DDP and warranty / product replacement

[peterrepair]

Hi!

Just a question that keeps bothering me and I cannot find an answer anywhere.
I sold a product to a German customer. To make it easier I sent it with DDP and included all the taxes in the price of the product.
All good. Customer received the product and I got charged the tax.
Now where the problem is - customer discovered the product is faulty and I accepted that.
Given that they really need it for their work I decided to ship the replacement without waiting for them to return the faulty one first.

I sent it with DDP again, declared full value of the product, but also marked it with RMA and that it is a return / replacement.
The customer received the replacement, however I was still charged all the tax as if the product was sold.
I complained to the carrier, but they say everything is fine on their side and the charge was correct.

To be fair I cannot afford to pay 19% of the product value when there is in an issue and there was no additional sale.

Should the replacement have some special HS code? It doesn't make sense to me.

Alternative is to use DAP and let customer deal with customs or stop selling to the EU which I wouldn't want to do.

How do you handle returns?

Thanks!

 

[Customs Geek]

Hi
No there isn’t a special HS code. There are however a range of customs special procedures that need to be used both in the EU and the UK to mitigate extra taxes

Unfortunately customs don’t care whether you are sending a replacement or not nor whether there was a sale. As far as they are concerned two items have arrived in Germany and they want tax on both at the full value not just the price paid. There is no such thing a a zero value as far as customs are concerned. Where there isn’t a sale the value is equivalent to when there is a sale.
It is possible for the importer to claim a rejected import and get a refund of the first lot of duty paid when the faulty item is reexported. However the person named as the importer is the only one legally allowed to make a duty reclaim in Germany . Again customs don’t care who physically paid the tax. It is most probably your customer who is the named importer as Germany don’t permit a non EU company to be importer.
As you have already given your customer a replacement they are unlikely to help you getting any tax back.
You also risk paying duty in the uk on the item being returned unless you claim returned goods relief and provide proof of the original export.
www.gov.uk/guidance/pay-less-import-duty-and-vat-when-re-importing-goods-to-the-uk-and-eu

There is no easy answer so you will need to make a commercial decision on how you want to proceed.
You could price your products to make up for any loss on occasional returns on faulty goods.
Change your T&Cs to make the customer pay the taxes or give you authority to reclaim any duties on their behalf. ( you would need to check this as each eu country has it own take on the legislation.
Look for a specialist provider of reverse logistics

 

[peterrepair]

Thank you!

This makes more sense to me now. I think I'll change the policy and send with DAP and let customers handle this, probably they'll be more equipped to recover any money.

Not ideal, but until I know the return rate I cannot risk the business.