to UK government research analysts, businesses who export their goods are on average 21% more productive, and more likely to ride out any economic downturns in the local economy too if they sell to overseas markets.
Our guide will help you to understand some of the latest rules for shipping internationally, and guide Shopify merchants through some of the steps to set up functionality to ‘get export ready’.
Here's a list of what we will cover:
- Post Brexit EU VAT rules
- Collecting EU VAT & OSS scheme
- Duty regulations & Delivered Duties Paid (DDP)
- Research & set up your HS codes
- Commercial Invoices
- EORI number
- DDP shipping labels
- Shopify Markets & choosing the right plan
1. Post Brexit EU VAT rules
From 1st July 2021, VAT rules on cross-border B2C eCommerce transactions changed, affecting everyone from online merchants and marketplaces both inside and outside the EU, to postal operators, couriers, customs and tax administrations to consumers.
How does this affect eCommerce merchants?
For eCommerce merchants, all orders shipped to the EU are now subject to VAT.
Since July 1st, 2021, buyers in the EU have been required to pay VAT on all purchases up to €150. (Both import VAT and customs duties will continue to apply on orders above this threshold).
Merchants shipping goods to EU buyers from outside of the EU can choose to collect VAT on orders below €150 to simplify the buying and shipping experience for their customers. If merchants choose not to collect VAT on exports to the EU below €150, customers will be charged upon delivery of the goods by the carrier.
Read more about Post Brexit Exporting to Europe VAT rules
How does this affect Shopify merchants?
As of July 1st, 2021, Shopify automatically updated tax settings to charge the VAT rate of the buyer’s shipping country for orders within the EU.
2. Collecting EU VAT & OSS scheme
If your combined sales to the EU is equal to or greater than 10,000 EUR you may need to register for an EU VAT number via the One-stop Shop scheme which allows merchants to collect and remit VAT for sales to the EU rather than registering in each country individually.
You can only use OSS if your store uses registration-based taxes and UK companies must register with the scheme via an intermediary to file the tax returns on your behalf. You should contact your local tax professional if you are not sure whether you need to apply to the IOSS.
There are lots of tax professionals who can help you with understanding your legal requirements for EU VAT and help you to set up IOSS. One company which integrates with Shopify and offers the IOSS service is Avalara.
According to the European Comission OSS portal, it is well worth the effort as merchants could save time and therefore money by registering with the scheme:
“Online businesses will benefit from a reduction in red tape of up to 95% by registering with the new One Stop Shop system.”
|Herd recommendation for Shopify merchants:|
Setup to collect VAT on orders up to €150 so that customers don’t have to pay the tax on delivery. If your tax professional advises, register for Import One-Stop Shop (IOSS) which is optional, and you need to do this via a tax intermediary (e.g Avalara) but if you don’t you will still need to register for VAT in individual EU member countries that you wish to ship to.
10. You must then use the IOSS intermediary tax professional (e.g Avalara Tax) to file and pay the tax office on your behalf.
3. Duty regulations & Delivered Duties Paid (DDP)
On orders above €150, there’s also duty to pay as well as any applicable VAT. You cannot use the IOSS scheme to process those shipments.
If you are selling goods above €150 and plan to continue to store goods outside of the EU, then here are the options available to you.
This is available within the taxes section of Shopify. Go to settings – Taxes and duties, and scroll down to this section:
|Herd recommendation for Shopify merchants:|
1. Add HS codes to products (see instructions in next section)
Note - collecting duties and import taxes at checkout is only available on Advanced/Plus plans and is a feature which is still in beta, so access must be requested via the Shopify Support team
Offering DDP on your international orders improves the user experience as the price customers pay at checkout includes all duties and taxes, avoiding any nasty additional charges on receipt of their parcel.
Your chances of improving your conversion rates are much higher if you offer DDP for international orders, as the global logistics leader DHL explains
“retailers who send DDP are growing at the rate of those that choose for duty to be paid on delivery, with 70% of online shoppers preferring to pre-pay duties and taxes at checkout.”
How to configure DDP in Shopify
The best way to configure DDP would be via a Shopify supported App such as Avalara AvaTax - a paid service only available to Shopify Plus merchants allowing you to get accurate tax codes, set tax rules per product to meet your business needs, and create accurate business tax reports. Shopify Plus merchants can find out more on the Shopify help center.
If you are not on Shopify Plus, you could try another Shopify supported App to accurately calculate and collect fully landed costs at checkout, such as Zonos Duty and Tax.
What if I don't want to offer DDP on my international orders?
If you don’t want to offer a delivery service with duties taxes paid, your customer will be responsible for any import duties on arrival at customs when the goods reach the country of destination.
It’s a good idea to clearly explain this both in your Shipping policy and other areas of your store (announcement bar, website footer, product pages and delivery FAQs) to make sure that your customer knows before placing their order that they are liable if there are any additional duties to be paid for their goods.
You could add a message similar to this one to clarify that you are not liable for any import duties:
INTERNATIONAL ORDERS: We can’t guarantee that you will or will not be charged customs duties or taxes for overseas shipping. Customs or import duties may be charged once your order reaches its destination country and must be paid by the recipient. (Insert merchant name) are not liable for these charges. This applies only to International orders outside of the UK.
Shopify’s shipping policy article contains lots of Shipping policy examples and templates on how to create your shipping policy.
4. Research & set up your HS codes
Harmonized system or HS codes (also known as Commodity or Harmonised Tariff codes) are six digit codes which identify and categorise each imported good for VAT and duty purposes, to be paid either by the exporter (ecommerce merchant) on shipping, or by the importer (customer) on receipt of the goods.
Selecting the correct code for each item you ship internationally is essential to avoid unnecessary delays at customs, or even having your parcel destroyed if the required documentation isn’t supplied.
For Shopify merchants, HS codes need to be added to your products in the admin area before you attempt to export or use the DDP function.
How to add HS Codes to your Shopify store
Follow these steps to add an HS code to your goods in the Shopify admin section:
- On the left hand menu bar, select Products and then click on Add Product on the top right hand side to add new, or select Edit in the Variants section of existing products.
- Scroll down to the Shipping section, and note the Customs information section just below it.
- Add the country/region of origin for your product. In most cases, this is where the product is manufactured. You may also need to add the province of origin, depending on the country.
- Fill in the “HS (Harmonized System) code” field by either searching for your item (e.g., “trousers”) and select the relevant six-digit code that comes up (e.g., “620463”) or entering it manually. Note that the search function is only a general guide – if unsure of the exact code to suit your product/material you can search various sites to find the correct HS code.
- If you have a code longer than ten-digits, enter it manually.
- Click save.
You can see this process visually below:
If you have a store with many products and variants it might be worth seeking professional help with sourcing your HS codes which could save you a lot of time and money in the long term, as it's essential that you get these codes 100% correct to avoid issues at customs.
Avalara is just one of many companies who offer this HS code finder service for a fee depending on your requirements.
Your local Department for International Trade or Chamber of Commerce International Trade Manager should be able to help recommend alternative companies who can advise and/or offer this service.
5. Commercial Invoices
When using international couriers (UPS, DHL, DPD, FEDEX etc) you will need to supply a commercial invoice instead of the standard customs declaration form CN22/CN23 which is used by Royal Mail to help customs officials understand what is in the package.
Customs declarations or Commercial invoices are required for:
- Payment control and repayment and remission of duties/taxes
- Checks on licensable, prohibited or restricted goods
- Ensure EU requirements for transit documentation are met
- Compiling trade stats for use by the government, EU and Commerce
Every International order shipped via one of the international couriers requires a commercial invoice for the shipped goods to prove ownership and payment.
Key information you will provide on this form will include:
- Control payment, repayment and remission of duties/taxes such as VAT
- Type of goods – HS code
- Nature of transaction – temporary, returns, repairs
- Value of goods – transaction price
You can complete these invoices on your international carrier’s website. The invoice must contain the value of your goods – i.e. the price you are selling them for. Your carrier might also require the freight costs and export insurance costs. It is essential that your information is accurate as the carrier will use this to make an official customs declaration.
With some carriers, the customs information could be included within the shipping label.
- If you have processed using DDP, mark the terms of delivery as DDP to indicate that duties and import taxes have been paid.
- If you haven’t collected duties and import taxes at checkout, mark the terms as DDU (delivered duties unpaid) or DAP (delivered at place) to indicate that these haven’t been paid.
Make sure that the information on your invoice marries up with the order in Shopify admin to avoid discrepancies and issues at customs which could result in delays in your goods reaching the end user – not good for your UX and potential positive customer review from your international buyers. These items should match up:
- HS Code
- Country of origin
- Price after discounts
- Collected duties and import tax
- Your local tax registration number if you are collecting low-value goods tax (i.e tax on orders less than €150/£135)
Remember – Your export is someone else’s import! If you put yourself in their shoes, what information would you like to know about the export? Think about mode of transport, estimated delivery date, shipment details, copy of the export docs to make importing easier.
6. EORI number
You may be asking, do I need an EORI number to export to Europe? An EORI or Economic Operator Registration and Identification number is now mandatory for exporting and importing goods to/from the UK meaning that you cannot trade internationally without this number. It must be added to your customs documents such as the commercial invoice.
Apply online for an EORI number if you do not already ship goods outside the EU. The number operates in all 28 EU member states and registration for the EORI can be done via the website of local customs authorities. It can take up to 3 days to get your unique EORI number.
EORI Number = Country code + unique national number up to 15 numbers ( e.g. GB123456789000)
The code applies even if you are not VAT registered, and If you are, your allocated EORI number will comprise your VAT number plus an extra 3 digits.
For further details on how to apply visit GOV.UK.
7. DDP shipping labels
Once you set up DDP to collect duties and taxes at checkout, you must purchase and use a DDP shipping label instead of standard shipping labels for international orders. If you don’t, your customer will end up paying twice for the duties an import taxes.
You must also check that the Information on the label matches the information used to calculate duties and import taxes in Shopify, to avoid additional charges. Learn more tips from Shopify help centre about purchasing and using DDP shipping labels
Another important aspect to your international eCommerce success is understanding Incoterms and what they mean for you as an exporter and your customer. International Commercial Terms (or Incoterms) are set by the International Chamber of Commerce (ICC) and define the responsibilities of sellers and buyers concerning the delivery of goods under international sales contracts.
They also determine the customs valuation and how the costs and risks are allocated to each party, expressed in export documentation as one of 11 three letter acronyms:
For sea transport (and inland waterways):
Free alongside Ship
Free on Board
Cost and Freight
Cost, Insurance and Freight
For any mode(s) of transport:
Carriage paid to
Carriage and Insurance paid to
Delivered at Place
Delivered at Place Unloaded
Delivered Duty paid
When choosing DDP the merchant is responsible for customs and import clearance of the goods. However the customer (or importer) must assist the merchant (exporter) in obtaining official authorisations where applicable. This means that DDP should NOT be used if the merchant cannot arrange either directly or indirectly for the clearance of commodities.
The Access2Markets European Commission portal for EU exporters and importers is a good place to research detailed information and guides on tariffs, rules of origin, taxes and duties, import procedures, product requirements and trade barriers. You can use it to help you find the best export market for your products too.
9. Shopify Markets & choosing the right plan
Shopify launched Shopify Markets in summer 2021 which is fast enabling eCommerce merchants big and small all over the world to sell cross-border easily from a single store.
This amazing functionality empowers every merchant on the Shopify platform with the tools to ‘go global by default’ to reach new markets with ease, increase sales and scale Shopify businesses faster than ever before.
It’s essential to choose the right Shopify plan to unlock the Shopify Market features you need for your international journey. Our handy table shows at a glance what each of the 4 plans has to offer right now, including what’s in the Shopify roadmap for future functionality on the Advanced and Shopify Plus plans, such as further customisation of storefronts, product catalogues and management of fulfilment locations per territory.
|Feature||Shopify basic||Shopify standard||Shopify Advanced||Shopify Plus|
|Manage how you sell to each market from one store|
|Sell in different language per territory|
|Sell in local market currency*|
|Provide local payment options*|
|Set up custom domains to optimize for search|
|Estimate and collect duties and taxes at checkout|
|Set custom pricing per market*|
|Coming soon in Shopify's current development roadmap:|
|Customise product catalogue by territory|
|Customise storefront content by territory|
|Manage fulfilment locations by territory|
*with Shopify Payments
|International transaction fees|
|0.85% when duties/import taxes are calculated with Shopify Payments; 1.5% if using alternative payment provider|
|1.5% currency conversion fee per order|
|Fees for using local payment methods are included as part of Shopify Payments international payment processing.|
As the old saying goes, fail to prepare, prepare to fail. Nothing can be more true in the post Brexit world when trying to navigate the red tape to export goods successfully from the UK to the EU and beyond.
Another good place to start for general advice on exporting goods from the UK is here: www.gov.uk/export-goods
You can also use the UK government ‘Check how to export goods’ database for rules and regulations by country to discover information about both exporting in general and by specific products to your export destination country.
Do your research well at the start of your global journey and you are on your way to selling internationally with ease. Poor customs paperwork, incorrect set-up and unclear information and policies on your store can lead to delayed deliveries, customer dissatisfaction and potential order cancellations. You could incur unnecessary costs or even fines, late delivery penalties or potential disputes, and fail to make any profit from your export endeavours.
If you’ve done your research, acted upon the legal advice from your tax professional about customs and VAT, appointed the right international carrier, configured and localised your eCommerce store correctly for your international customers, you should be ready to expand into new territories with ease and start to reap the rewards of your new global store.
Are you already exporting but want to improve your brand visibility in the target country to increase sales? Read our 9 international SEO tips to maximise your global eCommerce sales.
Ready to take the next steps to exporting and need help with setting up your first expansion store or help localising an existing store to improve global rankings and secure more sales?
Get in touch with our international Shopify experts today.