Incoterms Checklist For UK Importers And Exporters

Which Incoterm should you use for this shipment? The reassuring answer is that you don't need to memorise every shipping rule - you need to choose the term that matches how your deal actually works.

Incoterms can look like three-letter jargon, but they become much easier when you translate them into practical contract decisions. Who books the freight? Who pays insurance? Who handles customs? When does risk move from seller to buyer? What document unlocks payment?

If you're buying or selling goods internationally, getting this clear in your contract can save a lot of awkward emails later. A supplier, freight forwarder and customer may all assume different things unless your goods and services agreement ties the Incoterm to the rest of the deal.

What Are Incoterms Actually Deciding?

Incoterms decide delivery responsibilities, costs and risk between buyer and seller, but they don't decide everything in your international supply contract.

The current version most businesses use is Incoterms 2020, published by the International Chamber of Commerce. They're not UK legislation and they don't automatically apply just because you're shipping goods. You need to clearly include them in your contract, purchase order or terms of trade.

Incoterms mainly answer questions like:

• Where does the seller have to deliver the goods?
• Who arranges and pays for main carriage, such as sea freight, air freight or road transport?
• When does risk of loss or damage pass from seller to buyer?
• Who deals with export and import customs clearance?
• Whether either party has to arrange cargo insurance.

They don't usually deal with:

• When ownership or title to the goods transfers.
• When invoices are due or what happens if payment is late.
• Product specifications, quality standards or inspection rights.
• Liability caps, warranties or remedies for breach.
• Data protection, confidentiality or intellectual property rights.

That means your shipping term is only one part of the contract. If you only write FOB Shanghai on a purchase order, you may still have a dispute about whether payment was due on loading, on arrival, or after inspection.

Which Incoterm Should I Use For My Shipment?

It depends on how much control you want over transport, customs and delivery risk.

A useful way to choose is to start with the practical job each party is best placed to do. If you're importing into the UK and you already have a trusted freight forwarder, you may prefer to control the main carriage. If you're selling to an overseas customer who wants a delivered price, they may ask you to take more responsibility.

Common Incoterms You Might See

• EXW, Ex Works: the buyer collects from the seller's premises and carries most of the risk and work. This can be risky for exporters because the seller may have limited control over export clearance evidence.
• FCA, Free Carrier: the seller delivers to a named carrier or place. This is often more practical than EXW for international trade because the seller can deal with export clearance.
• FOB, Free On Board: generally used for sea freight. Risk passes when goods are loaded on board the vessel at the named port.
• CIF, Cost Insurance And Freight: the seller pays freight and minimum insurance to the destination port, but risk passes when goods are loaded on the vessel.
• DAP, Delivered At Place: the seller delivers to a named destination, but the buyer usually handles import clearance and import duties.
• DDP, Delivered Duty Paid: the seller takes on the heaviest responsibility, including import clearance and duties in the buyer's country.

DDP can sound attractive to buyers because it gives a landed price. For sellers, it can create real headaches if you don't have the right registrations, customs knowledge or local support in the destination country. If you're selling DDP into the UK, for example, you may need to think about UK import processes, an EORI number, customs declarations, VAT treatment and HMRC requirements.

What Should My Incoterms Checklist Include?

Your Incoterms checklist should connect the three-letter term to the real contract obligations that sit around it.

Use this as a practical pre-signing check before you accept a purchase order or send your terms of sale. It isn't a finished legal document, and a lawyer should tailor your contract before you rely on it, especially where shipments are high value or recurring.

1. Parties And Roles: write who is the buyer, who is the seller, and who is acting through freight forwarders, customs brokers or distributors.
2. Goods Description: describe the goods, quantities, packaging, labelling, standards and any country-specific compliance requirements.
3. Chosen Incoterm: state the exact Incoterm, version and named place, such as FCA Manchester Warehouse, Incoterms 2020.
4. Freight Arrangements: say who books carriage, who chooses the carrier, and who pays each transport leg.
5. Risk Transfer: spell out when risk passes, even if the Incoterm already says it, so your team can apply it in practice.
6. Insurance: state who must insure the goods, what level of cover is needed, and who is named on the policy.
7. Customs And Compliance: allocate export clearance, import clearance, licences, commodity codes, origin documents and safety filings.
8. Delivery Evidence: list the documents that prove delivery or dispatch, such as a bill of lading, airway bill, CMR note, courier proof or signed POD.
9. Payment Trigger: say exactly when payment is due and what document triggers it.
10. Delay And Damage Process: set notice periods, evidence requirements, inspection rights and who manages claims with the carrier or insurer.

The most common gap is the named place. FCA by itself isn't enough. FCA seller's warehouse and FCA port terminal can produce very different outcomes.

How Do Incoterms Affect Risk, Insurance And Damage Claims?

Incoterms affect risk by setting the point where loss or damage becomes the buyer's problem rather than the seller's problem.

This is separate from who physically has the goods and who paid the freight bill. That distinction catches a lot of UK importers and exporters out, especially with CIF and FOB shipments.

Say Priya runs a homeware brand in Bristol and buys 500 ceramic lamps from a supplier in Vietnam for £18,000. The purchase order says CIF Felixstowe, Incoterms 2020. The supplier pays the sea freight to Felixstowe and arranges the minimum cargo insurance required under CIF.

If the goods are damaged during the sea voyage after being loaded on board in Vietnam, risk has usually already passed to Priya under CIF. Her practical route may be an insurance claim, not simply refusing to pay the supplier. If Priya expected the supplier to carry the risk until Felixstowe, CIF was probably the wrong term.

Now compare that with DAP Bristol Warehouse. The seller would carry risk much further, up to delivery at the named place, while Priya would generally handle UK import clearance and import charges unless the contract says otherwise.

Your contract should also say:

• How quickly you must inspect goods after arrival.
• How quickly you must notify the other party about damage or shortages.
• What evidence you need, such as photos, packing lists, survey reports and carrier notes.
• Who is responsible for starting and managing insurance or carrier claims.

Without these details, you can end up with a practical problem: everyone agrees the goods are damaged, but no one agrees who has to do the paperwork or absorb the loss.

Who Handles Customs, Duties And Import Paperwork?

The Incoterm gives you the starting point, but your contract should still name the party responsible for customs, duties and supporting documents.

For UK importers, this usually means thinking about HMRC processes, customs declarations, commodity codes, valuation, origin documents, product-specific rules and whether you need a UK EORI number. For exports from Great Britain, you'll also need to consider export declarations and any licences or sanctions checks that apply to your goods or destination.

As a broad guide:

• EXW: the buyer often carries most responsibility, but this can be awkward where the seller is better placed to complete export formalities.
• FCA, FOB And CIF: the seller usually handles export clearance, while the buyer handles import clearance.
• DAP: the seller transports to the named place, while the buyer usually handles import clearance and import duties.
• DDP: the seller usually handles both delivery and import clearance, including duties and taxes.

Be careful with DDP if you're the seller. You might be promising to do things in another country that you're not set up to do. If you're the buyer, check that the seller can actually complete those tasks, because a stuck shipment still affects your stock levels and customers.

This is also where your product compliance work matters. Incoterms won't tell you whether your goods need UKCA marking, food labelling, safety documentation, chemicals compliance or other approvals. Those obligations should sit in your wider import export agreement or supply terms.

How Should Payment And Delivery Evidence Work?

Your payment clause should match the Incoterm, but it shouldn't rely on the Incoterm alone.

This is where many disputes start. A seller thinks payment is due once the goods leave the factory. A buyer thinks payment is due after the goods arrive and pass inspection. The Incoterm may help with risk and delivery, but it doesn't automatically settle your commercial payment deal.

Common payment triggers include:

• Deposit Plus Balance Before Dispatch: useful for sellers who want cash flow protection before goods leave their control.
• Payment Against Shipping Documents: common where the buyer pays after receiving a bill of lading, airway bill or other transport document.
• Payment On Arrival: more buyer-friendly, but riskier for the seller if goods are delayed or the buyer refuses payment.
• Payment After Inspection: useful where quality checks matter, but the inspection process needs clear deadlines and standards.

For example, Priya might agree to pay a 30% deposit on order, then the remaining 70% within 3 business days after receiving a clean bill of lading and commercial invoice. If she wants the right to reject damaged lamps after arrival, that needs to be a separate inspection and defects clause. Otherwise, the seller may say payment was triggered by the shipping documents.

Your contract should list the delivery documents clearly. Depending on the shipment, that might include:

• Commercial invoice and packing list.
• Bill of lading, sea waybill, airway bill or CMR note.
• Certificate of origin.
• Insurance certificate.
• Inspection certificate or test report.
• Signed proof of delivery.

If your finance provider, customs broker or customer needs specific wording on documents, build that into the contract at the start.

What Should Go Into An International Supply Contract?

Your international supply contract should combine the Incoterm with the commercial, legal and operational terms needed to run the deal smoothly.

A short purchase order or heads of terms can work for low-risk repeat orders, but templates often miss the parts that matter when goods cross borders. If the shipment is valuable, bespoke, regulated or time-sensitive, it's worth having the document tailored.

International Supply Contract Outline

1. Parties And Contact Details: identify the legal entities, company numbers where relevant, and operational contacts.
2. Goods And Specifications: set out product descriptions, quantities, quality standards, packaging, labelling and compliance requirements.
3. Price And Currency: state the price, currency, what is included, and how exchange rate changes are handled.
4. Incoterm And Delivery Point: include the exact Incoterm 2020 rule and named place or port.
5. Delivery Dates: say whether dates are firm or estimated, and what happens if they slip.
6. Customs And Trade Compliance: allocate import and export clearance, licences, origin documents and sanctions checks.
7. Insurance And Risk: align insurance obligations with the risk transfer point.
8. Payment Terms: set deposits, milestones, documents required for payment, and late payment consequences.
9. Inspection And Defects: set deadlines for inspection, rejection, repair, replacement or credit notes.
10. Title: state when ownership transfers, which is separate from Incoterms risk.
11. Liability And Indemnities: allocate responsibility for product defects, regulatory breaches and third-party claims.
12. Governing Law And Dispute Process: choose the legal system and escalation steps if something goes wrong.

If your business is a UK company, your contracting entity details should match your Companies House records. If you're trading under a brand name, make sure the legal company behind the brand is named clearly so invoices, liability and enforcement all line up.

Key Takeaways

• Incoterms are useful, but they only work properly when your contract includes the exact term, version and named place.
• Risk, ownership, payment and delivery evidence are different things, so don't assume one clause covers them all.
• CIF and FOB can shift risk earlier than you might expect, even if the seller is paying some freight costs.
• Customs responsibilities should be spelt out clearly, especially after Brexit and where HMRC processes, EORI numbers or import declarations are involved.
• Your payment trigger should match the documents your business can actually produce and rely on.
• A tailored international supply contract can help avoid disputes over damaged goods, delayed shipments and unpaid invoices.

If you'd like help with your international supply contracts, shipping terms, customs responsibilities and payment triggers, you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.