In March 2023, the European Union implemented the second phase of the Import Control System 2 (ICS2), which updated the requirements for compliance on shipments into the EU. Phase 2 specifically applies to Air Carriers, Freight Forwarding Companies, and Logistics Providers. To help understand how these changes impact 3PLs and brands shipping from the United States into the EU, we have put together this informational blog.
Please note – This article does not provide any specific tax or compliance recommendations. Businesses should always consult with a tax professional, shipping partners, and carriers directly to understand the specific requirements your organization should follow to be compliant with shipping into Europe.
Background on the ICS2
The ICS2 applies to all European Union member countries (27 in total) and includes all goods going into or transitioning through one of the member countries. The ICS2 is a standardized program that expands the security and safety of inbound shipments and establishes an integrated standard for the EU to enforce new customs compliance.
What information should you include shipping packages to Europe?
The base level information required for all shipments that shippers must include are, at minimum, a 6-digit harmonized traffic code, an accurate description of each of the goods shipped, and a tax identification number for the shipment (typically the recipient EORI number).
The big carriers have documentation available online to help shippers understand these changes:
Understanding Harmonized Commodity Codes (HS Codes)
HS codes are used to process international shipments to classify the products you are shipping. HS codes must be submitted with EU shipments as of March 1st. One of the complex aspects of HS codes is that the first 6 digits are standardized, and an additional 4 digits can be appended to the end of the HS code for country-specific tariffs.
HS codes are maintained and managed by the World Customs Organization. You can learn more directly using this link.
The key component to managing HS codes with European shipments is making sure you capture these values for every product you ship. Your warehouse management system (WMS) should have these values available by product and ideally include reporting to help capture when HS codes are missing.
Descriptions of Goods Shipped
When you request a shipping label for an international shipment, not only should you provide the standardized HS code, but you should also include a description of the goods being shipped. These descriptions are very important, and you do not want to use a shortened phrase or keyword but rather be very specific about what you are shipping.
For example, a poor description would be simply submitting “Shoes” or “Men’s Shoes.” A better and more accurate description would be “Men’s leather dress shoes.”
Like HS codes, the best solution for dealing with this requirement is utilizing your WMS or inventory management system (IMS) to track and manage product descriptions for every SKU. Your shipping system should have the ability to pull this information into requests for labels, helping streamline the entire process to keep you compliant for shipping to Europe.
Understanding Tax Identifiers
The final component of shipping internationally to Europe includes tax identifier information. Most carriers are now requiring the tax information transmitted securely to the carrier as part of EU customs processing for the Value Added Tax, or “VAT.” This tax information is typically printed on the commercial invoice in addition to being tracked and routed by the carriers.
When specifying your tax identifiers, you are required to submit the following information:
- Taxable Entity Type: The taxable entity types for this tax item. Valid values include the "Shipper" or "Recipient."
- Tax Identifier Type: The tax identifier you are attaching to the shipment(s) (see next section for specific values that are accepted)
- Value (Tax Number): The tax identifier number based on your selection.
- Issuing Country: The authority that issued this tax. This must be a valid 2-character ISO 3166 Alpha 2 country code.
The following tax identifiers are the most common values that are used. You may add multiple values to a single order as required.
- EORI: Economic Operators Registration and Identification
- VAT: Value Added Tax
- IOSS: Import One-Stop Shop
- VOEC: Norwegian Tax Administration
- TIN: Tax Identification Number
Wrapping up
International shipping can be complex and challenging. But, the flip side is there is a huge opportunity to expand your market footprint to reach millions more customers.
With the European Union implementing this latest phase of the ICS2, it is more important than ever that shippers are educated and aware of these regulatory and compliance changes. At Extensiv, we provide the tools and capabilities you need to be compliant and successful shipping internationally. If you would like to learn more about our shipping solutions for Brands and 3PLs, please contact us today for more information.
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