Frequently asked questions
Taking products over to Europe looks more complicated than it actually is.
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Especially for you, we have made a list of some relevant questions and answers. You will notice some convincing answers to some pressing questions.
To become successful in the European market, offering the right product for the right price is just not enough anymore. If your company plans to compete with the existing players in the market, you must do it at the right place, at the right time, and in the right configuration. So, it is essential to set up an effective and efficient supply chain, tailored to the unique characteristics of your products, service levels and markets.
There are many ways to set up your European supply chain. One of the most common ones is the centralized European distribution model, in which stock for the whole European market is stored in one centrally-located warehouse, and the supply chain is managed from this central point.
One of the crucial aspects in designing your European supply chain is selecting the right location for your European Distribution Center. Location factors such as air and sea port capacity, quality of the transport infrastructure, availability of logistics services, employment and real estate are obviously important. But don’t forget to consider customs regulations and the tax environment as well. The Netherlands is an ideal location from which to serve the European market. In fact, more than 50% of all international companies using a Centralized European Distribution Center locate their center in the Netherlands.
Dutch trading history goes back many centuries, so there is a long-established tradition of transport and logistics. Unique characteristics of the Netherlands include:
- Central location within the European market
- Excellent sea and airport facilities
- Extensive transport infrastructure with fast connections
- Excellent and well-developed logistics industry
- Internationally-oriented business community
Some of the most popular supply chain configurations we find in Europe include those with an EDC (European Distribution Center), multiple RDCs (Regional Distribution Center) and a BDC (Bulk distribution Center) in a network of local satellite warehouses.
European Distribution Center (EDC)
In a configuration with a (centralized) EDC, products are shipped directly from production to the EDC (usually in full containers), and from there shipped out to customers all over Europe after the sales order comes in. The advantage of this set-up is that it is cost-efficient, as a result of consolidation of inbound transport, and the fact that only one warehouse is needed. Besides, it is a relatively simple set-up, and therefore easy to manage and popular among companies that are entering the EU market.
Regional Distribution Center (RDC)
As new countries have joined the EU over the past few years, the EU market has grown geographically. In addition, the required delivery lead-times have become shorter and transport costs are rising. As a result, for some of the larger companies it has become inefficient to supply the entire European market from one central DC. In a regionalized set-up, a company will have multiple distribution centers (RDCs) (typically 3 or 4) spread out over the European market, each supplied directly from production overseas, and each serving a particular regional part of the market. Often supply chains using this configuration are still managed from a central control center.
Bulk Distribution Center (BDC)
In a configuration with a bulk distribution center (BDC) in a network of local or national satellite warehouses, the BDC is supplied directly from production and is a relatively simple operation (pallets in and pallets out). Its main function is to supply local satellite warehouses via regular replenishment. Distribution to the market is done from the satellite warehouse, and also customization may take place here. The advantage of this set-up is that a company can keep the costs for inbound transport low, as a result of consolidation of inbound transport, but at the same time offer quick delivery times to the market, as the inventory is located close to the (main) customers.
The optimal supply chain will be different for every company, depending on factors such as product type, customer’s location, required order delivery times, etc.
There are many ways to supply products to the European market. The design of a supply chain configuration must take into account such issues as where and how the products enter the market, where they are stored, and how they should be shipped to customers. The starting point in deciding what the optimal configuration is for your company is to strike the right balance between minimizing costs and maximizing customer service. As every company is unique, the ideal supply chain set-up will different for each company. Factors that influence the optimal supply chain set-up include:
- Production/sourcing locations
- Inbound transport strategy
- Scale of the business
- Type of product
- Sales channel
- Location of customers
- Required lead-time to market
- Taxation: VAT and corporate tax
Our logistics experts can advise your company on this topic.
The primary activities that take place in a distribution center include receiving goods, storing goods, and preparing goods for shipment. Nowadays, in addition to these traditional logistics activities, many high-value activities are performed in most distribution centers in the Netherlands. These additional activities can be divided into Value Added Logistics (VAL) and Value Added Services (VAL).
VAL refers to activities that directly add value to the final product. From a logistics point of view, most companies want to minimize stock, while at the same time maximizing the variety of products they can offer to the market. By storing parts, or sub-assemblies, in the distribution center, a company can customize its products after a sales order comes in and assemble the product quickly according to individual customer specifications. Examples of VAL activities include:
- attaching labels to shipments
- adding documentation or software in the language of the country where the final customer is located
- quality checks
VAS activities add value to the supply chain in a ore general sense, e.g., in financing, organization, or marketing. In order to focus more on their core activities, many companies outsource non-core activities to specialized external service providers. Examples of VAS activities include:
- stock management
- order management
- handling of customs transactions
- VAT administration
- customer services like helpdesks and handling guarantee claims
- office space rental
Since foreign trade and investments contribute significantly to the Dutch economy, the Dutch government works hard to create an attractive business climate for foreign companies. It aims to facilitate doing business via the Netherlands through cooperation and flexibility, as well as streamlined customs procedures that quickly validate documents. Bureaucratic red tape and customs checks have been replaced by streamlined administrative controls. Examples of this are:
Customs bonded warehousing
Theoretically, customs duties are payable when goods are imported into the European Union (EU). But the Netherlands allows the payment of these duties to be postponed through the storage of the goods in a customs bonded warehouse. Only when the goods are shipped out of the warehouse does the company pay the import duties. This can result in considerable cash-flow advantages.
VAT deferment system
In contrast to most other EU member states, the Netherlands has instituted a system that provides for the deferment of VAT at the time of import. Instead of paying VAT when the goods are imported into free circulation within the EU, the payment can be eferred to a periodic VAT return. Under this system, the VAT at import should be declared but the amount can be deducted on the same return. The bottom line is that there is no actual payment of VAT at import, so that you can realize cash flow and interest-earning benefits.
Highly automated customs procedures
Dutch Customs makes use of computerized clearance systems that speed up the flow of cargo. Also, as a result of uniform and standardized documentation across the EU, approval time is minimized and costly delays are eliminated.
Value Added Tax, or VAT, is used in all European Union states and in many other nations around the world. VAT, as its name suggests, is a tax on the value added by each producer in the economy.
The payment of VAT can be moved from the time of import to when the company declares taxes, usually monthly. The VAT due for the import will be recorded in the declaration as payable, while at the same time, amounts will be subtracted as pre-paid taxes. To obtain this deferment, the importer must apply for a license at the tax department under “Article 23.” The amount of import declared each month must also remain constant, and bookkeeping must meet specific requirements.
No, a company without an establishment in the Netherlands can appoint a fiscal representative. A fiscal representative works for a foreign company and deals with all its VAT obligations (VAT declarations, listing and paying VAT). There are two types of fiscal representatives; limited and general.
A limited fiscal representative acts on behalf of a foreign company to import the goods and make the subsequent deliveries. This means importing from outside the EU to a customer in the Netherlands or another Member State.
The general fiscal representative acts on behalf of a foreign company for all deliveries for which tax must be paid, the intra communal acquisition and import. For both types of fiscal representative, a license is needed as well as a customer’s statement officially appointing the fiscal representative. Many logistics services providers offer fiscal representation as a service to their customers.
Import duty is a form of taxation to be paid by the importer of goods from outside the EU. The amount to be paid is usually calculated as a percentage of the customs value. The customs value consists of the invoice value, plus the costs for shipping the products to the EU border. The percentage depends on the type of product that is imported. All goods are listed in the “Combined Nomenclature” (CN), which is the EU’s coding system for classifying products. The Integrated Tariff of the European Communities (TARIC) lists the duty percentages per product, as well as information on tariff quotas and other trade measures. Import duties are the same in every EU country, so there is no difference between importing a product into the EU via the Netherlands or via e.g. Spain.
Instead of customs clearing the goods upon arrival in the EU, a company can also store them in a warehouse under customs control; a bonded warehouse. Goods can stay in a bonded warehouse for an unlimited period of time, and no import duties and VAT will have to be paid until the moment they are actually imported into free circulation in the EU, e.g. to be transported to a customer. As the customs control of a bonded warehouse is mostly administrative, there is usually no physical separation in the warehouse between goods in free circulation and goods in bond. If the final customer is located outside the EU, the goods can be transported under customs bond (T1) from the bonded warehouse to the country where the buyer is located. In this way, customs duties and VAT at import are only paid in the country of destination, and double payment is avoided.
Binding Tariff Information (BTI) is an EU-wide system designed to allow economic operators and traders to understand the proper classification of goods in the tariff and correct statistical nomenclature. The BTI, which is generally in effect for six-year periods, provides legal guarantees to traders, ensures uniform application of appropriate nomenclature, allows duty rates to be established at import, and facilitates the use of import/export or advance fixing-certificates, calculation of export refunds, etc.
More questions? Please contact us.