Who pays for VAT and DUTY? A Guide for B2B Express Transport

Understanding customs processes and associated costs is essential when shipping goods across international borders. One of the most common questions that arises is who pays for VAT (Value-Added Tax) and duty. The short answer is that it depends on Intercoms in practice.

What are the Incoterms?

Incoterms are a set of internationally recognized commercial terms by the Chamber of Commerce (ICC) to clarify the roles and responsibilities of sellers and buyers in global trade. These rules define the responsibilities of buyers and sellers in international trade.

Each is crucial in outlining who is responsible for specific tasks, costs, and risks involved in the shipping and delivery process. The latest Incoterms organizes these rules into two main categories based on the mode of transport. Seven of the 11 rules apply to any mode of transport, while the remaining four specifically address transport by sea, land, or inland waterways.

For B2B express transport, the most common Incoterm is DDP (Delivered Duty Paid).   

Incoterms – DDP: The Exporter’s Responsibility

Under DDP (Delivered Duty Paid), the exporter is responsible for all costs associated with delivering the goods to the buyer’s named place of destination, including customs duties, taxes, and any other charges incurred in the country of import.

How does this work in practice?

1. Prepayment: The buyer must pay for the goods before they are shipped. This often involves an international money transfer, which can take time to process.
2. Customs Clearance: The exporter is responsible for arranging customs clearance in the importing country. This involves providing necessary documentation and paying any applicable customs duties and taxes.
3. Brokerage Services: To simplify the customs process, exporters often work with customs brokers who handle the paperwork and negotiations on their behalf.

Other Incoterms: The Importer’s Responsibility

While DDP is common, other Incoterms like EXW (Ex-Works), FCA (Free Carrier), and FOB (Free On Board) place the responsibility for customs clearance and costs on the importer.

In these cases, the importer typically:

1. Arranges Customs Clearance: The importer is responsible for appointing a customs broker to handle the clearance process.
2. Pays Duties and Taxes: The importer pays any customs duties, taxes, and other charges incurred upon import.
3. Communicates with the Carrier: The importer communicates directly with the carrier to provide necessary customs documentation and instructions.

At InstaCarrier, we simplify the customs process for our B2B clients. We work closely with our network of customs brokers to ensure smooth and efficient clearance, regardless of the Incoterm.

Our experienced team can assist with:

• Incoterms Interpretation: Understanding the specific responsibilities of buyers and sellers based on the agreed-upon Incoterms.
• Documentation Assistance: Providing guidance on the necessary documentation for customs clearance.
• Brokerage Services: Connecting clients with trusted customs brokers.

With us as a partner, you reduce delays and costs associated with international shipments. Ship with InstaCarrier now! For further questions do not hesitate to contact us, we will gladly help you. Now, that you understand the most common Incoterms, you might be wondering – What are the best sectors for express transport? Find out the answer here!