Get ready for Incoterms 2020 and Brexit 2021

11:37pm 23rd July 2020

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What are the 2020 Incoterms?


ALL MODES[ ]



SEA AND WATERWAY[ ]

Why incoterm 2020 be important for UK/EU Trade Post Brexit?

DDP & EXW

Although there are a number of incoterms used for trade with the Rest of the World, for trade with Europe, there are more than often just two (even if the terms are currently not officially used while the UK remains in the EU):

If buying:

EXW – You buy the goods and arrange the trucking.

DDP – You buy the goods and the seller arranges the trucking.

If selling:

EXW – You sell the goods and the buyer arranges the trucking.

DDP – You sell the goods and arrange the trucking.



WHY COULD THESE BE MORE OF A CHALLENGE

FROM 1ST JANUARY 2021?

Incoterms define who is responsible for customs declarations and any import taxes.

Customs declarations will be required after Brexit and under the new Incoterms, a lot of additional responsibility lies with you.


DDP =

DELIVERED DUTY PAID

If you are buying on DDP terms, the buyer is not actually the importer. The supplier is!

As well as the export customs entry, the supplier would also be responsible for arranging the import customs entry into the buyer’s country and paying any import taxes.

To do this they would need an EORI number and a VAT number in the buyer’s country.


DDP =

DELIVERED DUTY PAID (CON TD)

Once the goods are customs cleared, your supplier’s virtual identity would then supply you, the buyer.

This then becomes essentially a domestic supply.

The supplier’s invoice to you should show their virtual VAT number and they would charge you VAT (if applicable) at the rate in the buyer’s country.



DDP =

THE SOFTER VERSION

There is a further DDP option where the buyer remains the importer of record on the import customs declaration but this does involve extra liabilities.

• Seller arranges the export customs declaration

• Seller uses an agent in the buyer’s country to arrange the import customs declaration (agent pays any duty on their behalf and bills back to supplier along with any documentation fee).

• Buyer is responsible for import VAT only.



DAP =

THE ALTERNATIVE

The better option might be to switch to DAP terms (Delivered At Place). Under these terms:

• Seller arranges the export customs declaration

• Buyer arranges the import customs declaration.

• Buyer is responsible for import duty and VAT



EXW =

EX WORKS

If you are buying on EXW terms, the seller is not actually the shipper (exporter). The buyer is.

As well as the import customs entry, the buyer would also be responsible for arranging the export customs entry out of the seller’s country.

Another point of note is that the export sale is zero rated for VAT, so the seller has a vested interest in having the export declaration done correctly (to discharge VAT liability) and may want to do this themselves.



FCA -

THE ALTERNATIVE

The better option might be to switch to FCA terms (Free Carrier). Under these terms, the

• Seller arranges the export customs declaration

• Buyer arranges the import customs declaration.

• Buyer is responsible for import duty and VAT.



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