Transport and distribution are key considerations when planning for international trade. Choosing the most suitable mode of transport and getting the documentation right is essential to ensure your import or export operation is efficient and cost-effective.
It is also important to agree in advance, who is responsible for paying for the transport and for insuring the goods while they are in transit. You can do this by using appropriate Incoterms®.
2. Transport and distribution
There are four main ways of importing and exporting - road, rail, air and sea - although you may need to use more than one type of transport. When making your choices, you will also need to decide whether to handle logistics yourself, or outsource the work to a freight forwarder.
Find out about international trade distribution by road, rail, air and sea: exports, customs, regulations and freight management including the transportation of dangerous goods.
Read guidance on what to do If you are exporting by post.
Making sure you have the right documentation is a vital part of international trade. Thorough, accurate paperwork minimises the risk of problems and delays.
- There should be a clear written contract between buyer and seller, including details of exactly where goods will be delivered
- Specific documents may be needed to get the goods through customs and to work out the right duty and tax charges. There may be requirements both for the country the goods are being exported from and the country they are being imported into
- Documentation is needed to cover the transport of the goods and insurance during the journey
- The right paperwork can be an important part of the payment mechanism
It’s important to co-operate with your counterpart on getting the paperwork right. For example, if you’re shipping goods to a customer overseas, they should tell you what paperwork they require at their end. If you are dealing with a non-English speaking country, it can be a good idea to provide one set of commercial documents in the local language.
You may want to get help with handling paperwork. Many businesses use the services of a freight forwarder. The British International Freight Association (BIFA) may be able to identify a suitable freight forwarder. Find a freight forwarder on the BIFA website.
However, you should remember that you are ultimately responsible for making sure you have the correct documentation.
4. International transport documentation
Transport documentation is needed to provide instructions to the carrier on what should be done with the goods. They can be used to pass responsibility for, and sometimes ownership of, the goods during their journey.
- If you are exporting goods, you typically complete an Export Cargo Shipping Instruction giving the freight forwarder details of the goods and how they are to reach their destination.
- You also normally complete a Standard Shipping Note, telling the port how to handle the goods.
- The carrier should provide you with documentary evidence that they have received the goods, eg a bill of lading or a waybill. You should keep any documents as evidence in case of later problems with the shipment.
- A CIM Consignment Note gives details of the goods being transported. If you are shipping dangerous goods, you must also complete a dangerous goods note. See the guide on moving dangerous goods.
- You may need to insure the goods, and you may also be required to provide proof of insurance to your customer, particularly if you are passing on the costs. You should discuss what documentation is required with your customer and your insurer. See the guide on transport insurance within our Export Hub (under the 'Tips on trade' section).
Read an overview of how to complete key transport documents in the guide on transport document completion.
5. International trade documentation
The right paperwork plays an important part in making and receiving payment. Documentary collections and documentary credits are payment methods often used in international trade. By using special paperwork, the risks of the customer failing to pay or the supplier failing to deliver are reduced:
In some cases, exporting requires special documentation.
- You may need proof of which country the goods came from in order to qualify for preferential rates of duty. See the guide on using trade preferences.
- Your customer may require a certificate of origin from you. Your Chamber of Commerce can issue these.
- There are special UK requirements for some controlled goods, such as firearms, medicines, plants and animal products - for example, a licence may be required.
- You should check whether any special documentation is required overseas to satisfy local regulations. For example, you might need documentary proof that your goods meet local product standards. Research overseas markets.
- Dangerous goods must be accompanied by appropriate special paperwork. Read the guide on transport document completion.
- There are simplified processes for temporary exports, eg if you are taking samples to an overseas exhibition. See the guide on temporary exportation from the UK. If you have any doubts about the documentation you need, you should take advice. Many businesses get help from freight forwarders.
6. International trade contracts and Incoterms®
International Commercial Terms (‘Incoterms’) are internationally recognised standard trade terms used in sales contracts. They’re used to make sure buyer and seller know:
- who is responsible for the cost of transporting the goods, including insurance, taxes and duties
- where the goods should be picked up from and transported to
- who is responsible for the goods at each step during transportation
The current set of Incoterms® is Incoterms® 2020. A copy of the full terms is available from the International Chamber of Commerce.
Incoterms® are used in contracts in a 3-letter format followed by the place specified in the contract (eg the port or where the goods are to be picked up). Many of the terms are suitable for any mode of transport; others are suitable for transport by sea and inland waterways only.
For more detail, including terms that were in use before 1 January 2011, visit the International Chamber of Commerce (ICC) website.
There are also example contracts and clauses available from the ICC.
Note that VAT isn’t covered by Incoterms so you will need to specify who pays the VAT in the destination country.
7. Incoterms® 2020 for any mode of transport
EXW (‘Ex Works’)
The seller must place goods that conform to the contract at the disposal of the buyer at an agreed point and place of delivery. The seller must pay for checking operations and packing and, at the buyer’s request, give assistance in raising documents for export / transit / import / security.
FCA (‘Free Carrier’)
The seller delivers the goods into the charge of the carrier / person at a named place or point. The seller clears for export and pays all charges incurred for clearance. The carriage is arranged by the buyer (or by the seller at the buyer’s risk and cost).
CPT (‘Carriage Paid To’)
The seller delivers the goods to the carrier at an agreed place and clears the goods for export. The seller contracts for the carriage of the goods to the agreed point at the named place of destination.
CIP (‘Carriage and Insurance Paid’)
As CPT, plus: The seller must buy cargo insurance to the agreed point at the named place of destination and must provide the buyer with evidence of insurance cover.
DPU (‘Delivery at Place Unloaded’)
The seller delivers the goods unloaded from transport at a named terminal in a named place of the destination country. The buyer clears for import; the seller must assist if requested. NB – DPU replaces DAT (Delivered at Terminal) from Incoterms® 2010.
DAP (‘Delivered at Place’)
The seller delivers the goods when placed at the disposal of the buyer at a named place on arriving transport ready for unloading.
DDP (‘Delivered Duty Paid’)
As DAP, plus: The seller pays all duties and clears the goods for import into the buyer’s country.
8. Incoterms® 2020 for sea and inland waterways
FAS (‘Free Alongside Ship’)
The seller must deliver alongside a vessel nominated by the buyer and ensure goods are cleared for export. They must also pay port and dock charges to that point.
This term is commonly used for heavy-lift or bulk cargo (eg generators, boats), but not for goods transported in containers by more than one mode of transport (FCA is usually used for this).
FOB (‘Free on Board’)
The seller must deliver the goods on board the named vessel. The seller must also ensure the goods are cleared for export. This term is not used for goods transported in containers by more than one mode of transport (FCA is usually used for this).
CFR (‘Cost and Freight’)
The seller delivers goods on board a vessel and contracts at their cost for the carriage of the goods to the named port of destination.
CIF (‘Cost, Insurance and Freight’)
As CFR, plus: The seller contracts cargo insurance to the agreed point of arrival at the named place of destination and must provide the buyer with evidence of insurance cover.
9. Allocation of costs to buyer/seller
Please visit the following link to view this table data - https://businesswales.gov.wales/export/allocation-costs-buyerseller-according-incotermsr-2020-rules