List of Inter-Company Terms / Inco-Terms

Calculating the costs is a must before arranging to import any goods into the UK. Although it doesn't sound like anything important and wouldn't be anything that UK Customs would be interested in, the 'Terms of Sale' or 'Inco-Terms' between the seller and you is not only something that must be clarified at the time of purchase, but something that must also be clearly marked on your paperwork. Why? All is explained below. ukimports.org

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Inco-Terms

The 'Total Value' of your goods liable for Import Duty and/or VAT depends on the 'Terms of Sale' or 'Inter-company Terms (Inco-Terms), between yourself, the importer (or buyer) and the exporter (or seller), and clearly outlines as to who is paying for what.

When buying any goods, you would usually pay either an all-in price, one which includes the cost of shipping to the UK. Or alternatively, there could be the situation whereby the price you pay, only covers the cost of the goods and then you may have to pay the seller an extra charge for shipping them to the UK. Or, perhaps you are just paying the seller for the cost of the goods and you're sorting out the shipping costs out yourself, with the company who has shipped them from the country of origin to the UK port. These 3 options are 3 different examples of 'Inco-terms' (or 'Terms of Sale') and perhaps, are the most commonly used 'Inco-Terms', (although there are many more), and they each affect what Customs deem as the value of your goods on which import duty and / or VAT will be paid (if applicable).

UK Customs see that the total value of your goods as the original purchase price, as well as any of the following:

- Collection/Delivery costs from the shipper to the port of export, as well as the shipping cost to the UK of arrival

- The cost of any specialised packaging

- Any additional Insurance taken out to cover your goods during transit

If the seller absorbed these costs, then they will not be added to you Customs declaration (Form C88), however, if you paid for them, then you will have to pay import duty and / or VAT on them (if applicable).

So, what needs to be written on your paperwork? Well, Inco-Terms are shown in a 3-letter format, as follows: ukimports.org

DDP

Delivered Duty Paid

This 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.org

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DDU

Delivered Duty Unpaid.

Similar to the above, except that you are liable to pay for Customs clearance and any duty and / or VAT. ukimports.org

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CIF

Cost, Insurance and Freight

This means that you 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.org

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C&F / CFR

Cost and Freight

Exactly the same as above without your goods being insured. ukimports.org

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FOB

Freight on Board

This means that the seller has only paid for the goods to be delivered in the port of export. All freight costs and any other charges are payable by yourself, when the goods arrive in to the UK. ukimports.org

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Free Domicile

"Free Domicile" is an older terms used, but still a widely used pricing term to describe when the shipper pays all the charges until delivered to the your door. This term has since been replaced by Inco-term "DDP". ukimports.org

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Ex-Works

Again this is another old terms, which is still widely used within the freight / shipping industry. It means that the shipper has paid for the goods to be transported to the port of departure only. This term has been replaced by the Inco-term "FOB". ukimports.org

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Freight Prepaid / Collect

These are terms usually used on shipping documents, such as Airway Bills and Bills of Lading. This shows generally who is paying for the shipping costs. Prepaid being the seller / shipper. Collect indicating you, the importer. ukimports.org

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For more information on Inco-Terms, including a full list of codes, click on the links below:

- Buisinesslink.gov.uk

- International Chamber of Commerce

 

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