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Export Documentation

When you agree to sell goods to an overseas buyer, someone has to arrange the shipping, pay for insurance, handle customs clearance, and absorb the risk if something goes wrong in transit. Incoterms — International Commercial Terms — are the internationally standardised set of rules that define exactly who does what and at what point the risk transfers from seller to buyer.

Choosing the wrong Incoterm can leave you unexpectedly liable for costs you didn't budget for, or create a poor experience for your customer. Here is what UK exporters need to know.

What Incoterms Actually Cover

Incoterms (currently the 2020 edition, published by the International Chamber of Commerce) cover three things: who is responsible for arranging transport; who bears the cost of transport and insurance; and at what point risk transfers from seller to buyer if goods are lost or damaged.

They do not cover the transfer of ownership, payment terms, or what happens if the goods don't conform to the contract — those are covered by the contract of sale. Incoterms also do not automatically determine who is responsible for customs duties in the destination country; you need to read each term carefully to understand that.

The Most Common Incoterms for UK Exporters

EXW — Ex Works
The seller makes the goods available at their premises; everything else is the buyer's responsibility. On paper this minimises the seller's obligations, but in practice it creates complications: the buyer (a foreign company) needs to arrange collection from your UK premises, handle UK export customs formalities, and deal with all onward logistics. For most UK SMEs, EXW is impractical — your customer typically doesn't have UK logistics infrastructure.

FCA — Free Carrier
The seller delivers the goods to a named carrier at a named place (often a UK port or the seller's premises). Export customs clearance is the seller's responsibility; import customs clearance is the buyer's. Risk transfers when the carrier takes possession. FCA is the ICC's recommended alternative to EXW for most containerised and air freight shipments.

CPT — Carriage Paid To
The seller arranges and pays for transport to the named destination. Risk transfers to the buyer when the goods are handed to the first carrier — so the seller pays for transport but the buyer bears the risk of loss during transit. Insurance is not mandatory under CPT.

CIP — Carriage and Insurance Paid To
Like CPT, but the seller must also provide insurance. Under the 2020 rules, CIP requires a higher level of insurance cover (Institute Cargo Clauses A, the most comprehensive) than the old standard. CIP is well suited to high-value or fragile goods.

DAP — Delivered at Place
The seller delivers the goods to a named place in the destination country, ready for unloading. Import customs clearance and any import duty are the buyer's responsibility. DAP is one of the most commonly used terms for UK SME exports — it gives the customer a door-to-door price while keeping import formalities in the buyer's hands.

DDP — Delivered Duty Paid
The seller takes on full responsibility: transport, export clearance, import clearance, and import duty in the destination country. This is the most comprehensive obligation a seller can take on — and for UK exporters selling to the EU, it means you become the importer of record in an EU member state, responsible for registering for VAT there and accounting for import VAT. For most UK SMEs, DDP is a significant and often underestimated commitment.

Why DDP Is Risky for UK Exporters

DDP sounds appealing from a customer experience perspective — you offer a landed price with no surprises. But it puts you in a position most UK SMEs are not equipped for: you become responsible for import customs clearance in the destination country, paying import duty and VAT there, and potentially registering for VAT in that country. If duty rates change or your goods are mis-classified on entry, you absorb the cost.

For EU exports specifically, DDP means navigating EU customs and VAT rules as a non-EU business. This typically requires appointing a customs agent or fiscal representative in the EU country — adding cost and complexity. Many UK businesses that quote DDP for EU orders have found themselves facing unexpected bills when their freight forwarder invoices them for import duty they hadn't factored into the price.

Why DAP Is Often the Safest Choice

DAP keeps import customs responsibility where it belongs: with the buyer, in their home country, using their local customs agent. Your customer knows their market, their import procedures, and their applicable duty rates. You deliver the goods to their door; they handle the rest. This is the cleanest arrangement for most UK SME exports and avoids the risks of DDP without asking your customer to arrange collection from the UK as EXW would.

Incoterms on Your Export Documents

The agreed Incoterm and named place must appear on your commercial invoice — for example, "DAP Rotterdam, Incoterms 2020". This is important not just for clarity with your buyer but because customs authorities use the Incoterm to understand the commercial arrangement and verify the customs value. Getting it onto your documents correctly is a basic compliance requirement.