Export Advice Hub: Choosing the correct Incoterms® rule for UK imports when duty is suspended

Aug 16, 2022


We import goods into the UK under an authorised end-use approval granted by HMRC which means import duty is suspended. We then sell the goods to our UK customer using a TORO (Transfer of Risks and Obligations) arrangement in the approval.

In the contract of supply to the UK customers, HMRC say we are supplying them on the DDP (Delivered Duty Paid) Incoterm, but we believe we should be supplying under DAP (Delivered at Place).

We have a deed of indemnity with our UK customer which sits at the side of the contract of supply which legally protects us if HMRC charge duty because our customer fails to meet the compliance obligations under authorised use. Is it correct to change the Incoterms® rule to DAP?


You have two contracts here.

  1. The import contract from the overseas supplier to you in the UK. As you are the importer of record then this will not be DDP on your supplier. This is separate from your arrangement with your UK customer.
  2. Supply UK to UK — supply of goods after import clearance. This needs a separate Incoterms® rule to establish who has the following responsibilities relevant to domestic movements:
    1. freight
    2. insurance
    3. delivery point
    4. risk of loss damage.

Who organises the import customs clearance formalities and pays duty and taxes is irrelevant because the goods are already in the UK, and what the Incoterms® rules say, for both DAP/DDP about these obligations will fall on the seller (DAP) or buyer (DDP), isn’t appropriate here.

If you were supplying a product after customs clearance to a UK customer that is subject to the standard rate of VAT, you must charge it as this is a domestic supply.

So, it doesn’t matter whether you use DAP or DDP on the domestic contract as import clearance and duty/tax payments are not appropriate to the term. Both will have exactly the same obligations. It’s good you have an indemnity against failure to comply with your authorised end-use under the TORO as the Incoterms® rules don’t help at all with this.

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