When purchasing goods from non-UK suppliers there is a duty on the supplier
- to provide carriage capable of storing and transporting the goods in an appropriate manner, for example, in refrigerated containers, robustly packaged etc
- to take care of the cargo during transit
- to proceed without delay to the named destination
- not to deviate from the agreed route
To cope with the different legal practices and requirement of the various countries, internationally recognised terms (called Incoterms) have been developed by the International Chamber of Commerce. The main ones are listed below. These are important as, depending on which one applies to a purchase it may place a responsibility on the purchaser to, for example, insure the goods in transit, be liable for duty costs not detailed on the supplier’s tender documentation.
CIF – Cost, insurance and transit (probably the most common)
- it is the duty of the supplier to insure the goods in transit, to arrange carriage to the port of destination (in England, Scotland, Wales or Northern Ireland) and to provide the necessary documents (including export licences, VAT certificates, etc)
- it is the duty of the purchaser to arrange onward transportation of the goods on arrival at the named port and to pay the necessary import duties and customs charges etc
FOB – Free on Board
- it is the duty of the supplier to arrange transportation of the goods to the port of loading only
- it is the duty of the purchaser to make arrangements for departure (ie to book the necessary space on the ship or plane), to insure the cargo and to pay freight charges and all import/customs charges
Ex-works – goods held at the supplier’s warehouse of factory
- the purchaser has full responsibility for carriage, insurance, customs charges and onward delivery
Other less common Incoterms are
FAS – free alongside, named port of shipment
CFR – cost and freight, named port of destination
CPT – carriage paid to named port of destination
DDU – delivered duty unpaid, named port of destination
DDP– delivered duty paid, named port of destination
Remember to check the basis on which the quoted or tendered goods have been priced. There may be hidden charges (such as insurance and/or transportation costs, import duties etc) which could end up making the purchase price higher than expected. Also, in respect of import duty, relief from payment may be available. If in any doubt about the terms that apply to a proposed purchase, seek advice from your Head of Procurement.