Incoterms explained: a practical guide for UK buyers

The 11 Incoterms 2020 rules

Rules for any mode of transport

• EXW (Ex Works). Buyer collects from the seller's premises and handles everything, including export clearance.
• FCA (Free Carrier). Seller delivers to a named carrier, cleared for export.
• CPT (Carriage Paid To). Seller pays carriage to a named place; risk passes when handed to the first carrier.
• CIP (Carriage and Insurance Paid To). As CPT, plus the seller insures the goods.
• DAP (Delivered at Place). Seller delivers to a named place, ready for unloading. Buyer pays import duty.
• DPU (Delivered at Place Unloaded). As DAP, but the seller also unloads.
• DDP (Delivered Duty Paid). Seller delivers, cleared for import, with duty paid.

Rules for sea and inland waterway

• FAS (Free Alongside Ship). Seller places goods alongside the vessel.
• FOB (Free on Board). Seller loads the goods onto the vessel. Risk passes on board.
• CFR (Cost and Freight). Seller pays sea freight; risk passes on board.
• CIF (Cost, Insurance and Freight). As CFR, plus seller insures.

Which Incoterms should UK importers use?

Many UK importers buy FOB from Asia, which lets them control the freight forwarder and sea freight cost. CIF and CFR can look convenient but hide freight margin in the price. DDP can simplify things, but the supplier then acts as importer of record, which brings its own VAT and compliance issues. EXW puts export clearance on the buyer, which is often impractical.

Incoterms and landed cost

Incoterms decide which costs sit in the supplier's price and which you pay separately. Compare quotes on the same basis, then add freight, insurance, duty and delivery. See import duty from China and should-cost modelling. Our offshore sourcing service sets Incoterms as part of supplier negotiation.

Frequently asked questions