The EU just changed the cost of returns, and retailers need a new strategy

Cross-border returns have never been easy for retailers to navigate.

With the latest changes to the EU’s customs rules, brands now have to contend with a new flat fee when they sell into the continent, a fee that’s non-refundable, even if the customer returns the product.

For retailers that regularly sell into the EU, it’s a huge change: one that means rethinking the viability of their current returns programmes, and how they can protect their overall profit margins.

Here’s what you need to know, and what you should be doing next:

What’s changed with EU customs?

• Items valued €150 or less are no longer exempt from customs duty
• A flat duty fee of €3 is now applied for each HS code category
• This fee can’t be reclaimed in the case of returns

From July 1, 2026, the European Union has abolished its customs duty exemption for low-value goods (€150 or less).

Instead, you’ll need to pay a flat fee of €3 for every HS code category in the shipments you send into the EU from a non-EU country. While this new flat fee is a temporary measure, it’s expected to stay in effect until July 1, 2028.

That’s already a blow to many consumer ecommerce and retail brands, adding additional costs that are eating into their profit margins (if they don’t pass those costs to their customers).

 Crucially, the new €3 fee can’t be reclaimed if the customer returns the product.

For industries with painfully high return rates (such as fashion, which sits at 20–40%), this could mean paying out fees on almost half of their sales, without the revenue of an actual finished sale.

What does that mean for retailers?

This new flat fee applies to parcels valued at €150 or less, which means some industries are likely to feel the hit more than others.

Retailers selling everyday fashion and commodity goods could end up paying the fee on most of their orders, while brands selling high-end electronics and furniture will only pay the fee on a smaller number of sales.

What’s important to remember is that the €3 fee is calculated per HS code; not per item:

• If you sell 3 T-shirts, you’re charged €3 total, not €9 (as T-shirts all come under one HS code).
• If you sell 2 T-shirts and 1 watch, you’re charged €6, not €9 (for the two different HS codes).

That means retailers who usually ship orders with a single item (or orders with a mix of items) will end up with higher relative costs on each order compared to the value of the order.

How do the changes affect return costs?

Before the recent EU customs reforms, a return from the EU looked like this:

From the retailer’s perspective, it’s a standard return: they’ve suffered the relatively small losses of shipping and processing.

Today, that same return looks like this:

These new changes to EU customs are much more than an operational tweak:

They’re a fundamental change to the economics of returns and the financial viability of making them work.

Retailers selling the lowest-value goods will be hit the hardest, with the flat fee of €3 cutting out a larger portion of the revenue on each item sold.

For larger brands selling at scale, the final costs could be intimidating:

For a company with 100,000 annual returns, that’s €300,000 of non-recoverable additional expense each year, without the sales revenue to offset it.

The new returns strategy for retailers

The direct costs of the EU customs fees are a challenge for any retailer. Beyond those costs, retailers now have to deal with:

• New compliance issues: with new cross-border policies and processes that need to be reviewed and adjusted
• New supply chain issues: with additional customs events leading to delayed resale, markdown losses, and the potential for inventory distortion.

There’s no getting around the new customs duty rules for EU sales. But there are ways to minimise your losses and reduce your risk.

If retailers want to offset the inevitable costs of unavoidable returns, they need to rethink their current returns systems — and tighten their control over what comes back across the borders.

For most brands, that means focusing on three main areas:

1. Preventing returns
2. Fast recovery.

1.Preventing returns

Some returns are unavoidable. But for the rest of them, there are steps you can take to help prevent them entirely.

While some brands are changing their returns policies as a way of preventing returns (offering shorter return windows, or more strict conditions), it’s often a move that ends up damaging the customer experience.

Instead, retailers should be moving towards customer-focused changes, such as:

• Accurate and detailed product descriptions so their expectations match reality
• Media-rich product content Such as 360° views, hi-res imagery, and video demos
• Better sizing accuracy and size guides for apparel and footwear
• Better protective packaging and shipping instructions for fragile products
• Analytics to track the reasons for returns to help prevent those issues in the futur
  
  

2. Fast Recovery

With more low-value parcels being processed through customs, your entire reverse supply chain is likely to be slowed. That means you’re looking at:

• Delayed resale: lowering the chances of recovering value
• Higher depreciation: with items losing 3.5% of value for every week spent in the returns process
• More markdowns and discounts: especially for seasonal items, such as apparel and footwear.

To offset these risks, retailers need a faster and more efficient return journey for every parcel to get their products back on the shelf as fast as possible, and maximise the value they recover from each return.

What retailers should do now

The new EU customs rules are already in effect, which means your business is already seeing the additional costs of a non-recoverable fee.

Here’s what you need to be ready:

Cost exposure

• Identify how many EU returns are below €150
• Calculate the total annual cost from non-recoverable customs duties
• Update your margin forecasts to get the full picture of where you are

Returns strategy

• Track all avoidable returns (and the reasons behind them)
• Improve product content (descriptions, imagery, videos)
• Consider deducting the €3 fee from customer refunds (but use caution: this could hurt your customer experience)

Operations

• Map and review your return flows from each EU country
• Use local reconditioning services on fast-moving goods to resell from within the EU (and avoid a second flat fee)
• Explore circularity partners to recover maximum value from returns
  

Compliance

• Review the EU customs changes against your current processes

Are your returns ready for the new rules?

The new customs rules mean big changes for retailers (and a big risk to your profit margins).

But it’s also an opportunity to tighten your returns programme and reduce that risk. With the right returns system, you’ll be able to:

• Reduce the volume of returns (and EU fees) with deep insights and data
• Reduce your exposure to returns fraud (and everyday returns abuse)
• Get returned items back sooner (and recover more value)
• Simplify your cross-border returns with a partner that handles customs compliance and processes.

If you think your current returns system isn’t ready for the new rules, start a chat with one of our returns experts and we’ll give you the tools that help protect your margins and reduce your costs.