Incoterms explained: a practical guide for UK buyers
Incoterms are standard trade terms that set who pays for freight, insurance and customs, and where risk passes from seller to buyer. This guide is for UK businesses buying goods from overseas. It explains the common terms, which to use when and how we compare supplier quotes on the same basis.
By Matt Buckley · Updated
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.
Choosing Incoterms for UK imports
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 China sourcing agent service sets Incoterms as part of supplier negotiation.
Frequently asked questions
What is the most common Incoterm for imports from China?
FOB is widely used for sea freight from China, because the buyer then controls the main freight leg and cost.
Do Incoterms cover payment or ownership?
No. Incoterms cover delivery, costs and risk. Payment terms and when ownership transfers must be set out separately in the contract.
Are Incoterms 2020 still current?
Incoterms 2020 is the current edition published by the ICC. Always state the version in the contract, for example FOB Shanghai Incoterms 2020.
Further reading
- Incoterms rules: International Chamber of Commerce
- Import goods into the UK: step by step: GOV.UK
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Estimate landed cost per unit with freight, insurance and duty, and import VAT shown separately.
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