Brexit UK-EU B2B switch to Delivered Duty Paid DDP Incoterms

Since 1 January 2021, the end of the Brexit transition period, B2B businesses are switching their commercial terms (‘Incoterms’) of cross-border losing business. Failing to do so will certainly cause delayed deliveries and an end to repeat business. 

There are two most popular commercial terms – known as Incoterms – for cross-border sales are: 

1.     Delivered Duty Paid DDP, in addition to organising full transport to the customer’s site, the seller takes care of all the post-Brexit VAT and customs bother for the import. A great customer experience; but you’ll have to manage the paperwork and taxes. In the case, you have become the Importer of Record and customs declarant.

2.     Delivered at Place. DAP, the seller only transports the goods to the port (seaport, train or airport of departure); the customer has to pay import tariffs and VAT. Much easier for you as the seller; but your customer won’t appreciate the extra costs and most marketplaces will block you. 

Contact Avalara for FREE guidance on how this works, and help with some of the challenges listed below.

UK suppliers in particular are fast moving to DDP because they fear losing EU customers to EU-resident suppliers who do not face the new customs declarations, potential tariffs and import VAT charges. But this can bring many admin and import tax challenges:

• The importer will need a UK and EU EORI
• The importer will have to complete customs declarations - although the UK has given a six-month deferment. 
• Also, the importer will have to identify the right customs commodity code to avoid over or under paying any tariffs.
• Import VAT, which can be avoided through Postponed VAT Accouting (PAV) in the UK and deferred import VAT in the EU.
• UK businesses may need to appoint an EU fiscal representative in different member states for VAT registrations
• Requirement to appoint an indirect Customs representative to act as the import declarant

The picture is the same on B2C where marketplaces are forcing sellers to go DDP on distances sales and own, foreign held stock business model.