Making transit e-commerce Delivery into European Union ready for EU-new VAT legislation
In the run-up to the World Mail & Express Americas Conference 2021, Post & Parcel spoke to Achim Taylor, Director of POST Luxembourg’s Logistics department, to find out how a designated postal operator of one of the smallest EU countries became such a significant player in transit e-commerce in recent years.
Can you tell me a bit more about the whole group and the development it has been through?
POST Luxembourg, with its subsidiaries and more than 4.600-member workforce, is the main employer in the Grand Duchy and consists of three main business units; telecom services, financial services and postal services which include logistics. With regard to the ever-decreasing letter volumes and hence its shrinking business, POST Luxembourg developed its diversification strategy and implemented an international cross border e-commerce business cornerstone. POST Luxembourg launched this initiative in 2015 to create a sustainable business while generating new revenues.
Can you tell me more about the business model?
The business model is based on services that address international business customers and end-consumer needs. It is not limited to Luxembourg but covers the EU with a focus on non-EU to EU Transit and delivery services. The reason for implementing a European hub solution is, on the one hand, simply the fact of attracting substantial volumes and, on the other hand, making use of its positioning in Europe by having extremely fast access to major markets.
In 2016, the organization behind this initiative was set up with the recruitment of experienced logistics staff from very well-known 3PL providers. At the same time, the development of a scalable solution was defined and implemented, both operationally as well as from an IT perspective. In 2017, POST Luxembourg went live with their first cross border e-commerce service based on registered mail. At the beginning of 2018, POST Luxembourg shifted to Interconnect Standard, a decision valued by customers and consumers alike, with the result that POST Luxembourg ranked as one of the largest providers of Interconnect Standard volumes within Europe.
Moreover, the Covid-19 pandemic in 2020 did not negatively impact POST Luxembourg’s service level. Note: We did not implement a Covid-19 surcharge unlike many other providers during 2020.
Interesting to see that the international part rapidly became a business unit that contributed a lot to the growth of POST Luxembourg. How did you do this?
Quality is key: We work closely with partners and business customers on monitoring our performance. We see that the Interconnect Standard product is the best solution for e-commerce deliveries in Europe in that respect.
From the outset, POST Luxembourg worked with its partner eCommerce InterConnect on service as well as on international business development.
By focusing on compliance rules, customs regulations and national laws, POST Luxembourg is well prepared for future development. For example, the abolishment of the relief for low value consignment goods in terms of VAT starting in July 2021 is seen as an opportunity by POST Luxembourg. We believe that this is a way forward for sustainable and future proof business practices and not a potential roadblock.
Consequently, when the EU decided that the 22 Euro VAT exemption for non-EU shipments would be abolished, POST Luxembourg started implementing a commercial customs clearance service with the launch of our services.
The EU legislation for distant selling into the EU is the same for the whole EU-region. What specific benefits does POST Luxembourg provide to non-EU e-marketplaces and merchants?
First of all, it is important to understand what is changing on July 1st 2021 and what the impact is:
In order to enable non-EU e-marketplaces and merchants to continue to reach their consumers in a seamless manner after July 1st 2021, POST Luxembourg has created a ‘green-lane’ channel for transiting e-commerce shipments. The green lane is available to international e-marketplaces, merchants and consolidators that have implemented the IOSS model (Import One Stop Shopping). POST Luxembourg’s ‘green lane’ channel brings specific benefits in addition to the standard IOSS model.
POST Luxembourg’s services have been developed in close co-operation with EU-customs, Tax authorities and “last mile delivery” companies. We offer services for IOSS registration and intermediary services to e-marketplaces and merchants to allow non-interrupted business and logistical flows also after July 1st 2021.
Suppose a merchant or e-marketplace decides not to implement IOSS, what are the consequences?
A non-implementation of IOSS would make the business, financial and logistical process very complex:
- Parcels would have to be cleared in every country of destination separately;
- VAT registration in each EU country of final destination is required;
- Import VAT has to be paid per shipment already at clearance.
In case a non-EU e-marketplace or merchant is not yet ready for the new EU VAT legislation, we strongly recommend them to immediately consult experts in this segment. Of course, POST Luxembourg and their subject matter experts can assist and give advice and support.
How do you see the future for the ever changing postal industry as a whole and what kind of role can POST Luxembourg contribute on this?
We see a growing interest in higher quality delivery services and the need to be better aligned with customer/consumer expectations. In this context, the IPC, with its postal partners, has substantially improved the delivery times, track- and tracing possibilities combined with competitive rates. There is a tendency towards alternative and direct entry services. Nevertheless, the quality, service model and user experience are not always as expected. In addition, the Postal industry is facing fiercer competition from express service providers who develop new products.
While exploring new services for our customer base, POST Luxembourg checks carefully on these aspects to ensure that the new service fits and adds value to our own portfolio, but also to our customers.
Regarding the future, POST Luxembourg is active on multiple fronts: (1) economy-based services, (2) Enhanced VAT handling/payment services, (3) fulfillment and warehousing services, (4) enhanced cross dock services. The vision of POST Luxembourg and its stakeholders is to continue to hold a leading position in cross border e-commerce by combining the best of both worlds – logistics and postal.
About the author:
Achim Taylor, German native, graduated with an Economics degree specialized in logistics and a MBA at Durham University UK. He is 51 years old and has held several managing director positions in various countries for Kuehne + Nagel, as well as Fiege. Having grown up in a small family business, he has been able to demonstrate his entrepreneurial spirit while setting up this area of activity from scratch since he started at POST Luxembourg in 2015.