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List of Inter-Company Terms / Inco-Terms

Calculating the true cost of importing goods into the UK is essential — and the Incoterms (also known as Terms of Sale) you agree with your supplier play a major role in that.

Many importers assume Incoterms are just a formality that UK Customs won’t care about. In reality, they determine who pays for what, who bears the risk, and how much duty and VAT you’ll actually pay. They must be clearly agreed at the time of purchase and stated on all your shipping and customs paperwork.

Why does this matter so much? We explain everything below, including what the most common Incoterms (DDP, EXW, FOB, CIF and others) really mean for UK importers. ukimports

We can help you with shipping and UK customs clearance no matter which Incoterm applies to your shipment.

Need assistance? Contact our Imports Team on 0800 690 6310, email enquiries@ukimportservices.com, or complete our online quote form.

What needs to be shown on your paperwork?

Incoterms are always written in a standard 3-letter format (e.g. DDP, EXW, FOB, CIF).

Below you will find both the official ICC explanations and our simplified, practical versions written specifically for UK importers.

Click on any term in the blue boxes to expand and see both the official wording and what it usually means in real-world UK import situations. ukimports

DDP - Delivered Duty Paid

Official explanation: “Delivered Duty Paid” means that the seller delivers the goods when the goods are placed at the disposal of the buyer, cleared for import on the arriving means of transport ready for unloading at the named place of destination. The seller bears all the costs and risks involved in bringing the goods to the place of destination and has an obligation to clear the goods not only for export but also for import, to pay any duty for both export and import and to carry out all customs formalities.

Simplified explanation: This usually means that you have paid the seller an all-in price, for the goods and their delivery to your door (without having to pay any charges to anyone else). ukimports

DAT - Delivered At Terminal

Official explanation: “Delivered at Terminal” means that the seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes a place, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal. The seller bears all risks involved in bringing the goods to and unloading them at the terminal at the named port or place of destination.

Simplified explanation: This usually means that the seller will be arranging and paying for the goods to arrive at the destination airport or Port.

CIF - Cost, Insurance and Freight (for use with Sea Freight only)

Official explanation: “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.”

Simplified explanation: This usually means that you, the buyer/receiver have paid the seller, the cost of the goods, Insurance during transit and the freight charges to the UK. All cost costs incurred once in the UK are payable by yourself. ukimports

CFR - Cost and Freight – also shown as C&F (for use with Sea Freight only)

Official explanation: “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.

Simplified explanation: Exactly the same as ‘CIF’ above without your goods being insured.

CIP - Carriage and Insurance Paid to

Official explanation: “Carriage and Insurance Paid to” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.
The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIP the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.

Simplified explanation: This usually means that the seller will be paying for the goods to be shipped, and arranging insurance cover, up till an agreed place (usually an agreed address between you, the buyer/receiver and the seller).

CPT - Carriage Paid To

Official explanation: “Carriage Paid To” means that the seller delivers the goods to the carrier or another person nominated by the seller at an agreed place (if any such place is agreed between parties) and that the seller must contract for and pay the costs of carriage necessary to bring the goods to the named place of destination.

Simplified explanation: This is usually the same as CIP above, but without the Insurance cover.

FOB - Free on Board (for use with Sea Freight only)

Official explanation: “Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.

Simplified explanation: This usually means that the seller has only paid for the goods to be delivered in the port or airport of departure in the Country of Origin. All freight costs and any other charges will need to be arranged and paid for by yourself, the buyer / receiver. We can assist you with this, so why not contact our Imports Team for more information. ukimports

FCA - Free Carrier

Official explanation: “Free Carrier” means that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place. The parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.

Simplified explanation: FCA is identical to FOB, except for the fact that it usually means that the seller will arrange for the goods to be delivered to the port/airport/cargo shed instead of you, the buyer, having to pay for it to be collected.

EXW - Ex-Works

Official explanation: “Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e. works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.

Simplified explanation: This usually means that it has been agreed that the shipper is not paying for anything other than the sale of the goods. The responsibility for the collection of the goods from the supplier’s premises, export documentation including any local Customs declaration and handling costs, and the shipping to the UK, will be the arranged by the buyer. Again, we can assist you with this, so why not contact our Imports Team.

How Incoterms Affect the Customs Value (Duty & VAT)

The total value of your goods for UK import duty and VAT depends heavily on the Incoterm (Terms of Sale) agreed between you (the importer/buyer) and the seller.

Incoterms define who is responsible for paying the various costs — and this directly determines what HMRC considers the customs value of your shipment.

In simple terms, when buying goods you usually face one of these common situations:

You pay an all-in price that includes shipping to the UK (e.g. under DDP).
You pay for the goods only, with the seller adding a separate charge for shipping to the UK.
You pay just for the goods and arrange (and pay for) the shipping yourself from the country of origin to the UK.

Marine insurance (if taken out to cover the goods in transit)

What is included in the UK customs value?

Incoterms are internationally recognised rules published by the International Chamber of Commerce (ICC). The current version is Incoterms 2020.

They are always shown on quotes and shipping documents in a standard 3-letter format (e.g. DDP, EXW, FOB, CIF).

For UK Customs (HMRC), the customs value is normally the original purchase price plus any of the following costs that you (the buyer) have paid or will pay:

Transport costs from the seller’s premises to the port/airport of export
Shipping / freight costs to the UK
Specialised packaging costs
Marine insurance (if taken out to cover the goods in transit)

If the seller has already absorbed these costs under the chosen Incoterm, they are not added to your customs declaration. If you pay for them separately, they must be included — and you may pay import duty and VAT on them (where applicable). ukimports

Related Pages

Freight Shipping Menu

New to Imports

General. Scheme of Preferences

Reg. Importer/Exporter - EORI

incoterms

Shipping Insurance

List of EU Countries

Shipping Terms / Glossary

Shipping a vehicle

Shipping to Amazon Warehouse

Importing into the UK

Exporting from the UK

Shipping to the UK?

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UK Import Services Limited
Global Shipping and UK Customs Broker

PO Box 832
Rainham
Kent
ME8 1DQ
United Kingdom

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