Compliance with laws and regulations is an important pre-condition when executing our strategy. Due to the nature of our business and size of our company, we operate in an environment with many law and regulations to comply with.
These regulatory requirements are in development, just as our business is. In this section we explain the most relevant regulatory requirements, the developments and potential impact thereof on PostNL.
The Dutch postal market has undergone fundamental changes in recent years. Since 2005, volumes have decreased by more than half, and the decline is set to continue. Below we discuss the impact regulation is having on the postal sector in which we operate.
In March 2020, the State Secretary of Economic Affairs and Climate published proposed amendments on the Postal Law for the Dutch Parliament. The amendments aim at keeping nationwide mail delivery affordable and reliable against the backdrop of a changing market.
The Dutch House of Representatives (Tweede Kamer) sent its remarks and questions on the proposed amendments on the Postal Law to the Dutch Government in May, addressing topics that included access regulation, the role of ACM, supervision of the labour market, consolidation, and protection of the universal postal service. This report is the first step in the parliamentary legislative process towards a renewed Postal Law. The State secretary of Economic Affairs and Climate has responded to the questions and remarks placed by Parliament in May. After this usually a political debate will take place in parliament about the proposal, however the exact timing of this process is unclear.
On 27 September 2019 the State secretary of Economic Affairs cleared the merger between PostNL and Sandd. This approval is subject to the condition that PostNL will provide access to other postal operators, respect its commitments towards workers and adhere to a profit cap based on the return on sales. On 11 June 2020 the Rotterdam district court (rechtbank Rotterdam) annulled the decision of the State secretary. Both the State secretary and PostNL have appealed against this annulment to the Trade and Industry Appeals Tribunal (CBb). As part of the appeal procedure the State secretary will issue a new decision, which is expected in Q2 2021. We do not expect a final ruling of the Tribunal before the end of 2021.
PostNL has reached an agreement with FNV trade union regarding the minimum wage case of Sandd. Around 8,500 former employees of Sandd supposedly did not receive payment for all the hours worked. This originated before PostNL's acquisition of Sandd.
PostNL is accountable for potential breaches of the Foreign Nationals Employments Act (Wet Arbeid Vreemdelingen), both internally and through its contractors. In 2020, the Dutch Labour Inspectorate uncovered several breaches at some of our delivery partners. PostNL, which is looking at ways to prevent this from happening in the future, cannot rule out fines.
In July, the Dutch Labour Inspectorate visited PostNL facilities following a number of anonymous complaints regarding breaches of Covid-19 and social distancing rules, and again later in the year in response to a growing number of infected employees who they believed may have been infected at work. No serious regulation breaches were discovered. However, due to the government's Covid-19 regulations, additional requirements were imposed on the working conditions in our locations.
In response, we have immediately adjusted our processes and workspaces in all our locations. PostNL remains in close contact with the inspectorate, and has been in contact with local and regional health services throughout the pandemic whenever Covid-19 infections have occurred among employees.
The Council of the European Union has decided to abolish the VAT exemption on low value goods below €22 euro imported to the EU from third countries. In 2020, the European Member State representatives agreed to postpone the EU VAT e-commerce package from 1 January 2021 to 1 July 2021, primarily because of the disruption caused by the Covid-19 pandemic. While this will benefit customers, for example through the creation of a level playing field, it is expected to have an impact on our costs because the new procedures for customs clearance mean postal operators will have to collect the import VAT.
The European Commission (EC) is in the process of evaluating the Postal Service Directive (PSD). PostEurop and PostNL contributed to the stakeholder consultation, highlighting that the USO remains the starting point for legislation and further sector-specific legislation is not necessary. The evaluation report is expected in the second quarter of 2021, and will report if the PSD is fit for purpose or needs to be revised.
In December, the EC published proposals for the Digital Service Act, meant to increase responsibility of platforms in dealing with illegal content/illegal products, and the Digital Market Act, an ex-ante competition instrument aimed at the large international platforms.
PostNL provided input to PostEurop for their contribution in the stakeholder consultation, highlighting the need for addressing competition concerns regarding big international platforms and their increased bargaining power in the delivery sector.
As a result of the Extraordinary congress in Geneva in 2019, the self declaration of rates for small packets with the USA was implemented as of July 2020. For the other relations, this system will start as of 1 January 2021.
As of this date, following UPU regulations, it is also mandatory to provide Electronic Advanced Data with all international shipments containing goods.
The next UPU congress, following a four year cycle, was planned to be held in Ivory Coast end of August last year but has been postponed due to the Covid-19 pandemic. The congress will now take place in August 2021 in Ivory Coast if the pandemic situation permits it at that time. If this is not the case, the congress will take place in Geneva in September in a remote and/or hybrid form.
Besides topics concerning the contribution system, the budget principles for the next cycle, remuneration proposals and the shortfall in the provident scheme, and the possible opening up of the UPU to the wider postal sector, will probably also be on the agenda for this congress.
The United Kingdom formally left the European Union on 31 January 2020 but a transition period was agreed during which the UK would remain part of the single market. This transition period ended 1 January 2021 at which time customs formalities were required for moving goods between the EU and the UK. Unlike the postponement as agreed in the EU, the UK has removed the Low Value Consignment Relief at this date as well for all commercial goods. A new VAT scheme applies for commercial items valued between £0 and £135 where sellers must pay VAT direct to UK. The £39 gift threshold for which no VAT will be levied, remains in place for private individuals. On the 24 December 2020 the EU and the UK reached a trade agreement whereby items above £135 or €150, will also be exempt from duties if the items originate from either the UK or the EU. In this trade agreement it was also confirmed that Northern Ireland will remain in the EU's single market for goods meaning that customs formalities will only be needed between Great Britain and Northern Ireland but not between the EU and Northern Ireland.
PostNL has adjusted its product conditions and processes as of 1 January 2021 to account for all changes as described above.
Digitalisation is transforming our business. IT and data enable us to integrate seamlessly with customers, meaning we can better tailor our services to their wishes. And as the nerve centre of our logistics processes, IT and data support us in providing interconnected services, 24/7. PostNL chief information officer (CIO) Marcel Krom discusses digital developments across the company.
"The IT organisation has been fully integrated into the company, and we are investing in the digitalisation of both our network processes and customer journeys. This digital transformation means we are shifting from technology push to business pull. Which means we are using IT and data to provide a seamless customer journey, create new delivery options, and open up new markets. And we need to be 100% reliable: this means no downtime. Digital Next, our company-wide transformation programme will help us execute our digital strategy even faster, leading to a smarter, more agile company that can continue to exceed customer expectations."
"Our focus is on introducing greater simplicity, which will facilitate further digitalisation and improve the pace of innovation. In Parcels, for example, we have established a group that is going to fully digitise the business's supply chain. This makes it easier to access data and information, improving efficiency and communication.
When we work on developing new systems and processes, we concentrate on three areas: agility, scalability and adaptability. Of these three, adaptability enables you to not only survive, but also thrive. But we are also working to make our agile teams 100% focused on the customer journey, to enhance the customer experience."
"Absolutely. Digitalisation helps us improve processes across the entire organisation, from strengthening the customer experience to creating more efficient operations. For example, it helps us us respond to the needs of our customers and consumers more rapidly, enabling us to build stronger bonds. It allows us to create a faster, more efficient supply chain and cut costs by automating activities and improving the flow of information. And it helps us grow our network capacity, making us better positioned to adapt to changing market requirements."
"We are focusing on a broad digital transformation at PostNL, developing distinctive customer and consumer experiences and innovative business models to further strengthen our competitive position in a changing marketplace. Going forward, we will accelerate the digitisation of our products, journeys and channels, placing our customers at the heart of our decision making.”