Customs expert Markus Bitzer ensures more equal opportunities in customs traffic  

Online marketplaces such as Amazon or etsy offer online retailers the opportunity to set up their own international online shop with just a few clicks. However, behind the supposed ease of use lurk a number of traps that entrepreneurs should be aware of. In EU-wide, cross-border trade, VAT obligations must be kept track of and implemented on time. If you send your goods not only within the EU, but also to third countries, the complexity increases: in addition to VAT regulations, customs regulations must also be observed. We have customs experts Markus Bitzer asked what challenges online retailers can face in international trade.

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Mr. Bitzer, you turned your back on customs after 17 years and now advise tax consultants, lawyers and entrepreneurs so that they are not surprised by customs audits and exposed to additional claims. Tell us a bit about yourself: how can we imagine your work?

In the last few years of my work as a customs investigator, I have found that many penalties have been enforced, although a simple conversation with the people concerned could have solved the problem much better. So there is a huge imbalance. I am now trying to do my bit to ensure more equal opportunities in customs traffic and advise companies and lawyers. The new work is actually not very different from the old. The principle of my investigations has remained the same: It always starts with a status analysis. I then consider what the goal is and what needs to be changed in order to achieve this goal. It's no different with customs investigations. You always look at the current situation first and analyze the sources of error, which are then used as evidence. My job now is to find these sources of error in advance and advise my clients on how to prevent problems from arising in the first place.

Why are shipments checked at customs?

All shipments pass through the electronic customs clearance system ("ATLAS"). Many risk parameters are entered there, which are regularly updated by the customs authorities. The first control instance takes place via the digital ATLAS system, in which all available data of the shipment is checked and then the selection takes place. A consignment can be selected for a wide variety of reasons. The control procedure is always carried out in the same way: The consignment is stopped and checked or manually inspected by customs. As a rule, the customs officials then require documentation from the residents of the shipment. As a result, either an additional payment is made or the parcel is not released and sent back. The shipment may also be confiscated, especially if it is a shipment that is not allowed to be traded, such as counterfeit products or narcotics.

Which stores are affected by customs duties? What types of goods are most frequently checked in online trade?

In principle, the topic of customs always becomes interesting when I import or export something. Therefore, it basically affects companies that trade across borders, but of course also stores that import goods and sell them in Germany. The types of goods are often not necessarily the decisive factor in terms of controls. Of course, all products and goods that entail high customs expenses are increasingly in focus. Nevertheless, it cannot be said that one trader is more at risk than another.

Which customs law and VAT risks are closely interlinked in cross-border online trade?

Import tax and VAT are very closely interlinked. Import tax is a customs matter, while the tax authorities or the tax office are responsible for VAT. For example, you can import something as a store, pay the import sales tax and then deduct the amount from the input tax. In this way, both control authorities automatically check the shipment. There is therefore also a close dialog between customs and tax authorities. Information is exchanged not only nationally, but also internationally between the authorities. It is therefore extremely important that the figures in the accounts are correct and that no mistakes are made. Especially when it comes to fulfillment services or dropshipping matters. The relevant authorities fill in similar or even identical control fields: Under what conditions are deliveries made, who delivers to whom, who is named in the customs declaration, who recovers the VAT? There are numerous overlapping links and accordingly there is a close exchange between the responsible customs and tax authorities. You therefore have to work extremely cleanly. In the case of VAT, there is a very intensive exchange between the authorities: Special VAT inspectors exchange information with customs and, at the same time, the latter checks the tax data of those concerned for imported and exported goods.

What challenges should an online retailer be aware of when using marketplaces such as Amazon or etsy?

This cannot be generalized. It depends on both the store design and the movement of goods. Other important parameters in the analysis are the storage strategies and the use of fulfillment services - there are really many factors that play a decisive role. If in doubt, however, I would always speak to a tax consultant and, if necessary, consult an expert. It is always important to know how the purchasing business and the shipping business relate to each other, as they can usually differ greatly. Especially when I use marketplaces such as etsy or Amazon, I act as a store and have buyers, but my shipping service provider is based abroad, for example, and sends the goods using the dropshipping system. Such cases are very much in the crosshairs of customs. Before shipping, the purchase transaction is often the measure of all things. Although - or precisely because - the purchase transaction is not even shown in the shipping traffic in the customs declaration, customs are increasingly checking the information on this.

What recommendations can be given to online retailers to ensure that their stores comply with customs regulations?

Customs and tax law responsibility always lies with the store or entrepreneur - even if you commission customs agencies or shipping service providers to handle the customs declaration. You should also have a basic understanding of the subject matter, especially because there is a very strong focus on trade and tax compliance. I therefore recommend not blindly trusting the data from suppliers, but rather checking or at least verifying delivery bills, goods tariff numbers, customs declarations etc. yourself. You have to be aware of your responsibility under customs and tax law. This also means checking whether the service provider is working correctly and keeping proper accounts. And perhaps most importantly, when it comes to shortcomings, don't trust that nobody will notice. It will be noticed!

What was one of your most exciting cases?

There are many! The most curious case was a company with a bonded warehouse in which goods could be temporarily stored tax-free until they were sold. These goods are subject to special monitoring, as no movement of goods is allowed without official registration and notification. The goods in question were rubble and iron ore with a value of around 10-15 million euros. We were quite astonished when the 1,800 tons of goods disappeared. To this day, nobody can explain how this happened, because it is actually impossible for goods that are subject to such special monitoring and control to simply disappear.

But it also works the other way round: in another case, I was called in at very short notice as an expert in a customs audit in which the entrepreneurs and auditors were unable to reach an agreement. Working closely together, we were able to avert an additional claim amounting to a quarter of a million euros and ultimately reduce it to 23,000 euros.