Shipping, Import tax, Duties & VAT - Tips to avoid nightmare situations.
I receive many calls and emails from watch enthusiasts around the world asking me to clarify the what’s, why’s and how’s when it comes to… 1) buying watches from different countries and importing them…. and (2) selling watches to different countries and exporting them.
Brexit, VAT, Duties, Import taxes, handling fees… What does this all mean for us watch collectors?
I’m a watch enthusiast and a watch professional. I buy watches for my own enjoyment to feed my insatiable thirst to experience new watches.
I am also what some might call a “dealer” – however I’m not too keen on that term. I see myself more as a watch professional – that is someone who likes to help other watch enthusiasts with their watch goals. If I do a good job, I get to make a little profit for my kids’ piggy banks from my service and experience.
I’ve been buying and selling watches as a collector for over 20 years, and professionally since 2017. I own a global marketing manufacturing company and have been importing and exporting goods from all around the world for longer than I care to remember.
So you are in good hands when it comes to “first hand knowledge and experience” with global importing and exporting.
Firstly, it’s worth mentioning that this information is going to be a little UK-centric as I am in England – however – I do buy watches from international dealers from around the world and import them into the UK. I also sell watches to international buyers – so shipping from the UK to countries around the world.
The rules – for the most part – are pretty much the same – for most people around the world.
However, do seek local expert advice from an import/export specialist and even a tax specialist or accountant that knows their stuff when it comes to importing and exporting goods to and from your country.
The reason I advise this is because
1) different couriers like DHL / Fedex / UPS work differently in different countries.
2) Customs departments in different countries work differently.
3) There are different import tax rates and regulations in different countries and different rules apply.
So, there may be nuances to this information as things change between couriers and customs and country rules and regulations. Worth bearing this in mind.
I’m not a tax or shipping expert – but I do have a lot of experience that I would like to share and I hope you find it helpful.
From a UK standpoint – everything changed drastically for us (as far as buying and selling watches around Europe is concerned) on the 1st January 2021, when the UK & Northern Ireland left the EU regulatory framework.
With an eye popping 1,200 pages of legal jargon to wade through in only a few days, Politicians, Retailers, Traders and every poor soul on the street rushed to try to understand the implications of the agreement.
For us watch enthusiasts in the UK…. trading watches with European countries changed significantly.
For watch collectors and dealers… 1) admin increased, 2) things took longer and 3) costs went up for both. (1) buying watches from Europe and bringing them into the UK and (2) selling watches from the UK into Europe.
The whole show just got a lot more expensive, because even though we are aware of ‘tariff-free’ movement of goods across the new EU – UK border, ‘tariff-free’ doesn’t mean NO VAT or import taxes.
UK customers are now expected to pay UK VAT on all imports from the EU.
And our European brothers and sisters buying watches from me (and anyone else in the UK), now have to pay their local sales tax (VAT, IVA, GST) in order to get their hands on their new watch.
An example, a £10,000 watch purchase from the EU will most likely come with a £2,000 VAT bill when the watch arrives at the UK border.
This bill will need to be paid to the courier or to customs directly in order for the watch to be released and continue its journey to your wrist.
In the past, with a system called the ‘VAT Margin Scheme’ when you bought a pre-owned watch you typically didn’t pay VAT on the full price of the watch.
Instead the dealer paid VAT only on the profits of the watch i.e. the difference of what they bought and sold the watch for.
In this example of a £10,000 watch, if the dealer bought that watch for £8,000 they would effectively pay £400 in taxes under the VAT Margin Scheme because only the margin that the dealer makes – £2,000 in this example – is taxed for VAT.
When the UK was part of the single market, this scheme applied across the EU meaning a watch buyer in the UK didn’t need to worry about VAT when buying from an EU dealer and vice-versa.
However, this is no longer the case. The margin scheme no longer applies, and you (the customer) will need to pay VAT on the full price of the watch as opposed to the dealer paying VAT on their margin only.
VAT Margin Scheme Vs Standard Import VAT example:
Let’s say you’re after a Rolex Submariner, trading in the UK at £10,000.
If you bought that same watch under the standard VAT system (not the previous VAT Margin Scheme) the VAT tax amount would be an EXTRA £2,000 – which is 20% on top of the £10,000 purchase price of the watch.
A whopping increase in tax.
So in the UK – of course, you can still buy from – and sell to – individuals and businesses in Europe, but everyone needs to be aware that the buyer – who is the importer of the watch – will need to pay 20% – or whatever the local VAT rate is – on top of the buy price of the watch in order to get the watch cleared through customs.
This will be true regardless of whether you are buying from a dealer or from a private individual on eBay. Or Chrono24 or any other marketplace.
In short, the buying and selling rules for the UK – trading with Europe, is now the same as trading with the USA, Japan or any other non-EU country around the world.
A UK based individual buying a watch from a European country – will most likely need to pay VAT at import.
A UK based individual selling a watch to a person/business in Europe – THEY will most likely need to pay their local VAT at import, their end.
A UK based individual buying a watch from a person or dealer in Japan / USA / Canada / Brazil – will most likely need to pay VAT at import to get the watch cleared through UK customs.
A UK based individual selling a watch to a person/business in Japan / USA / Canada / Brazil – will mean THEY will most likely need to pay local VAT at import, their end.
So now, for us watch enthusiasts in the UK, there are no benefits to trading with other EU countries like there used to be. The playing field has levelled and it is now the same for us in the UK and Northern Ireland as buying from anywhere around the world.
If you are trading EU to EU – then the good old free-trade still applies. So a seller in Germany can sell to a buyer in France, and the watch can move around with no nasty VAT payments.
But as soon as that watch leaves the EU and into the UK – BAM – that cheeky little VAT payment is due.
Likewise – A UK person buying / selling watches to another UK person or business has no extra VAT as the goods are already within the UK.
For us watch collectors in the UK, this has created a new little watch Eco system where we are seeing a lot more watches being traded UK to UK than ever before and less watches coming into the UK from Europe. Also less watches are being shipped out of the UK to Europe and the rest of the world.
Where once we could freely ship in and out of the EU – now – BAM – that cheeky little VAT payment.
When exporting watches out of the UK into Europe, I now have extra admin to take care of and it is now EXACTLY the same as shipping to anywhere else in the world out of the EU.
This extra admin includes the creation of a Pro-Forma – or – Commercial invoice with every shipment I make.
This needs to include detailed information such as
Commercial / declared value – that is the commercial value of the goods as per the invoice amount paid by the customer to the dealer.
A DETAILED description of goods – and I do mean detailed. Once we write a “pre-owned wrist watch” to help prevent sticky fingered package handlers at the sorting office having a nose and taking an interest in what’s in the package.
Now we have to mention EXACTLY what is in the package including the brand, the reference number, the material and any other contents like the box / accessories. Anything else you are sending – perhaps a complimentary gift.
We have to write the country of origin of the watch – whether it is Switzerland, Japan or UK or US (or wherever).
We need to include the Harmonised code – also known as the “commodity code” or HS code) of the watch – and different watch styles have different HS codes. For example – a digital quartz watch with a digital display has a different HS code to a quartz watch with an analogue display.
This is different to a mechanical or automatic watch.
I’ve also had to get an EORI number for my business. EORI stands for “Economic Operators Registration and Identification number”. Businesses and people wishing to trade from the UK must get and use their EORI number as an identification number in all customs procedures when exchanging information with Customs administrations.
Mind boggling – Right!
I’ve heard lots of complaints from lots of dealers about packages getting stuck in customs and courier depot’s. They’re not making it through and not getting delivered.
And that was most likely – I would guess – a result of one or more of the above not being completed correctly on the shipping paperwork.
It only takes one thing to be wrong or inaccurate and – BOOM – the watch isn’t delivered and opens the door to a nightmare of calls to courier companies and disagreements with the buyer with complaints and bad feeling…….. NIGHTMARE.
Fortunately so far I have not yet had any delivery issues, delays or held packages. I hope and pray that continues because customs and depots can be a real pain in the derriere to deal with.
How About The Customers/Buyers Role In Shipping?
Once upon a time it was purely the job of the dealer or seller to get the watch onto the wrist of their customer. No if’s and no but’s.
However, I personally like to explain to my international customers – anyone buying a watch from outside of the UK – that we need to work in partnership a little and I need their help.
I will push the package out of the UK and into their local courier depot and – it is likely – they need to help pull the package out of customs to get it into their hands.
Of course I keep a close eye on the delivery via the couriers online tracking portal but there is some degree of responsibility and “assistance” for the client – who is now the importer – or – receiver – of the goods
I wish it wasn’t this way – but unfortunately it is what it is – and being aware of this involvement makes things much smoother.
Once my package gets to the local delivery depot – wherever it is in the world – the local courier (Fedex/DHL or whoever) collaborates with the local customs to ‘clear the goods’ – that is – inspect the package and check all the consignment paperwork lines up with the actual contents of the package.
If it doesn’t – this is where the nightmare can begin.
If it does all line up, there is still the small matter of getting the package OUT of the courier depot and through the front door and on to the wrist. And this is where the customer / “importer” of the goods comes into play.
They may need to call the courier – or be in a position to receive a call from them to help clear the goods so they can be released. So they need to be on standby on the day of delivery or a few days before the intended delivery date.
It might just be answering a few questions about the package – or clarifying delivery information – or perhaps the BIG ONE – paying the import taxes. That is – the local sales tax in your country or state.
Each state in the USA has a different sales tax percentage rather than the country as a whole having one general GST rate. Countries around the world have different import tax rates too.
For example in Australia, GST is 10%. In Singapore it is 7%. In Hong Kong there is 0%.
Bhutan is the world champion of VAT at 50%.
Some countries call it VAT. Sometimes it’s GST. Sometimes IVA – and there are others.
There will also be some small extra fees to pay on top of the import tax like a custom clearance processing fee – or “handling fee”. This could be anything from a few Euros. Or it could be 20-30 Dollars. Just be aware of it.
I am also seeing extra fuel sur-charges on invoices too which can add an extra 5% or 10% to my shipping invoice – which is often unaccounted for on my end and not very welcome.
If the VAT – import tax is not paid to the courier or the customs officer – the watch won’t get released. It won’t make its way safely home to the customer.
It will sit in the depot for a few days or weeks. Rest assured – the courier depot won’t house it forever. After a while, they will want to return the package to the sender and this can again open the door to a stressful situation.
If you’re a watch dealer reading this and intend to ship internationally – it is important to be sure you explain the import tax situation to international buyers well in advance.
After all, no one wants to pay £10,000 for a watch and then have to pay an unexpected extra £2,000 of local taxes to the courier to get the watch out of customs and onto the wrist.
I am seeing lots of dealers not interested in selling internationally any more.
Some European dealers only sell to other members of the EU and UK dealers only sell within the UK and Northern Ireland. All this to take away the hassle and the risk of international selling.
I’ve tried to buy from the US before and some dealers won’t ship a watch to the UK because they wouldn’t take the risk. Some international dealers will sell you a watch but will ask you – well, mainly in the case of trade B2B dealing – to send them a shipping label.
This means that they want you to arrange a collection of the watch using your courier account to arrange the collection, export the watch out of the country… and import the watch into your country. What this does is totally relinquishes all responsibility of the door to door delivery from them, on to you and puts sole responsibility into the hands of the person or business importing the watch.
If there are any challenges, issues, admin problems, it’s on you to resolve.
I’m sure a dealer (well, a professional one anyway) wouldn’t leave you high and dry. That they would try to assist wherever possible, but the onus is on you – not them – to get that watch delivered.
All this convoluted processing and extra cost is shrinking the watch buying playground for many watches in the UK and Europe. I used to buy watches from Europe on a weekly basis, but now, because of the extra 20% price hike, only certain watches are brought into the UK from overseas.
Now I import watches that are either very well priced and I can make a profit on the sale after the extra cost of import taxes…. Or rarer vintage models with a price tag that is a bit more flexible and less “set” in the marketplace.
I am hoping for a good free-trade deal between the UK, the US and Japan. Where there is a rich stock of interesting, well priced new and pre-owned watches.
When I say “free-trade” I am hoping for 0% import VAT and not just ‘duty’ free trade.
But for now I won’t hold my breath. I will remain optimistic though.
DDU Vs DDP
DDU stands for Delivery – Duty Unpaid. DDP stands for Delivery Duty Paid
As the names suggest – DDU means the customer / importer is responsible for paying the duty at customs in order to clear the goods for release. The exporter – or seller – is NOT.
DDP means the dealer – the sender of the watch – is responsible for paying the import duties. The importer is NOT.
The DDP service means the seller/dealer will receive an invoice from the courier (Fedex/DHL) shortly after the watch is delivered. This will need to be paid or your account may be frozen.
The trust will be broken between you and the courier and you can be black-listed. This is likely to have a negative impact on future deliveries from them to you.
I have used the DDP service several times, however I’m not a fan. It always costs me more than I expect. I calculate the simple math of watch price plus VAT amount in any particular country plus a few extra £s for processing / handling. But for some reason it never quite stacks up.
It always works out more and I make a loss.
Hopefully I will get it right one day. But challenging the amount with the courier is time consuming and just creates extra work for me. For now I will try to stick to DDU and make it the importer’s responsibility to pay the import taxes and clear the goods through customs.
I occasionally hear stories of buyers / customers / importers receiving their watch from international dealers and not having to pay and import taxes.
It seems, occasionally things slip through the net. I have had a few instances where I THOUGHT there was to be no import tax to pay, only to get a bill through the post a week later.
If you’re a buyer and your watch whistles through customs without a peep and sails effortlessly from the dealer to your wrist – either thank your lucky stars – or – keep an eye on your post as one day – just maybe there will be a bill for import taxes from the courier that delivered it.
When dealing with Business to Business transactions – or dealer to dealer – sometimes the courier company will pay the import fees on behalf of the importer and then send an invoice later. Or they ask for upfront payment and won’t release the goods until payment is received.
I’m unsure why it varies but it is probably to do with the depot having knowledge of your business numbers (VAT number and EORI number). They can therefore trust that you will pay the import tax bill in the near future and therefore will release the goods.
If the importer is known to the shipping company (DHL or UPS) and has a relationship with them with an account set up and is a frequent shipper, this may also add to the “trust” level and encourage them to pay the import taxes knowing they will recover the cost in the very near future.
With private individuals they will always ask for payment in advance – upfront – in order to clear the goods through customs and release the consignment.
Although I’ve heard of a few instances of watches slipping through the net and going from an international dealer to the importer’s wrist with no import taxes.
You are always better to account for the correct import fee cost – sales tax and handling fees – so you don’t get caught short.
You don’t want to owe money to HMRC or the IRS, believe me. You definitely don’t want them coming after you. That is one big bad ugly hungry relentless wolf coming after you.
To avoid stress and sleepless nights and worry – and just pay up!
Which Courier...?
When delivering watches to my customers around the world, I use mainly DHL but also Fedex and UPS too. For high value items – above £10,000 or £15,000 I use Ferrari Couriers.
It depends on the destination country and the value of the watch.
Prior to shipping a watch to a client I will advise them which courier I plan to use.
Sometimes they come back with a thumbs up – sometimes they ask to use a different courier – perhaps because they have a bad reputation in their city/country – or they’ve had a bad experience in the past. I use a shipping agent so I have access to multiple carriers and this works really well for me.
As long as everything is ship-shape with the waybill information/commercial invoice and the watch is properly packaged and protected – all should be OK.