E-commerce in full swing

Consumers order more and more from foreign webshops. Also, recently a new European VAT regime for the e-commerce sector took effect. How do Customs and the industry respond to the rapid changes in the market?

E-commerce is developing rapidly. People are ordering much more from abroad, for instance. Also, on 1 July 2021, a new European VAT regime for the industry will take effect. Customs is making every effort to continue to ensure proper supervision in this changing market.

Consumers are ordering more and more online. And even more in this time of corona. They also increasingly order directly from foreign web shops instead of Dutch shops. The consequence: containers are now packed with tens of thousands of packages for just as many individuals. Previously, a container often contained only one or a few large orders. As a result, the number of declarations processed by Customs is increasing explosively: from around 250 million in 2018 to approximately 800 million in 2021. This growth means a lot of extra work for Customs.

Other developments also pose challenges. Such as ‘fulfilment’, the process of order processing. Because consumers expect short delivery times, goods are often imported before they are ordered. They can then be delivered to the customer faster. Because the products have not yet been sold, it is more difficult for Customs to determine their value. And to determine import taxes. The fact that the products are often made in countries with low production costs only adds to the challenge.

There are also more and more players in e-commerce. They include parties that make ‘drop shipping’ possible, i.e. sales without keeping stocks. And parties who arrange customs declarations for companies, for example. As a result, information on orders becomes even more fragmented. This makes it more difficult for Customs to check whether declarations are correct.

Therefore, we took several decisions in 2020 to keep a grip on the rapidly growing flows of goods from non-EU countries. For example, declarations are divided among several declaration systems, per type of transaction and sometimes per country where the goods originate. We also use data analysis to map out where the most risks lie, enabling us to check more intelligently. And we looked closely at where in our organisation we could use extra supervision capacity, in the context of the huge increase of the number of declarations.

New VAT rules
From 1 July 2021, new VAT rules will apply to web shops selling non-EU goods to consumers in the European Union. In 2020 we prepared for the implementation of this new scheme, which is fairer for European entrepreneurs. For example, we built the new declaration system DECO, especially for goods that fall under the new VAT regulation. Also, we intensively consulted with our colleagues from the Ministry of Finance and ‘Brussels’ to make the implementation run efficiently.

What the new rules mean: the exemption from import VAT on goods with a value of € 22 or less has been abolished. Another change: EU suppliers selling for more than € 10,000 a year to consumers in the EU must charge the VAT rate of the countries where they sell. And pay VAT here as well. It also gives platforms that facilitate sales to consumers in the EU, such as Amazon and eBay, greater responsibilities for declaring and accounting for VAT.

“More transparency for the consumer, and more efficiency for us”

What do the new European VAT rules mean for Customs and the business community? Han Bosch, e-commerce specialist at Customs, and Walter van der Meiren, director of UPS Europe, talk about it.

What do you think of the new rules?
Bosch: “They were badly needed. The world of e-commerce has changed a lot in a short time, and the rules were no longer in line with this. Look at that exemption, for example. If you buy a 20-euro product from the shop around the corner, you pay 21 per cent VAT. But that is not the case when you order outside the EU. This creates unfair competition for Dutch and other European entrepreneurs. That exemption also invites abuse. Some entrepreneurs deliberately understate the value of their goods. That means the Netherlands misses out on a lot of income, just like all the other EU countries. This new regulation puts an end to that.”

Van der Meiren: “I’m pleased that platforms are being given a bigger role in VAT. Many web shops are not clear about the import duties. Or they list prices without the VAT. The customer then suddenly has to pay additional charges when he gets the package. We now often have to return a package because the customer finds it too expensive. But we have already paid the import duties and VAT. And we have to ask for it back. It’s a complicated process. With platforms gaining more responsibility for VAT, I assume they will start showing prices more clearly. That means more transparency for the customer and more efficiency for us and for Customs. Plus: it gives us the assurance that the value is correct, and we don’t get hassled about import duties and VAT afterwards.”

What do the rules mean to you?
Van der Meiren: “With the exemption disappearing, each package must be declared digitally. No matter how low its value. This means we need to hire and train more specialists. Entrepreneurs can make use of a new import regime: the Import Regime. They then pay the VAT on goods under € 150 in one monthly declaration to the tax authorities of one member state instead of per product and per country. They may also declare all goods under that amount to Customs for import in one country. Even if those goods are intended for other member states. In theory, this is easier for us, but the problem is that this scheme is not mandatory. We can’t always tell if our customers have opted in, and therefore if we are allowed to declare all goods in a country or not. We then have to check this with the shipper first, which can delay the shipment.”

Bosch: “The same applies to Customs. We will soon have 3 identical packages that 3 different regulations can cover. That doesn’t make it any easier to supervise. For us, it is handy that entrepreneurs can declare everything in one country with the import regulation. We usually have to ensure that only goods with the destination of the Netherlands are imported into our country. That is not the case with the Import Regime. Also, some checks can be done automatically with this scheme. But other than that, the work hasn’t been made any easier for us. We still have to do some checks, which sometimes mean opening packages.”

How did you prepare?
Bosch: “The new rules have many implications for our IT systems, so we’ve been working hard to adapt them in time. We also started a project team. And we trained people and gathered a lot of information. We went through the new rules with the business community, looked together at possible bottlenecks and sought solutions for them. We have also made an overview of questions that companies have. The answers can be found on our website www.douane.nl. We’ve done our best to make sure imports go smoothly, for business and for Customs.”

Van der Meiren: “It was a race against time for us. Because each member state has its own customs system, and these 27 systems all had to be adapted. That means we actually had to prepare 27 times. I must say: the Netherlands is one of the few countries where Customs does a lot on its own and really understands what can be improved. This helps us to know how to apply the rules and which systems to change. And that in turn helps us explain the new rules to customers.”

This interview also appeared in our recently issued overview ‘Dutch Customs in 2020’. Click here to read the full publication.

Do you want to know all about the new European VAT rules that came into force on 1 July 2021? And about the choices Dutch Customs has made in terms of their implementation? Then read our ‘White paper e-commerce – Check the changes to your customs affairs’.

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