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What are Incoterms? A simple guide for shipping abroad

Incoterms are delivery terms that show who pays for freight, customs and VAT, and when responsibility for the goods passes from seller to buyer. Here we explain the most common terms in a simple way.

What are Incoterms?

Incoterms® are international trade rules drawn up by the ICC (International Chamber of Commerce). Each rule is a short three-letter abbreviation, for example DAP or DDP. The abbreviation tells you:

  • Who pays for the freight and to which place
  • Who pays customs, VAT and customs clearance in the destination country
  • When the risk transfers, meaning where the buyer takes over responsibility if the goods are damaged or lost

Good to know: Incoterms do not govern the price of the goods, payment, or when ownership transfers. You and your customer agree that separately.

Why does it matter?

Within the EU you rarely need to think about Incoterms, because there is no customs duty. But when you ship to a country outside the EU, for example Norway, the UK, Switzerland or the USA, the goods must go through customs. Then it must be clear who pays customs, VAT and clearance fees.

If it is unclear, it can get expensive:

  • The recipient gets an unexpected invoice and refuses to accept the package
  • The package is sent back or gets stuck in customs
  • You as the sender may have to pay return shipping and extra fees.

The terms you can choose

Term Who pays the freight? Who pays customs and VAT? In short
EXW (Ex Works) Recipient Recipient The recipient collects the goods and handles everything
FCA (Free Carrier) Recipient Recipient The sender hands the goods over to the recipient's carrier
CPT (Carriage Paid To) Sender Recipient The sender pays the freight, but the recipient bears the risk during transit
CIP (Carriage and Insurance Paid To) Sender Recipient Like CPT, but the sender also pays for transport insurance
DAP (Delivered at Place) Sender Recipient The sender pays the freight all the way to the destination
DPU (Delivered at Place Unloaded) Sender Recipient Like DAP, but the sender is also responsible for unloading
DDP (Delivered Duty Paid) Sender Sender The sender pays for everything, the recipient pays nothing extra

The terms FOB, CIF, CFR and FAS apply only to sea freight and cannot be selected for road transport.

How this works in Sendify

When you ship outside the EU, DAP is standard. The recipient then pays customs and VAT when the package arrives.

In Sendify, the person who books pays for the freight, regardless of which term you choose. Whether you then invoice the recipient for the freight is up to you. The term should also be stated on the commercial invoice.

If you want the recipient to avoid extra costs, choose DDP. Read more in Terms for booking DDP.

Tip: Tell the recipient in advance if they need to pay customs. Otherwise the package may get stuck or be sent back, and that can cost you extra.

Sendify does not calculate customs or VAT. For an estimate, contact the customs authority in your country:

  • Sweden: Tullverket, 0771-520 520 (tullverket.se)
  • Germany: Zentrale Auskunft Zoll, +49 228 303-26030 (zoll.de)

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