January 7, 2022
By: Peter Gregory
Want to sell to European customers through your site? With a population more than 6 times the size of the UK’s (source), the EU represents a massive pool of customers.
Brexit has changed the way that the UK can trade with customers in the EU, and there are a lot of rules you now need to follow. Luckily, we’re in constant contact with hundreds of clothing businesses just like yours who are facing the same challenges!
In this guide, we’ll reveal the top 10 practical steps that every British clothing designer needs to take before selling to customers in the EU. Whether you’re trying to sell to Ireland, France, Germany, Hungary or any other EU member state, this list will give you everything you need to know to get started!
In the UK, VAT numbers are issued by HMRC, so you could be forgiven for assuming that your VAT number only applies to UK sales and purchases. In fact, most countries in the EU charge VAT on a lot of goods, and if you want to import or export goods, there may be VAT to pay on top of any customs duties.
The best place to start is with a UK-registered VAT number. Here in Britain you’re not required to register for VAT unless your turnover hits £85,000 (learn more on HMRC’s website), but things get more complicated if you sell goods to an EU-based customer. Depending on what you’re selling and who you’re selling it to, you might have to register for VAT in that customer’s country (search VAT rules by country on the Europa.eu website).
When the customs authorities are deciding whether to let your goods cross the border (and what taxes are due), they check your type of goods against a massive list called the HS (Harmonized System) Codebook.
Almost every country on earth uses the HS system to figure out its customs strategy. Every type of product you can think of — from cars to computers to shoelaces — has its own HS code (also known as a tariff code). As soon as you know what HS code your goods fall under, you can get a clear idea of the rules that your type of product needs to follow. Your customer (or you) might need to pay customs taxes, apply for a share of an import/export quota or produce additional customs documents before your order can get where it’s meant to go. Once you know the HS code, you can figure it all out.
HS codes can be a bit complex. There are a few tools on the Gov.uk website (see here) which can help you. If in doubt, our advice is to hire a customs broker. A few hours of time with a professional customs expert can save you thousands in the long run.
When you sell something to an overseas buyer, there are a lot of different costs and responsibilities that need to be considered. Who is going to pay delivery costs? Who is paying customs charges? Do goods have to be insured when they travel, and if so, who pays this bill? You and your buyer both need to understand, up-front, who is responsible for what … especially if you’re selling a bulk order to a retailer based in the EU.
This is where Incoterms come in! Incoterms are an internationally-recognised set of ‘template contracts’ that you can use when selling or buying goods overseas. Some Incoterms put a lot of responsibility on the buyer, while others put more responsibility on the seller. For instance if you use the EXW (Ex-Works) Incoterms, then your overseas buyer is responsible for picking goods up from your place of work, shipping them to their final destination and covering all customs costs and risk of damage during transit. DDP (Delivered Duty Paid), on the other hand, works the opposite way: the seller handles everything and takes full responsibility for getting goods where they need to go.
You can learn more about Incoterms and how they impact British trade at great.gov.uk.
When you ship a parcel abroad, lots of different logistics companies get involved in the delivery of your goods. Most courier companies, ferry companies and airlines have parcel tracking systems that can tell you where your parcel is at any given moment, but they don’t all talk to each other, and you sometimes have to pay an additional fee.
When you’re selling goods from the UK to customers in the EU, a good tracked delivery service is usually worth the extra money. When you can share a tracking reference with your customer, any unexpected delays are explained away. And unexpected delays will happen from time to time. Parcels will get held up at customs occasionally. Planes and ferries can get cancelled due to bad weather. Parcel depot workers might have to self-isolate. The more you can do to make sure everybody knows what’s going on when things go wrong, the happier your customers will be.
The EU is a collection of lots of different member states, all with their own laws, customs and customer expectations. Consumer protection rules are still very similar in the UK and the EU, so right now if you’re complying with things like the Distance Selling Act then you’re probably meeting the minimum legal standard for selling to customers in the EU. But who wants to just do the minimum?
If you want to offer exceptional customer service and build your brand overseas in a meaningful way, then you need to go further than the legal minimum. Do your own research on local customs. Find out how easy it would be for someone in Austria, for instance, to return a garment if they ordered the wrong size. Figure out whether a shopper in Portugal expects discounts, speedy delivery or free returns outside of the normal returns window. The information is out there — you just need to dig around, then make sure that you are going one better than your customer expects.
Have you got a French or German version of your website, or is all the text written in just English? Language translation is incredibly important if you’re trying to sell to EU-based consumers. There are 24 official languages in the EU (source). Most online shoppers will — rightly — expect to be able to buy goods in either their native tongue or a popular European language. It’s up to you to come up with a workable solution for this.
Almost every ecommerce platform out there gives you the ability to display your online shop in multiple languages. You don’t have to have every one of the EU’s 24 languages pre-loaded, but you should at least consider adding one or two alternatives to English.
It’s also important to consider how you come up with your translations in the first place. You could just copy-paste all of your text into a free automated translation app like Google Translate, but sometimes the computer won’t understand the nuance or double meaning of what you have written. Your translations must be clear, comprehensive and convincing, or they won’t help you sell your clothes online. Sometimes, your best option is to spend some money and hire a professional translator.
UK consumer data protection law is basically the same as EU data protection law (source). This is good news if you’re trying to store any EU customer data (including emails and delivery addresses), because you just have to follow the rules you were planning on following anyway for your UK customers.
Your first step should be to register with the Information Commissioner’s Office. On their website (see ‘SME web hub’ here) they have lots of advice on every aspect of data protection law. You can learn a lot from reading their easy-to-follow how-to guides, and it doesn’t cost much to get registered. What’s more, having an ICO registration number proves to your customers that you’re a legitimate business that takes their personal data seriously.
Most countries in the EU use the euro (€), but there are still some countries (Sweden and Denmark, for example) that use their own currency. If you’re a small business it’s probably simplest just to sell everything in pounds sterling only. As your business grows, you may want to start accepting foreign currencies, too.
Just watch out for the exchange rate if you want to sell goods with a foreign price tag. Fluctuations in the exchange rate can eat into your profit margin and — in extreme cases — even cost you money. Keep a close eye on exchange rates and talk to a financial professional about ways to protect your business from sudden shifts in the value of the pound (or euro).
Any EU business that wants to sell goods abroad needs to have an EORI (Economic Operators Registration and Identification) number. If you’re a UK business selling goods in the opposite direction, it can be really useful to have an EORI. In some cases, you can’t trade without an EORI.
The EORI number is a bit like a company registration number or a VAT number in that it ‘belongs’ to your business. You have to include an EORI on a lot of customs forms, so even if you don’t technically need to have one, it can be very helpful to apply for one. You’ll find that an EORI will speed up some of your customs procedures and potentially save you some money, too. Learn more about EORIs on Gov.uk
Are your goods made in britain? Are you sure? If you print your own t-shirts from a commercial premises in Cardiff, for instance, you might assume that your goods are of UK origin. But what if the cotton for those t-shirts was farmed in Sub-Saharan Africa, milled in North America, then cut and stitched in the Far East? Should you still say that the product originates in the UK?
In the world of customs, this kind of economic origin information is very important to get right. Different countries apply different tax rates to products depending on the origin of the raw materials involved, how much work has gone into turning those raw materials into finished goods and so on. If you get the origin information wrong when you’re asked, you can land in hot water with the customs authorities.
Many businesses apply for something called ‘Proof of Origin’ — it’s basically a certificate that confirms the origin of your goods so that you can pay the right amount of tax and get your parcels through the border faster. The Gov.uk website has more information on proof of origin if you’re interested (see here).
Customs is a very complex field and the penalties for non-compliance are high. A lot of businesses make it easy on themselves by hiring a customs broker. Customs brokers are experts in the paperwork side of getting goods across borders. They can help you classify goods correctly, and if there’s ever a problem with the customs authorities, they can advise you. Your accountant or solicitor might be able to help you with some of the challenges involved in exporting to the EU, too.
Most of the items on this list are important if you’re selling direct to consumers. If you’re selling to retailers, then your customs burden can get easier over time. If you can find a good reseller in each country with which you plan on trading, and if this reseller has the systems in place to help grow and support your business, our advice is to go for it! You’ll be able to stay focused on your product lines, effectively outsourcing the day-to-day fulfilment and customer service work to a regional partner who speaks the local language.
If you’re looking for more information about selling overseas, and how to manage the impact of Brexit on your business, we’ve got a few guides on our website which you should definitely take a look at.
Whatever you do, remember that all of this export and customs stuff is just red tape at the end of the day. You’ll find it a pain the first few times you sell to an EU customer, but after a while it will become second nature. And you don’t have to do every step each time you sell something (for instance, your VAT number and EORI number lasts a lifetime).
Don’t be put off, and remember it’s all about growth. If you can see an opportunity for your product in the EU, our advice is to go for it!
Thanks for reading!