New challenges for UK exports to France and EU
The French government has announced that they will be removing the option for UK companies to use limited fiscal representation under the Customs Regime 42 importation option as of 1st January 2026.
This will affect any UK companies that export into the EU via France where the VAT and duty are handled by the seller, otherwise known as the Delivered Duty Paid or DDP incoterm.
Essentially this is where the exporter wants to sell their goods in a European Union member state, such as Italy, but the goods are delivered via France to be transported further on.
It utilises the VAT reverse charge mechanism so no VAT is payable by the UK exporter.
Regime 42 is not being abolished and limited fiscal representation will still be a choice but only for EU established companies.
Customs can be confusing at times, and the constant changes just add layers of complexity. Whilst this provides a challenge to UK businesses there are several ways to overcome it and not prevent any delays or extra costs to exports. It just requires a different way of thinking, and the solution depends mainly on your volume of exports.
Why was the Regime 42 option removed?
The French tax authorities removed it so that they do not miss out on duty fees they are reasonably due. The money will then be in the French economy rather than the destination country.
A major benefit is that it makes transportation inside the EU easier as the customs declaration has already been completed at the EU border. Authorities will not need to track the delivery to the end point to ensure payment. Plus, this keeps the cash flow for the consignees high as you will not have to pay upfront. Paperwork is completed behind the scenes by your authorised tax agent.
It’s also to help bring France more in line with other EU Countries which operate in a similar way. There are still a great many benefits to importing via France and I still recommend it as the best option in a lot of cases.
What Are Your EU Export Options for the Future?
There are practical options for every type of export depending on volume, the destination of your goods or your approach to exporting. A vital part of the process is to review your supply chains, understanding who the importer of record is, and how your goods are being moved into the European Union.
Option 1: Use DAP incoterm Instead
UK companies may need to set up the EU consignee as the importer of record, which requires a direct representation form. As we saw with Brexit, not everyone understands this and some refuse to complete the documentation.
You could consider continuing to use Regime 42 through France but instead switch to the Delivered Duty Paid (DAP) incoterm for the clearances. This creates the least change to how you export.
However, this does mean that the consignee (most likely the customer) will have to put in extra effort as they will need to be the importer of record. The consideration of this is that it may make the perception of your goods as slightly less competitive in Europe due to the increased knowledge requirements and demands placed on the buyer.
You can almost simulate DDP in a way by billing the UK company any applicable duty and customs clearance charges. The consignee is still the importer of record but it does make your goods a little simpler to purchase for European buyers.
I expect that a lot of UK companies will set up the EU consignee as the importer of record and that means needing the customer to complete a direct representation form. It’s a simple process but it is important the Consignee understands what they are signing and why.
Option 2: Use a different route
An alternative route into Europe could be utilised where you clear your goods in The Netherlands or Belgium instead. This would include using article 23, for example, which allows VAT deferment in the Netherlands.
The Netherlands have their equivalent of Regime 40 & 42 which is General or limited fiscal representation which you can read more about here. Belgium is also an option however both involve a number of in depth security checks which take up a lot of time. On balance I would still recommend the French route for EU importers in the majority of cases.
You can route directly into the Netherlands but it’s a 8 hour ferry overnight where your consignment will be unaccompanied. If you route via Dover to Calais ferry or tunnel then you will need T1 documentation which comes at extra cost and risk due the T1 needing to be closed by customs law.
Option 3: Use Regime 40 with a French VAT number
Setting up Regime 40 with a French VAT registration is also an option. It involves monthly management fees, so it suits exporters with high export levels or at least consistent sales to European customers to justify the cost. Overall it may work out as the cheaper option than Regime 42.
This becomes a better option if you are exporting in enough volume, around 10 consignments a month is usually about where it becomes cost neutral against Regime 42. It really depends on the value of the consignments though.
Another major advantage of Regime 40 is that customers can use a bulk invoice rather than many smaller invoices which also leads to a cost saving.
Bulk invoicing under Regime 42 is not possible!
As a lot of companies will be applying for French VAT numbers before the end of the year I am expecting that the application process will become longer. It currently takes around 6 weeks to obtain a French VAT number so seeing that extended makes it more important to apply early.
Which types of business does this affect most?
Exporters with large volumes will be less affected as they can either switch to Regime 40 or use DAP if their customer has the capacity. Importers with more volume are more likely to have the ability to handle VAT and importing in house.
The worst affected will be exporters who are shipping goods ad-hoc or in low volumes where it is less commercially viable to switch to other options due to the costs and responsibilities on the buyer.
Will other countries make similar changes to this?
Belgium and Netherlands have similar rules with these being the main short straits into the EU. This change is France catching up rather than the first of many.
There will always be changes to customs processes. There have been a lot in the last 5 years so it’s certain that more changes will follow in the coming years.
Let’s hope communication and clarification is better in the future to stop confusion.
What type of help is available?
You will need to find a clearance agent and a Tax agent in France if your EU consignee will not act as the importer of record. Alternatively, you can do this yourself in house if your accounts team are knowledgeable on EU import process and you are registered for VAT in France.
You can learn more about creating commercial invoices here and more detail in the incoterms available here.
For Freight Forwarders you either need a robust customs partner or an in-house customs department although we have found that having our own department speeds the process up significantly and keeps you in control of your own customs costs.
People often find customs confusing to start with and the ever-changing landscape just adds layers of complexity. We find that the best way to help our customers is to take the hard work out of finding the solution. We will take the time to understand how unique your situation is and we will monitor and adapt to new developments along the way. We’ll hold your hand through the process, until you are 100% happy with the solution we have offered you.
The important thing is not to go backward. Using T1’s and having to pay import VAT upfront in the EU really should be a thing of the past. Engage with us and understand your options so as not to affect cash flow or increase your costs.
