How Will Brexit Affect Amazon Sellers?

In this guest article, Chris MacNeil of ResilienceHelp.com explains how sellers from outside of Europe can prepare for Brexit.

If your business uses Amazon to sell to customers in Europe, you need to understand and prepare for how Brexit, the United Kingdom’s (UK) withdrawal from the European Union (EU), will impact your business starting on the 1 January 2021.

A Time of Transition

You might not have noticed any changes yet because although the UK withdrew from the EU on 31 January 2020, it is currently in a transition period where EU law and access to the Single Market remain in force. This transition period, during which a new free trade agreement is meant to be negotiated, ends on 31 December 2020.

27 European nations with a combined population of 447 million people belong to the European Union. It’s the largest economy in the world and the largest trading block. But it’s more than a free trade area. It is a political and economic union. EU citizens have the right to live, work, and retire in any EU country.

Brexit's Impact on Trade in the UK and EU

Frictionless trade between EU member countries is achieved through two mechanisms: the Customs Union and the Single Market. The Customs Union sets common tariffs for goods entering the EU from non-member "third" countries. The Single Market guarantees the freedom of movement for goods, people, money, and services within the EU. For businesses, this means that once goods pass through EU customs they enter the EU Single Market, where harmonized regulations mean they can move freely between member countries.

As of 1 January 2021, when the UK’s withdrawal from the EU will be complete, the UK will become a Third Country outside the EU. This means that UK businesses will no longer have free access to the European Single Market and will trade with European partners on World Trade Organization (WTO) terms. This is a massive change to doing business as they know it.

There is hope that the UK will enter into a free trade agreement with the EU to agree customs arrangements and preferential tariffs for its goods that will improve on WTO terms. However, the current state of play is that businesses are being advised to prepare for No Deal Brexit as an agreement between the two sides looks unlikely prior to the transition period ending and the UK has declined to ask for an extension.

Brexit and Your Amazon FBA Business

How will Brexit affect Amazon sellers? Amazon has been preparing itself for Brexit. Because the UK will be outside both the Customs Union and the Single Market, Amazon has notified its 3P sellers of the following amendments to its processes:

Amazon’s UK FBA operations will be split from the EU with no more EFN (European Fulfilment Network).
Amazon’s UK Fulfilment Centres (FCs) will no longer be used to fulfill orders in Europe.
There will be an end to Pan-European FBA inventory transfers between the UK and EU.
Sellers can no longer send products to FCs in the UK for Amazon to distribute them for storage across Europe.
3P sellers’ products will no longer be Prime-eligible and thus visible to millions of customers through the EU.
Advantageous delivery speeds and fulfillment costs will no longer be available to sellers.
Stock sent to an Amazon warehouse in Europe will still be distributed to other European warehouses, but it won’t be sent back to the UK.

Editor’s note: Amazon is reopening its European Fulfillment Network between the UK and the EU starting in March 2022. Sellers can fulfill cross-border orders of eligible products with FBA inventory stored in their home fulfillment centers, subject to EFN fee changes. This restoration will occur in phases through May 2022.

Preparing for Brexit

If your business wishes to continue to trade in both the UK and the EU in 2021, you, like Amazon, will need to split your business. This may have cost implications and you may need to evaluate your route to market to assess the impact on your margins. If you can, you may wish to send stock to alternative fulfilment centres now in anticipation of the transition period ending.

Tariffs

You will need to send products directly to fulfilment centres in the UK and the EU separately in order to avoid tariffs being imposed twice.

Customs

You will need to find someone to act as an Importer of Record in the EU in order to send stock to EU warehouses in the future.

Regulations

Although they are currently harmonized, rules on product standards will become different for the EU and the UK markets.

VAT

You may need to register your business for VAT in both the EU and the UK to access these marketplaces.

Stay Resilient

Our team at ResilienceHelp.com can help you understand how Brexit will impact your business. We provide Brexit consultancy as well as training for Brexit/EU Exit readiness and COVID-19 business continuity planning.