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Brexit Checklist: INCOTERMS
26 November 2020
As we get closer and closer to the end of the Transition Period (31st December 2020 - 5 weeks to go!), we count down the weeks by highlighting areas that are key in preparing your business for the new trading models in 2021.
This week: INCOTERMS
Incoterms are ‘International Commercial Terms’ that are used worldwide for the international trade of goods.
They clearly communicate the responsibilities between a seller and buyer in regards to tasks, costs and risks associated with the global transportation process.
You can find out more about Incoterms HERE.
Currently there are no customs formalities between the EU and the UK and no import Duty/VAT payable. As such it has been fairly simple - either you arrange the transport or your customer/supplier does.
These terms are called Ex-Works (EXW) and Delivered Duty Paid (DDP).
DDP & EXW are not very Brexit friendly terms.
Using either of them will make you, or your customer/supplier responsible for both UK and EU customs declarations, as well as any import duty, which makes things much more complicated.
We recommend that instead of using EXW you use FCA (Free Carrier) and replace DDP with DAP (Delivered At Place).
This makes the export customs formalities the responsibility of the exporter, and the import customs formalities the responsibility of the importer. Simple!
The export declaration is needed to prove the goods were exported, which allows you to zero rate the VAT on your export commercial invoice.
Under EXW this job is made the responsibility of your customer. If not done ahead of the goods being exported, then you are responsible for the VAT element.
COMING UP
All you need to know about commercial invoices, what they should include and why they are going to be so important for UK/EU trade.