Trade Terms Explained: Key Clauses for UK Business Contracts

When you buy or sell goods internationally, trade terms, standardised rules that define who pays for shipping, who handles customs, and when risk transfers. Also known as Incoterms, these clauses are the backbone of every international deal. If you’re exporting from the UK or importing from the EU, US, or Asia, getting trade terms wrong can cost you thousands in unexpected fees, delays, or lost goods.

Trade terms aren’t just about shipping—they control who owns the goods at every stage. For example, FOB, Free On Board, means the buyer takes responsibility once goods are loaded onto the ship. But if you use DDP, Delivered Duty Paid, the seller handles everything—even customs clearance and taxes in the buyer’s country. That’s a huge difference in cost and risk. Most UK SMEs stick to FOB or CIF because they keep control and limit liability. But if you’re working with new suppliers in Asia or Eastern Europe, DDP might save you headaches, even if it’s pricier upfront.

These terms also affect your cash flow. If you’re using EXW, Ex Works, you’re responsible for picking up goods from the supplier’s warehouse—even if it’s across the world. That means arranging transport, insurance, and customs paperwork yourself. For small businesses, that’s often a dealbreaker. Most UK companies avoid EXW unless they have a trusted logistics partner. On the flip side, CIF, Cost, Insurance, and Freight, gives you more control over shipping but doesn’t protect you from customs delays or import duties. That’s why many businesses now prefer CPT, Carriage Paid To, which separates transport costs from insurance and gives clearer responsibility splits.

And it’s not just about shipping. Trade terms tie into payment methods, insurance, and even who pays for inspections. If your contract says FOB London but your supplier insists on payment before loading, you’ve got a mismatch. That’s where things go wrong—when people assume everyone understands the same terms the same way. The UK’s HMRC and Companies House don’t enforce trade terms—you have to write them clearly into your contracts. That’s why so many UK businesses use templates from the International Chamber of Commerce and get legal reviews before signing.

What you’ll find below are real guides from UK businesses that have been there. From how to negotiate Incoterms with Chinese suppliers to fixing a customs disaster after using the wrong shipping term, these posts cut through the jargon. You’ll see exactly how trade terms impact your bottom line, your supplier relationships, and your ability to scale without getting buried in paperwork.