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A Single Digital E-Commerce Market

On 1 July 2021, the rules and regulations for importing goods into the EU change fundamentally, creating a single e-commerce market and digitalizing the operating environment for logistics and commerce stakeholders along the entire delivery chain

e commerce market

September 2020

Author: Walter Trezek Twitter Linkedin

The European Union (EU) is a major e-commerce market, with almost 90% of its 446 million inhabitants online.

B2C e-commerce revenue in Europe is currently growing at 12.72% a year, and is projected to exceed EUR 700 billion in 2020.

Around a 1/4 of all consumer purchases are made from sellers based outside Europe.[1]

2021 brings a truly digital e-commerce market

The EU eCommerce VAT package[2], which comes into effect on 1 July 2021, revolutionizes Europe's e-commerce market.

The digital handling of import customs and VAT on all transactions becomes mandatory, and import VAT becomes due on each and every shipment sent to the EU.

This is a disruptive change, and will lead to the emergence of a whole range of new business models.

It brings to an end to the current dominance enjoyed by EU postal operators in importing ecommerce shipments, and their monopoly on paper-based customs clearance.

This development is further accelerated by fundamental changes in postal pricing, such as dramatic increases in UPU rates.

Furthermore, shipping, customs clearance and import VAT management are all becoming separate transactional workflows. This creates new options for e-commerce marketplaces and online merchants, and offers greater flexibility for optimizing commerce logistics and last-mile-shipping within the EU.

And as if all that weren’t enough, new EU standards are also emerging, involving more local obligations to digitally register and notify authorities (e.g. waste management).

How the EU ecommerce VAT Package fundamentally changes the e-commerce market from 1 July 2021:

  • Abolition of the import VAT threshold limit (de minimis rule) for low value B2C consignments below 22 EUR – VAT is payable on all goods imported into the EU.
  • Import-One-Stop-Shop model (IOSS) to manage all local import VAT (all EU target countries consolidated under a single tax identification number and account and registered with one selected EU tax authority).
  • Shipments valued under €150 are exempt from import VAT when the Import-One-Stop-Shop is used, with digital customs (pre-)declaration enabling digital clearing and seamless border-crossing where import VAT payment liability is clearly documented.
  • Marketplaces (“deemed suppliers”) liable for the payment of import VAT.
  • Removal of de-facto customs clearance privilege enjoyed by designated postal operators with the end of paper-based customs clearance for low-value consignments (below €22) = over 2/3rds of cross-border shipments to the EU ecommerce market.
  • Customs, import VAT and shipping channels become independent entities – opportunity for importers to optimize flexibility and cost by choosing different service providers for each transactional channel.

New operating environment throws up extensive challenges…..

On 1 January 2021, the Universal Postal Union (UPU) introduced mandatory electronic advanced data (EAD) notification for every individual cross-border commercial mail item destined for delivery within the networks of designated postal operators worldwide.

In addition, current developments at UPU level, in particular rising UPU tariffs, make the previous, often preferred model of the “classic postal channel”— sender hands mail to a non-EU postal operator which forwards it to an EU postal operator for customs clearance and delivery — increasingly unattractive.

Users of this traditional channel will need to look for new and efficient customs clearance and VAT solutions.

These solutions are independent of the mail item delivery itself so that, following customs clearance, the sender is free to choose the optimal delivery channel for these items within the EU (e.g. remain within UPU channel, direct entry to the postal channel in the EU, commercial delivery solutions).

….as well as opportunities

These omnichannel and multicarrier solutions may increase complexity and the demand for local know-how, but they also provide interesting options for reducing cost, boosting quality and increasing control and flexibility along the delivery chain, starting well before the collection of postal items and ending well after last mile delivery.

All of this will have a significant impact on cross-border commerce and imports into the EU.

Global impact on logistics & commerce

The greatest impact in the e-commerce market will be felt by shippers importing consignments of goods into the EU – not only those based in the major Asian marketplaces, and eShops, but also shippers in markets such as Switzerland, USA, Canada and Russia.

Logistics service providers outside the EU, both designated postal operators and commercial companies, face the same set of challenges.

They will need to implement digitalized cross-border logistics solutions for imports into the EU, provide their customers with relevant and flexible digital solutions, and comply with the new rules and regulations – all whilst retaining their competitive edge.

No stone left unturned

The COVID-19 crisis is only accelerating this development.

Already, there are clear indicators that when cross-border transport capabilities are reestablished, buyers will revert from their current local focus to options in which the primary consideration is cost.

In 2021 we expect to see growth rates for inbound volumes to the EU of a scale hitherto unknown — assuming that e-commerce market stakeholders can successfully adapt to the new environment and create the digital capabilities required to exploit these new business opportunities.

[1] Europe 2020 Ecommerce Region Report, published by Ecommerce Europe & EuroCommerce  [2] On 5 December 2017 the Council adopted the VAT e commerce package consisting of:  Council Directive (EU) 2017/2455, Council Regulation (EU) 2017/2454, and Council Implementing Regulation (EU) 2017/2459

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