Shipping terms – what do they mean?

Shipping terms are used globally to outline the responsibility of suppliers when shipping cargo, such as EXW, FOB, and CIF/CFR. These are all abbreviations which have vastly different meanings, and it is essential that you understand them.

EXW: Ex-Works

In this case, the customer is responsible for all the costs and risks from the door of their supplier to their door in the UK. You, as the buyer, will be paying the shipping company all the costs to make the necessary arrangements. It can be harder to get an exact quote than on FOB terms before we speak to your supplier as they have licenses in place and distance from the port create additional variables that can impact this. Typically, your costs will be transparent when operating on EXW terms and there shouldn’t be any hidden costs, however, it can take longer in order to establish them.

FOB: Free On Board

It is effectively “free” for the customer to get the items onboard the ship by using these terms, as the seller pays all the charges in the country of origin. These expenses will be added by the supplier to the price of the products. The best way to import your goods from Asia is to ship on FOB terms so you are in control of your costs. From here, you can then pay you supplier for the products with no hidden costs using FOB terms, and then a shipping company such as ourselves will get them to your door. 

CIF/CFR: Cost, Insurance & Freight, or Cost & Freight

Both of these are quite similar, with the primary difference being that the seller often pays for for the insurance when on CIF shipping terms. The supplier will cover all of the costs of getting the products to the UK under these terms. Once they have arrived at the UK port the buyer’s duties will begin. At Westbound we would advise first-time importers to avoid these terms as they can be complicated – whilst they can seem like a cheap option, there can be a lot of hidden costs.

If you are still uncertain about the shipping terms your supplier offers, why not read our extended Shipping terms page a read.

Please do not hesitate to email us at info@westboundglobal.com or call us on 01375 800800 for further details.

Now you understand your shipping costs and terms, the next step is calculating your UK Duty and VAT import:

Duty and VAT

You are required to pay UK Duty and VAT when importing goods to the UK.

UK Duty is calculated using a percentage based on Tariff codes given to the type of products you import. You can usually work out your own Tariff code on the Tariff Classification website, which is likely to be between 0% and 12%. Usually, the import VAT will stand at the standard rate of 20%:

VAT on Taxable Import = 20% of [Cost to buy your goods] + [UK Duty] + [Shipping Cost & Insurance]

Is Sea Freight right for me?

The primary points you should consider when making this decision are as follows:

• The minimum weight we advise is 100kg, 0.5cbm in volume, in order to make Sea Freight a viable option. If you are looking to transport something smaller than this then a courier service may be a more suitable choice – your supplier can often help with this.
• Shipment from Asia by sea freight will typically take 6-7 weeks door to door, with approximately 4 weeks spent on the water with a week either end for processing. If you are working to a tight schedule sea freight may not be the most appropriate option.

We specialise in LCL Sea Freight Shipping but can also provide FCL and Air Freight solutions for more urgent shipments. We endeavor to make your importing experience stress-free, offering a full turn-key solution from paperwork for customs clearance to delivering straight to your door. View our full selection of services here.