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Choosing the correct Incoterms delivery terms is crucial for the profitability of every transaction with UK. After Brexit, when UK became a third country, these terms become particularly important — they determine who bears responsibility for customs clearance, who pays customs duty and VAT, and who bears the risk of loss of goods during transport. Advice on Incoterms can significantly reduce costs and operational risk for your business.

What are Incoterms and who establishes them?

Incoterms (International Commercial Terms) is a set of standard international trade terms issued by the International Chamber of Commerce (ICC). The current version is Incoterms 2020, introduced on 1 January 2020. Incoterms:

• Define the division of responsibilities between seller and buyer
• Determine the moment of transfer of risk of loss or damage to goods
• Indicate who organises and pays for transport
• Indicate who is responsible for customs clearance (export and import)
• Determine who pays for transport insurance

Important: Incoterms do NOT regulate tax issues (VAT, excise tax), ownership of goods, or consequences of breach of contract.

Overview of all 11 Incoterms 2020 rules

Rules for all types of transport

EXW (Ex Works) — Seller places goods at the disposal of buyer at their place of business. Buyer assumes all costs and risk from the moment of receipt of goods. When trading with UK after Brexit, EXW is complicated for Polish exporters — the buyer in UK must independently organise export clearance in Poland.

FCA (Free Carrier) — Seller delivers goods to the carrier nominated by buyer, after completing export clearance. New in Incoterms 2020: possibility of issuing an “on board” bill of lading for documentary credits. Recommended when exporting from Poland to UK instead of EXW.

CPT (Carriage Paid To) — Seller pays for transport to the place of destination, but risk transfers to buyer after goods are handed to the first carrier. Import clearance in UK lies with the buyer.

CIP (Carriage and Insurance Paid) — Like CPT, but seller also pays for insurance. In Incoterms 2020, minimum insurance requirements for CIP were changed to Institute Cargo Clauses A (full coverage).

DAP (Delivered at Place) — Seller delivers goods to the indicated place in the buyer’s country, but does NOT perform import clearance and does NOT pay import customs duty and VAT. Buyer clears goods and pays liabilities. Popular when exporting from Poland to UK.

DPU (Delivered at Place Unloaded) — New in Incoterms 2020, replacing DAT. Seller delivers and unloads goods at the place of destination. Import clearance lies with the buyer.

DDP (Delivered Duty Paid) — Seller assumes ALL costs and formalities — transport, export, import, customs duty and VAT in UK. Most beneficial for the buyer in UK, but most difficult to implement for a Polish exporter (requires VAT registration in UK or a tax representative).

Rules exclusively for maritime and inland waterway transport

FAS (Free Alongside Ship) — Seller delivers goods alongside the ship at the quay. Used for bulk goods.

FOB (Free On Board) — Seller delivers goods on board the ship. Risk transfers at the moment of loading. Popular when exporting raw materials and bulk goods to UK.

CFR (Cost and Freight) — Seller pays freight to the port of destination, risk transfers after loading.

CIF (Cost, Insurance and Freight) — Like CFR plus insurance. In Incoterms 2020, minimum coverage for CIF: Institute Cargo Clauses C (limited coverage).

Incoterms and Brexit — what changed in UK-EU trade?

Before Brexit, trade between Poland and UK was treated as intra-EU trade — no customs duty, no customs clearance, simplified Incoterms conditions. After Brexit, the situation changed fundamentally:

• EXW became problematic — under EXW, the buyer in UK must organise export clearance in Poland, which is logistically difficult
• DDP requires VAT registration in UK — a Polish exporter using DDP must be registered as a VAT payer in UK or have a tax representative
• DAP is most commonly used — seller delivers to UK, buyer clears and pays customs and tax liabilities
• FCA gained in popularity — clear specification of the moment of export clearance

Practical recommendations — which Incoterms to choose?

When exporting from Poland to UK:

• For small companies exporting sporadically: DAP — buyer in UK assumes import customs duty and VAT
• For regular exporters with clients requiring an “all-inclusive” price: DDP with the help of a VAT tax representative in UK
• For maritime export of bulk goods: FOB or CFR

Need help? Contact Plutos Team — licensed UK customs brokers.