Who Pays Import Duties on UK Commercial Shipments?

A container can arrive on schedule, the goods can be ready for delivery, and yet the shipment still stops at the border because no one has agreed who pays import duties. For UK importers, this is not a minor administrative detail. It affects landed cost, cash flow, customer pricing and whether customs clearance can be completed without delay.

The short answer is that the importer of record is normally legally responsible for customs duty and import VAT. However, the commercial agreement may mean the overseas seller pays or reimburses those charges. The difference depends on the Incoterms used, the customs declaration structure and the instructions given to the freight forwarder or customs agent.

Who pays import duties in a UK import?

In most standard business-to-business imports, the UK buyer pays import duty and import VAT. This is particularly common where goods are bought under EXW, FCA, FOB, CFR, CIF, CPT or CIP terms. The seller arranges only the agreed part of the journey, while the buyer takes responsibility for destination customs formalities and the associated charges.

That does not mean the buyer must physically make the payment at the border. A customs agent, freight forwarder or carrier may submit the declaration and use a duty deferment account to settle charges with HMRC. The importer remains accountable for the declaration and for paying the party that advanced or deferred the money.

The key distinction is between the party that is legally liable and the party that bears the commercial cost. These are often the same business, but not always. A supplier might agree to absorb duty within the sale price, for example, while the UK importer remains named as importer of record. Clear paperwork is essential when this arrangement is used.

The importer of record carries the customs responsibility

The importer of record is the party entered on the import declaration as responsible for bringing goods into the UK. It must have the correct EORI number, hold the records supporting the declaration and be able to evidence the commodity code, customs value, origin and any licences or controls that apply.

Import duty is calculated from the customs value and the relevant UK Global Tariff rate, unless a preferential rate or other relief applies. Import VAT is then normally calculated on a wider value that can include the goods, freight, insurance, duty and certain incidental costs to the destination.

This is why a low freight quotation alone does not show the full import cost. Duty, VAT, customs entry fees, port charges, storage and delivery may all sit outside the headline transport rate.

How Incoterms decide who pays duty

Incoterms set out who arranges transport, handles export and import formalities, and takes risk at different points in the journey. They are commercially important, but they do not replace UK customs law. The declaration must still accurately identify the importer of record and the parties involved.

DDP: the seller normally pays duties and taxes

Delivered Duty Paid, or DDP, places the greatest destination responsibility on the seller. The seller arranges carriage to the named place and is expected to clear the goods for import, paying duty and import taxes.

DDP can be attractive for a UK buyer because it creates a more predictable delivered price. In practice, it needs careful planning. A non-UK seller may need an appropriate customs setup, a UK EORI number where required, and a reliable route for paying charges. If these points have not been arranged before the goods move, a supposedly simple DDP shipment can become difficult to clear.

Buyers should also check whether the price includes every destination cost. “Duty paid” should not be treated as a vague sales promise. The purchase order and shipping instructions should state the agreed Incoterm, named place and exactly which local charges are included.

DAP and DPU: the buyer usually pays import charges

Under Delivered at Place, or DAP, the seller delivers goods ready for unloading at the agreed destination, but the buyer normally handles import clearance and pays duty and VAT. Under Delivered at Place Unloaded, or DPU, the seller unloads the goods, but the buyer still usually manages import formalities.

These terms can work well when the UK buyer has a customs agent, a deferment account and control over its declarations. They also make the duty liability visible rather than burying it in a delivered price.

FOB, CIF and similar terms: duty is normally for the buyer

For sea freight, FOB and CIF are frequently used. FOB means the seller delivers goods on board the vessel at the export port. CIF includes the cost of freight and insurance to the destination port, but it does not usually mean the seller pays UK import duty.

The UK buyer will generally be the importer of record, arrange destination clearance and pay import charges. The same practical outcome often applies with FCA, CPT and CIP, although responsibility for freight and risk differs between terms. It is worth choosing the Incoterm for the transport method and commercial deal, rather than selecting a familiar abbreviation by habit.

Duty is not the same as import VAT

Import duty and import VAT are separate charges. Duty is a customs tariff charge and may be zero, reduced or payable at the full tariff rate depending on the goods, origin and applicable trade agreement. Import VAT applies to most commercial imports, even when no customs duty is due.

A VAT-registered UK business may be able to use postponed VAT accounting, subject to the relevant requirements. This allows eligible import VAT to be accounted for on the VAT Return rather than paid immediately at the border. It can improve cash flow, but it does not remove the need for a correct customs declaration or affect any duty due.

Do not assume that goods shipped from the EU are automatically duty-free. Preferential tariff treatment depends on the rules of origin, not simply where a consignment was dispatched from. A supplier declaration, statement on origin or other evidence may be needed. If the goods do not qualify, standard duty can apply.

Four checks before goods leave the supplier

Most duty disputes can be avoided before collection. Confirm these points in writing:

• The agreed Incoterm and the precise named place or port.
• The UK importer of record and the EORI number to be used.
• The commodity code, origin and expected duty rate for every product line.
• Whether duty and VAT will be paid through a deferment account, advanced by an agent or settled directly with the carrier.

The commercial invoice should show an accurate description of the goods, quantities, unit values, currency, country of origin and agreed Incoterm. A vague description such as “parts” or “samples” can trigger questions, delay clearance and increase the risk of an incorrect classification.

For regular imports, build a landed-cost model that includes product cost, origin freight, international transport, insurance, duty, import VAT treatment, customs fees, destination handling, storage risk and final-mile delivery. This gives procurement and sales teams a figure they can use with confidence, rather than discovering charges after the shipment has arrived.

Avoid unexpected bills and clearance delays

Unexpected duty bills often arise because the commercial invoice, purchase order and customs instructions tell different stories. A supplier may mark goods as DDP while the carrier receives instructions to clear in the buyer’s name. Or the invoice value may omit assists, royalty payments or freight costs that should form part of the customs value.

The answer is not simply to choose the term that appears cheapest. DDP can reduce work for the buyer but limit visibility over the import entry. Buyer-controlled clearance can provide better control and VAT accounting benefits, but it requires organised data and a capable customs process. The right option depends on shipment frequency, product type, supplier location and the business’s appetite for administration.

Milky Way Logistics can coordinate customs documentation, commodity information, duty and VAT arrangements alongside air, sea, road and multimodal freight. Before confirming a purchase order, ask for a tailored freight quotation and have the import responsibility checked against the planned route. A short discussion before goods are collected is usually far less costly than resolving a duty issue once they are waiting at the port.