Incoterms 2020 is a set of eleven International Chamber of Commerce rules splitting costs, risk and transport and customs obligations between seller and buyer. On deliveries to the United Kingdom the rule decides who acts as importer, who pays duty and VAT, and at what point the risk of loss passes to the buyer.
What a rule does, and what it does not
Incoterms answers three questions: who arranges and pays for the carriage, at what point risk passes to the buyer, and who handles customs formalities on each side. It does not answer when title passes, what the price is, what the payment terms are, or what happens in a dispute. All of that stays in the sales contract. The most common mistake is treating a three-letter code as though it were the whole agreement, then discovering it does not govern the things people expected of it.
The eleven rules in brief
- EXW: goods available at the seller's premises, the buyer arranges everything, including export clearance.
- FCA: the seller hands the goods to the carrier nominated by the buyer and clears them for export.
- CPT and CIP: the seller pays carriage to the destination, and under CIP insurance too, but risk passes earlier, on handover to the carrier.
- DAP: the seller delivers the goods ready for unloading at destination; the buyer handles import clearance.
- DPU: as DAP, but the seller also unloads.
- DDP: the seller delivers goods cleared for import, with duty paid.
- FAS, FOB, CFR, CIF: sea rules, misapplied in road transport to the United Kingdom and a steady source of confusion.
Why sea rules cause trouble on road traffic to the UK
On UK trade we still see invoices quoting FOB for a trailer delivery through the tunnel or on a ferry. A sea rule assumes goods are placed on board a vessel in a port, not handed to a driver at a ramp. The result is that nobody can point to the moment risk passed, and when damage occurs an argument begins. For road carriage the correct choices sit in the first group, most often FCA, DAP or DDP. This is not pedantry, it is about knowing whose problem it is when something goes wrong.
Who acts as importer in the United Kingdom
This is the most important practical consequence. Under DAP the British consignee is the importer: they file the import declaration, pay the charges and answer for the accuracy of the data. Under DDP the EU seller takes that role, which requires a footprint on the British side, including registration and usually a representative. Many Polish exporters promise a customer DDP delivery without that footprint and find out on the first shipment. We break it down in our texts on DDP and DAP, on who pays duty and VAT and on UK VAT registration.
EXW on exports to the UK: convenient in theory
EXW looks attractive to a seller, because it removes everything from their plate. In practice, since Brexit, the seller still has to supply data for the export declaration, while formal responsibility for export falls on a buyer established outside the EU who may not be able to act as exporter at all. The result is carriage with an uncertain declaration status, which leads straight to problems evidencing export for tax purposes. On UK trade FCA is usually a more sensible choice than EXW. Export documentation is covered in our text on EU export clearance.
Insurance and the point risk passes
Only two rules impose a duty to insure the goods, CIP and CIF, and the level of cover required differs between them. Under the other rules nobody is obliged to insure the load, which surprises the parties only after a loss. Set that against the fact that carrier liability cover operates within the CMR Convention and does not cover the value of the goods in every case. We break it down in our texts on cargo insurance and on the carrier liability limit.
How to write the rule so nothing is left open
The three-letter code alone is not enough. The rule should be written with a named place and a reference to the version, for example "DAP, consignee street and town, Incoterms 2020". The named place identifies where risk passes or where the delivery obligation ends, and without it the rule is unfinished. It is also worth writing into the contract the things Incoterms does not cover: who bears waiting time charges, who pays for storage en route and how pallets are settled. Waiting time practice is covered in our text on waiting time charges on UK transport. This is general information rather than legal advice.
Sources
Not sure which rule fits your UK delivery? Describe the transaction through the quote form and we will show what it means for transport and customs. Formalities are collected on the customs clearance page.
