Europe's New eCommerce Handling Fee: Another Hit to Australian Fashion Retailers' Profitability

As new European import charges squeeze margins, recovering VAT and Duty on returned merchandise is becoming an increasingly important profitability strategy.

Australian fashion retailers selling into Europe face another increase in the cost of cross-border eCommerce. The European Commission has confirmed a €2 handling fee on qualifying online purchases shipped into the EU from outside Europe, with implementation scheduled for 1 November 2026, subject to completion of legislative scrutiny.

Unlike the €3 customs duty introduced in July, this fee also applies to purchases exceeding €150. This follows the €3 customs duty introduced in July on qualifying low-value imports. Unlike the earlier duty, the handling fee is not simply restricted to purchases below €150. For Australian fashion brands already managing freight costs and high return rates, it adds significant pressure on margins.

The Real Cost Is Greater Than €2

The new handling fee is not simply another charge per parcel.

Like the existing €3 customs duty, it is calculated according to the distinct categories of goods within a shipment.

Consider an Australian fashion retailer shipping an order containing two cotton tops and one woollen skirt, with the garments falling into two separate customs classifications.

Under the new arrangements, that order could attract:

• €6 in customs duty under the existing €3 charge.

• €4 in additional handling fees under the new €2 charge.

• €10 in combined charges, before applicable VAT and freight costs.

For a business dispatching thousands of European orders every month, the cumulative impact can quickly become significant.

More concerning is that the €2 handling fee is non-refundable, even when the customer returns the merchandise.

The Real Cost of International Returns

When customers return merchandise, retailers may be left carrying freight, customs duties, clearance costs and VAT-related expenses on sales that generated no lasting revenue. The new handling fee is intended to be non-refundable even when merchandise is returned. However, eligible VAT and customs duties may be recoverable where the appropriate fiscal, customs and logistics arrangements are in place.

Turning Recovery Into a Profitability Strategy

Consider an Australian fashion brand generating €5 million in annual European sales with a 25% return rate. That represents around €1.25 million in returned merchandise value. The VAT and Duty potentially recoverable depends on original import values, tax treatment and individual claim eligibility, but the opportunity can be substantial.

Through Sell To Europe, we are already helping Australian fashion retailers establish the registrations, Importer of Record arrangements, customs documentation and returns processes required to support recovery of eligible VAT and Duty on UK and EU returns. For brands with established international sales, this offers a practical way to improve profitability in the short to medium term without relying on higher prices or additional sales.

Correct arrangements must be in place in advance: recovery opportunities may be lost where documentation or customs structures are not properly configured.

Protecting Profitability Starts With Recovering What Is Eligible

Australian brands cannot control new European import charges. They can, however, make sure eligible VAT and Duty on returned merchandise does not become an unnecessary permanent cost.

For CFOs and business owners, the question is straightforward: What is your leakage ... how much VAT and Duty is your business paying on UK and EU returns, and how much are you actually recovering?

Contact us to explore whether your operating model is leaving recoverable amounts unclaimed.