What’s in your warehouse, who does it belong to and where is it going? If you think none of that matters, you really need to think again. The world of e-commerce has been largely unregulated in the UK up to now, but a dramatic change is on the way, warns transport and logistics law specialist Howard Catherall.

Tough new regulations will crack down on previously ‘under the radar’ fulfilment houses and will place very significant administrative burdens on all companies involved in this sector. HMRC’s Fulfilment House Due Diligence Scheme goes live in April 2019, but the deadlines are much earlier. “Any company engaged in fulfilment services for non-EU customers is required to register with HMRC this year and then to comply with the requirements. Failure to register in time will lead to significant penalties,” says Mr Catherall, a partner with Gotelee Solicitors.

The reason for the new regulations? HMRC says there is a £1.5bn VAT and Customs duty black hole where large amounts of e-commerce are taking place and fulfilment houses are being used by unscrupulous retailers, based outside the EU, which advertise goods for sale online.

“HMRC says there is systematic under-declaration of value and misdeclaration of goods, with no VAT being paid following the online sale,” says Mr Catherall.From the very largest, sophisticated fulfilment houses, to the warehouse operator using a few spare shelves to handle and store products sold online, to the individual channelling products through their spare bedroom, the rules will apply across the board.

In every case, the fulfilment house will have to have details of exactly who each customer is and, if the operator knows or has reasonable grounds to suspect that customer isn’t meeting VAT/Customs obligations, there is a requirement to notify HMRC and not do any more business with that party. Failure to do so could lead to a £3,000 penalty. Non-compliance could put a company out of business entirely.

“The fulfilment house will be required to keep records of customer details, VAT information, descriptions of the types and quantities of goods being stored, import entry numbers and other information,” says Mr Catherall. “There will also be a knock-on impact relating to the safety of items being sold. Trading Standards will have access to HMRC’s list of fulfilment houses. Trading Standards officers will visit your premises, have the power to look at goods being stored and will ask how you ensure that unsafe goods don’t leave the warehouse. It’s no good saying to HMRC or Trading Standards ‘it’s all cardboard boxes to me’. Whether it’s satisfying HMRC’s due diligence obligation on type and quantity of products or complying with your product safety obligations – it’s your responsibility to open the box and check.”

In response to the impact of the new rules, Gotelee Solicitors have developed an App, to be launched at Multimodal, which enables those involved in e-commerce distribution to run through a series of defined steps to check the safety of the products they are handling.

As Howard Catherall says: “Some legislation is complicated – but that doesn’t mean you can afford to ignore it.”