Customs
Breaking down the Incoterms
A quick guide to help cut through the jargon and simplify the complexities of customs.
Incoterms specify whether the buyer or the seller is responsible for specific parts of the shipment process such as paying duty and VAT. You would normally use different incoterms depending on how you want to sell your products to the end customer, how they want to buy and what capabilities that both of you have in your supply chain.
They clearly show who takes responsibility for:
- Paying for and managing the shipment through loading, ports or shipping.
- Insurance
- Import Clearance, Import Duties and VAT
This is something that needs to be agreed between the buyer and the seller beforehand.
Free Carrier FCA
when importing to UK
Free Carrier is a trade term dictating that a seller of goods is responsible for the delivery of those goods to a destination specified by the buyer.
The UK importer:
- Pays for freight movement.
- Arranges and pays for UK destination clearance.
- Pays for UK destination taxes.
- Pays for UK import VAT.
- Signs a letter appointing a direct customs agent.
The EU exporter:
- Arranges and pays for EU origin clearance.
What does that mean for you?
- This will affect the overall price of the goods’ movements.
- Obliges the exporter to control origin clearance.
- Have complete control over the freight.
Delivered At Place DAP
when exporting from the UK
Delivered-at-place (DAP) refers to an arrangement wherein the seller covers the costs and takes on the risks of moving product to the buyer’s location.
The UK exporter:
- Will arrange and pay for UK origin clearance.
- Pays for freight movement to agreed place.
- Signs a letter appointing a direct customs agent.
The EU importer:
- Arranges and pays for EU destination clearance.
- Pays for EU destination taxes.
- Pays for EU import VAT.
What does this mean for you?
- It is a simpler process than other Incoterms.
- Exporter’s payments occur only in the UK.
- Affects overall price of the goods’ movements.
- Do not need a fiscal representative.
Delivered Duty Paid DDP
when exporting from the UK
When goods are bought or sold “Delivery Duty Paid” (DDP) it means that the Seller delivers the goods to a place previously agreed to by the seller and the buyer.
The UK exporter:
- Arranges and pays for UK origin clearance.
- Pays for freight movement to agreed place.
- Arranges and pays for EU destination clearance.
- Pays for EU destination taxes.
- Pays for EU import VAT.
- Signs a letter appointing an indirect customs agent.
What does that mean for you?
- Fiscal representative required to pay VAT and duty on your behalf (we can arrange this for you in certain countries)
- Customs broker required to oversee customs clearance (we can do this for you)
- Affects overall price of the goods’ movements.
- No change for your importer at the end of the Brexit transition period.
Ex-Works (EXW)
when importing to the UK
EXW stands for Ex-Works.
The UK Importer:
- Arranges and pays for EU origin clearance
- Pays for freight movement
- Arranges and pays for UK destination clearance
- Pays for UK destination taxes
- Pays for UK import VAT
- Signs a letter appointing a direct customs
agent
What does that mean for you?
- Allows you to be in control of EU origin
customs paperwork meaning you have
an awareness of any delays in the EU - Affects overall price of the goods’ movements
- Must ensure the exporter has an EU EORI
number. - Has complete control over the freight
Make customs your competitive advantage
