UNSCRUPULOUS manufacturers of lighting fixtures selling on Amazon are offering to make false declarations of extremely low cost prices to help UK customers evade custom duties, it has emerged.
The practice – not uncommon in the fashion and giftware businesses – is relatively new to the lighting industry and it threatens to undermine local manufacturers who are struggling to complete with ultra-low prices from Asia, especially China.
Sellers will typically declare the goods as a ‘gift’ on the custom declarations and mark the value as £15 to be under the VAT and duty limits.
Amazon maintains it is technically a marketplace and not an importer or supplier, and therefore it is not required to ensure compliance with customs and excise regulations. The buyer is responsible for the payment of any duty and taxes even if the seller under declares the value.
The practice of under-declaration can result in a luminaire or lamp costing at least 23 per cent less, avoiding 20 per cent VAT and duty of 2.7 per cent minimum for electric light fittings or even more for a lamp, depending on its energy-efficiency.
For a £200 light fittings, the seller is avoiding at least £45, making it difficult for a UK seller to compete, even after taking into account the cost of shipping.
Amazon says that sellers on its site are ‘independent businesses responsible for complying with their own VAT obligations’. Additionally, the recipient is the importer of record and therefore must comply with all laws and regulations of the destination country including any import taxes, customs duties and fees, which are levied once a shipment reaches the recipient's country.’
A report for the European commission has estimated that over £500m a year is being lost to member states because of the large volumes of packages qualifying for the low-value VAT exemption.
Some Chinese suppliers are explicit in the practice. One supplier of waterproof colour-changing LED light bars tells customers on its Amazon listing: ‘The price exclude[s] import tax, but we will declare very very low’.
The Lighting Industry Association is currently undertaking a market surveillance of major retailers and online sellers, including Amazon. The association has selected six lighting products where Amazon is acting as the fulfilment house and has stock in its UK warehouses. The LIA says the consumer is often unwittingly making a contract with a Chinese company which is outside the jurisdiction of the UK law enforcement bodies.
Early results suggest that five of the six have ‘major non-compliance issues’ some of which are safety related.
‘Nearly all these fulfilment transactions avoid VAT either because they are under the threshold or simply don’t charge it as they are not registered,’ the LIA’s chief operating officer Peter Hunt told Lux. ‘We’ve found no evidence that any of them are registered for WEEE compliance which means compliant UK companies are picking up the bill for the Chinese products at their end of life. How can UK companies that work hard to comply with the raft of legislation in our industry compete on this basis?’
The UK government is due to launch a ‘fulfilment house due diligence scheme’ in April but industry sources fear it will do little to tackle the scale of the problem as the sanctions being applied to businesses that fail to register are minimal.
In December, Amazon came under fire from three European trade associations over lamp sellers’ non-compliance with waste legislation. The bodies drew attention to the high levels of disregard for the Extended Producer Responsibility legislation, particularly WEEE.
- The design of LED luminaires is the subject of this year's Lighting Fixture Design Conference, which takes place on 20 and 21 June 2018 . Organised by Lux and LEDs magazine, the event takes place at the Cavendish Conference Centre in London. For more information and to reserve you place, click HERE.
Main picture: Shutterstock copyright 2017