Fulfilment House Due Diligence Scheme to Elevate Fulfilment Standards

The importance of reliable and efficient fulfilment providers cannot be overstated. Recognising the crucial role that fulfilment houses play in the success of online businesses, I-Fulfilment is proud to announce the launch of its Fulfilment House Due Diligence Scheme (FHDDS).  

The scheme applies to all registered fulfilment providers operating in the UK. This initiative aims to set new industry standards for transparency, reliability, and excellence in order fulfilment services.  

 What is a Fulfilment House? 

 A fulfilment house is a company that specialises in operating certain logistical tasks for businesses. These specialised tasks may include handling product shipments, managing inventory, or assisting with order fulfilment. Fulfilment houses can benefit companies that operate online and take orders or ship on a large scale. By outsourcing these tasks to a registered third-party logistics (3PL) provider, businesses can focus on core competencies while providing top-quality customer service. 

Furthermore, fulfilment companies can frequently offer their services at a lesser cost than most enterprises could achieve on their own. As a result, they can assist businesses in streamlining operations and increasing production without losing quality or increasing prices. 

The Due Diligence Scheme for Fulfilment Houses 

The FHDDS is critical for combating tax evasion and preventing tax rule abuse. It is designed to improve accountability among fulfilment houses, and the system makes the participating companies take on extra due diligence responsibilities, particularly tax and duty obligations, when it comes to their clients and the agreements they execute.  

The evaluation process under the FHDDS is comprehensive, involving a meticulous review of crucial documents such as licenses and insurance policies. Furthermore, it extends to on-site assessments, delving into the safety and security standards of the facility.  

The procedural steps typically involve: 

Identity Verification: 

Confirming the identity of the business or individual through the examination of official documents such as licenses or passports.  

VAT Registration: 

Validating the VAT registration number of the overseas client, often facilitated through systems like the VAT Information Exchange System (VIES) or analogous databases. 

Business Status: 

Evaluating the legal status of the business, discerning whether it is a registered company, a sole trader, or another form of business entity. 

Financial Health: 

Some fulfilment houses choose to extend their due diligence by assessing the client’s financial stability, although this is not obligatory under FHDDS. 

Background Checks: 

Investigate the business history of the client, with a focus on any involvement in legal disputes, particularly those related to tax evasion or fraud.  

Contractual Agreements: 

Ensuring that agreements with overseas customers incorporate clauses mandating compliance with all relevant tax laws and regulations.  

Ongoing Monitoring: 

Recognising that due diligence is an ongoing process, regular checks are imperative to confirm that the client consistently adheres to pertinent legal and regulatory frameworks. 

The Due Diligence Scheme for Fulfilment Houses applies to the following: 

• Businesses that hold goods imported from countries other than the EU 
• Businesses that store products in the United Kingdom on behalf of sellers based outside the EU. 
• Businesses that store goods for sale that have never been sold in the UK before. 

The objective of the due diligence scheme for fulfilment houses is to instil confidence in stakeholders. Failure to register for FHDDS at the right time may put a business at risk of penalties and a criminal conviction.   

 The scheme creates a level playing field by ensuring participating companies consistently uphold high-quality fulfilment services, meeting industry standards and legal requirements. This uniformity is vital for cultivating fairness and equity within the system. 

If you are a trader based outside the UK, find out if the company that warehouses your products in the UK is a member of the Fulfilment House Due Diligence Scheme. Click here: gov.uk 

The Importance of Fulfilment House Due Diligence Scheme 

If you do business with foreign nations and store products in a UK warehouse, the Fulfilment House Due Diligence Scheme may apply if the warehouse or fulfilment center has not yet applied for the scheme. If they fall into one of the following categories, they are expected to follow the scheme, and failing to do so may result in VAT fraud because they are not keeping data on their overseas consumers. 

 If they are found to be allowing fraudulent behaviour, the warehouse may be closed down, which means your company will no longer be able to use its space to keep products, and you may lose sales for your products. This is why it is critical that companies register for the FHDDS scheme if required and why you should ensure that the warehouse you are utilising is FHDDS compliant. 

Benefits of FHDDS Compliance for Businesses 

A fulfilment house plays a crucial role in the success of eCommerce companies for several reasons. The importance of these services stems from the impact that delays and uncertainties in inventory management and order fulfilment can have on both customer satisfaction and the business’s overall financial health.  

Businesses partnering with fulfilment houses registered under the HMRC can enjoy a range of benefits, including: 

• Enhanced Reliability: Registered fulfilment houses ensure reliable and consistent service, minimizing disruptions in supply chains and maintaining timely deliveries for online businesses. 

• Improved Transparency: The FHDDS promotes transparency by validating licenses, security measures, and operational standards, offering businesses a clear view of their fulfilment partner’s capabilities. 

• Mitigated Risks: Potential risks such as inventory mismanagement or data security breaches are mitigated, providing a more secure environment for businesses entrusting their operations to fulfilment houses. 

• Quality Assurance: Registered providers uphold industry standards, ensuring that businesses receive top-tier fulfilment services, enhancing customer satisfaction and retention. 

• Cost-Efficiency: Partnering with registered fulfilment houses often means streamlined operations and optimised costs, allowing businesses to focus resources on core competencies while maintaining high-quality services. 

• Compliance and Legal Assurance: Businesses partnering with FHDDS-certified fulfillment houses benefit from adherence to legal requirements and industry standards, reducing legal liabilities and ensuring compliance in their operations.

The efficiency gains and access to specialised expertise contribute to streamlined operations and cost-effectiveness. By fostering a commitment to quality and continuous improvement, FHDDS compliance positions businesses to not only meet current demands but also to navigate future challenges in the dynamic marketplace. Contact I-Fulfilment if you are looking for a reliable and trusted partner.