Like most people, and certainly like just about every business, we were pleased when it was announced, just before Christmas, that Britain had got a deal with the EU. It seemed to promise a scintilla of hope to cap off what had been, in most other respects, a rather gloomy year. A deal certainly seemed favourable to the supposed apocalyptic scenario of a no-deal. But, in truth, nobody really knew what a deal meant; and it is only now that the terms of our trading arrangements are starting to come into focus.
I am writing this piece purely to explore the impact the deal will have on the buying and selling of motorcycle clothing. I am not in the slightest bit interested in making political points. Indeed, for some time my personal position on the subject was somewhat agnostic; and certainly latterly I was personally of the school that just wanted it all to come to an end so that we could get on with the fun bits of running a business.
But, in common with many people, we had thought that a deal meant that goods would flow freely between the European mainland and the UK in the way that they had always done. And that’s just not the case. In recent days the press has been full of stories about how people ordering goods from their favourite European sellers have been hit by tariffs, VAT and assorted admin. charges. And so we thought we would explain what is going on, and what it will mean in the future for those who have got used to finding their motorcycling gear cheaper in the EU.
For some years now, players like FC Moto, Chromeburner, Motardinn and others have been able to undercut UK sellers across an array of brands and products. This has not been possible, as some have suggested, because sellers over here are greedy, uncompetitive and unwilling to sacrifice margin. In most cases, the reason prices are higher over here is because goods come into the UK through a distributor. These distributors perform a vital role, because the big European brands simply cannot cope with selling their gear into hundreds of separate retailers. In Europe it is different. The brands don’t use distributors. They sell directly into individual retailers. The problem, insofar as pricing is concerned, is that the UK distributors have to earn a margin in return for their services, and this slice of the cake simply gets added on to the retail price.
For some people the pursuit of the lowest price has little to do with necessity. It is a game, a competitive sport. If you can find a jacket £20 cheaper in Germany or Italy you have won! And, so in recent years, some large European retailers have set themselves up to meet this demand for lower prices with dedicated cut-price .co.uk websites, offering cheaper prices than they do in their own markets.
Personally, we have always tended to the view that those who chase cheaper prices overseas have a propensity to ‘know the price of everything and the value of nothing’. There may be a saving in the initial instance, but down the road things don’t always go as smoothly, and barely a week would go by in our shop without someone asking if we could help with a warranty issue on a jacket, helmet or boot that had been purchased abroad. Unfortunately, it is only with the original retailer that one has recourse. Unfortunately, these companies tend not to be as responsive when there’s a problem as they are when it comes to sending the initial parcel out. Emails can take an age to get answered. There’s suddenly a lack of English speakers on the phones, and so on. What hurts is that to send a jacket back to Europe for, say, a zip repair or a leaking membrane costs something in the region of £60. It doesn’t take long for that smart buy to suddenly not look quite so clever.
But not everybody experiences problems with their gear, and certainly some bikers will have had experiences that they are satisfied with. Without a doubt these overseas vendors have taken a lot of sales from UK sellers in recent years. But domestic retailers have learned to live with the situation. In business, you win some and lose some; and if it’s too hot in the kitchen you should get out!
But in the post Brexit world, the challenges of buying abroad are going to be a little different. The rewards, in most cases will be lower; the risks higher.
What we now know is that the deal that Boris and his cohorts did with Europe did not provide tariff-free trade in the way that we had all got used to it.
The only goods that can be purchased from Europe tariff-free are those that are actually made in Europe. The problem for motorcyclists is that, even though most of the major brands are domiciled in Europe, almost everything they sell comes out of China. So we’re talking here about Alpinestars, Dainese, Spidi, Furygan, Rukka, Halvarssons, Held, Revitt, Bering, Segura, Belstaff, and so on. In fact, very few brands manufacture in Europe. The only brands that we know who make their clothing in Europe are Stadler, PMJ and Rokker, although there will be others for sure. And certainly a number of the boot and helmet manufacturers makers do still manufacture their products inside the EU.
What this means is that, in by far the majority of cases, when you buy from a European seller, you will now have to pay import duty. Knowing what that duty is going to be is, frankly, a bit of a minefield. The tariff is dictated by what is known as the ‘Commodity Code’. This code reflects both the product category and the country of origin. Every item of clothing will have its own commodity code, and therefore its own level of tariff. This can vary from a relatively low 2% for helmets, up to 12% for clothing made in China.
So, if you are looking to buy something out of Europe the first, but certainly not the only, consideration you have to bear in mind is the tariff charge. If you are assiduous, you should be able to calculate what this charge will be, as long as you know definitively where the goods are made. And in this you might need the help of the overseas retailer. Once you have the country of origin, you should be able to get the commodity code via the .gov.uk website. But undoubtedly the best thing would be for the retailer to supply you with the commodity codes for all the items you want to order. Once you have this, you will be able to make an exact calculation of the duty that will be levied when the goods arrive on your doorstep.
But the tariff is only going to be a part of the extra cost you need to bear in mind; and in most cases it will be the less significant cost. The main issue for many people is going to be the levying of VAT at the UK rate of 20%. Now there’s a threshold here. Goods that cost less than 150 Euros will ultimately not be subject to additional VAT. This is a somewhat arbitrary figure, but it was agreed on as part of the deal. For items below this threshold, European retailers are obliged to register for VAT with our own HMRC. On all sales below this figure, European sellers are supposed to pay the VAT direct to the Chancellor.
A couple of pointers here. The extra administrative burden involved has caused many smaller European retailers to refuse to sell into the UK. The amount of admin. required would simply be disproportionate given the income these smaller companies might generate from sales to the UK. Technically, the 150 Euro threshold will only come into play in six months’ time. In fact, currently, the threshold below which you do not have to pay VAT is only 22 Euros. This might allow you to buy a nice pair of replacement laces for your TCX boots!
What you should also be aware of is that the VAT will be calculated not on the price of the goods on their own, but on the combined cost of the goods plus the duty. So let’s say you buy a £750 Rukka jacket from FC Moto. When that lands on your doorstep, you will be expected to pay out an extra £90 duty. The VAT at 20% will therefore be calculated on the figure of £840. That’s another £168, bringing the grand total to £1008. That’s an extra 35% almost on top of the price stated on the retailer’s website.
But we’re not done yet. The couriers are going to be levying an admin. charge as well, and this is to compensate them for the extra work entailed in collecting payment from the buyer, for accounting for this, and for remitting it to HMRC. It’s difficult to say what this charge will be. It will vary, we suspect, from company to company but, historically, when we have brought goods into the UK from outside Europe we have paid somewhere between £15 and £20.
We have already mentioned the issues to do with the cost of returning goods to Europe for warranty claims and repairs. That is not going to change per se, although given that we are now not on the inside, it is inevitably going to become more expensive to send parcels into Europe.
But the real difference is that whereas, in the past, when you purchased an item from, say France, you were protected by the manufacturers’ warranties, this will no longer be the case. In the past, you still had to go via the supplying dealer to activate the warranty, but you were nonetheless protected by law. But now, if you buy goods from the EU, you will effectively be ‘grey importing’. You will have no legal rights whatsoever, and the manufacturer will have no obligation to honour the warranty, for the supplying retailer will have sold the goods outside their allotted ‘territory’. You will have to rely on the goodwill of the seller. And if that isn’t there, you will have nowhere to go. Indeed, even if you do have the seller’s goodwill, the manufacturer may refuse to honour the warranty claim because the retailer may well have broken the terms of his supply contract.
As we said before, we always thought that there was an element of risk involved in buying your bike gear from Europe, because when if even the smallest thing went wrong you could often find yourself facing significant costs to put things right. But that situation has suddenly got a whole lot worse because, as a grey importer, your consumer rights don’t really exist. It’s a clear case of ‘caveat emptor’. Take the chance if you have the appetite, but you will simply have to live with the consequences if things go wrong.
There is one more quite significant factor that you will need to factor into your considerations when buying goods from Europe. Let’s say you’re thinking of buying a pair of boots from your favourite European seller. You’ve been into your local motorcycle apparel shop to check the fit. Having ascertained the correct size you tell the assistant you need to have the expenditure approved by your wife. And so you rush home, turn on the computer, and order your goods overseas. Not a problem; we hear this line all the time in the shop.
But let’s say that when your boots turn up, they don’t seem to be as comfortable as the ones you tried on in the shop. And that can happen. Often here in our shop two size 44s will fit a bit differently. It’s not uncommon. Same with gloves, helmets, jeans and so on. So you decide you need to return your boots to Spain. Fair enough; you return them, and your retailer might even offer free returns. But here’s the rub. You won’t be able to claim back the duty, the 20% VAT uplift and the admin. charge. And that’s a loss you will just have to take on the chin.
There is no moral to this story. Some will blame those who voted to leave the EU, but there will be gains for the UK, both politically and economically, and by the same token there will be losses too. In the long run, what we are talking about here might even end up being a net benefit to UK plc.. I don’t state this as a fact. In truth, as a former economist, I happen to favour the law of comparative advantage, which postulates that all parties benefit comparatively where there is free trade across borders.
But, for now, this is where we are. I would suggest that the financial benefits would now have to be huge to justify buying your motorcycle gear out of sellers in mainland Europe. The prices will not be as advantageous as they once were. There will clearly still be instances where goods can be purchased less expensively overseas. But the problems you might experience if things do not go smoothly, and the costs associated with resolving those problems, have multiplied. If you’re a gambler, go for it. But you’ll have nobody to complain to if it does go wrong. And if it does, it will cost you.
In recent weeks, we have placed numerous orders with a variety of European retailers. We have done this to ascertain whether the reality matches the theoretical position. And in most cases it has done. But there were certain instances where the expected charges did not transpire. In some cases that was partly because retailers, mistakenly or on purpose, filled out the paperwork incorrectly. In some cases, particularly when parcels were left on the doorstep as nobody was at home, the tariffs, VAT and admin. charges were not paid. In all but one case, however, the relevant invoices have followed later. It may be that, occasionally, somebody will get away with it, and escape the extra charges. But in our recent experiences the instances of this will be low. And one can be pretty confident that whatever loopholes currently exist will soon be closed up.
Some people will bemoan their lack of access to cheaper prices in Europe, and we understand this. But, by the same token, UK retailers have often been taken advantage of, with bikers wasting their time on identifying the right garment and the right size, in the full knowledge that they were only ever going to make their purchase overseas. And that has been somewhat unfair. We don’t stand by dealers who give shoddy service. But if your local dealer has given you a good service, they have probably earned the right to your custom. Furthermore, there has never been a time when your local seller has more needed your support.
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