Incoterms for UK-EU Trade: Who Actually Clears the Goods Under EXW, DAP and DDP

Every commercial invoice for a cross-border shipment should carry a three-letter Incoterm. Most people treat it as boilerplate. It isn’t. The Incoterm you agree with your trading partner decides who files the export declaration, who files the import declaration, who pays duty and VAT, and — critically — who ends up named as importer of record on the customs paperwork. Get the wrong term on the wrong shipment and goods sit at the border while someone scrambles to register for an EORI number they didn’t know they needed.

This matters more for UK-EU trade than it used to, because since Brexit every movement across that border needs a customs declaration, regardless of which Incoterm is used. The term doesn’t remove the paperwork; it only decides who is responsible for it.

What Incoterms actually decide

Incoterms are published by the International Chamber of Commerce, and the current version is Incoterms 2020, which contains 11 rules covering how costs, risk and responsibility pass between buyer and seller. They are a commercial shorthand agreed in the sales contract — not customs law. HMRC still decides who is legally entitled to act as importer, what duty is owed and how the goods must be valued; the Incoterm simply tells everyone who is supposed to carry out those jobs.

That distinction causes real problems in practice. A seller can agree to DDP terms and promise to “handle everything”, but if they aren’t properly set up to act as importer of record in the UK, the shipment can still be delayed or refused clearance. Incoterms allocate responsibility between the parties; they don’t automatically grant the legal standing to discharge it.

EXW: minimum effort for the seller, maximum exposure for the buyer

Ex Works places the least obligation on the seller. The goods are considered delivered once they are made available at the seller’s premises; from that point the buyer arranges collection, export clearance in the seller’s country, transport, import clearance in the UK, and all duties and VAT. EXW is common on both import and export quotes because it is simple to price, but it leaves the buyer dependent on a seller who has no contractual duty to help with export formalities — and if the export declaration is handled badly, the buyer can be left without proof of export for VAT zero-rating purposes. Many logistics advisers now steer first-time UK-EU traders towards FCA (Free Carrier) instead, precisely because it still puts export clearance in the exporter’s hands.

DAP: the practical middle ground for road freight

Delivered at Place is the term most UK hauliers and EU exporters gravitate towards for cross-Channel road freight. Under DAP, the seller arranges transport and clears the goods for export, including any transit formalities, and bears the risk until the goods arrive at the agreed destination. The buyer, however, is still responsible for unloading and for managing and paying the full cost of import clearance — the customs declaration, duty and import VAT all sit with the receiving business. DAP suits traders who want the convenience of door-to-door delivery without handing full control of the import process, and the associated risk of getting it wrong, to someone overseas.

DDP: who really becomes the importer of record

Delivered Duty Paid sits at the opposite end of the spectrum from EXW. The seller takes on export and import clearance, pays import duty and VAT, and delivers the goods ready for unloading. For UK buyers this sounds attractive — no customs admin, no unexpected duty bill at the door. The catch is that someone still has to be named as importer of record on the UK declaration, and in many countries foreign entities face real practical obstacles carrying out import clearance and tax formalities themselves. An overseas seller selling DDP into the UK typically needs a GB EORI number and, in most cases, must either be established in the UK or appoint a UK-established representative to act as declarant.

This is where “DDP light” has crept into UK practice: the buyer is named as importer on the declaration while the seller reimburses the duty and VAT informally. It works until something goes wrong — a valuation query, a classification dispute, a retrospective duty demand — at which point liability can land squarely back on whichever party is actually named on the entry, regardless of what the commercial invoice promised.

Practical steps before you agree terms

• Confirm who will be named as importer of record before the first shipment moves, not after a query arrives from HMRC.
• Check whether an EORI number is needed on each side of the border, and whether the importer needs to be established in the UK to submit a full declaration.
• Remember that HMRC’s Customs Declaration Service requires the delivery terms code to be entered on declarations using the transaction value method, so the Incoterm has to be accurate and consistent with the commercial invoice, not just a label.
• If you’re the UK buyer and VAT-registered, check whether postponed VAT accounting is available to you — it lets you declare and recover import VAT on the same return rather than paying it upfront, and needs no prior approval.
• Put the agreed term in writing on the sales contract and the commercial invoice, including the named location, so there is no ambiguity if customs queries the declaration.

The takeaway

None of the eleven Incoterms removes the need for a customs declaration on UK-EU movements, and none of them override HMRC’s rules on who can legally act as importer. Choose the term that matches who is genuinely able and willing to clear customs at each end, put it in writing, and check the EORI and VAT position before the goods move rather than after they’re stuck at the border. If you’re weighing up EXW, DAP or DDP for a new trading relationship, or inheriting terms from a contract you didn’t negotiate, GEIM’s customs team is happy to talk through what they mean for your specific shipments.

Sources and further reading

• Choosing the right incoterms for your goods – business.gov.uk (business.gov.uk)
• CDSSG04995 – Navigating the Tariff, Step 10 – HMRC internal manual (gov.uk)
• Check when you can account for import VAT on your VAT Return – GOV.UK (gov.uk)
• Place of registration – Economic Operators Registration and Identification (EORI) – GOV.UK (gov.uk)
• Who should register for an EORI number – GOV.UK (gov.uk)
• DAP & DDP Incoterms 2020 explained: Key differences – ICC Academy (academy.iccwbo.org)
• DDP & EXW Incoterms 2020 explained: Key differences – ICC Academy (academy.iccwbo.org)