Incoterms are standard trade terms maintained by the International Chamber of Commerce. They set out who handles which tasks, costs and risks, and they govern the sale contract, not the contract with the carrier.
Under EXW (Ex Works), the seller makes the goods available at its premises and does not have to load them or clear them for export. Under FOB (Free on Board), the seller delivers the goods on board your nominated vessel, and risk and costs pass to you at that point. Under CIF (Cost, Insurance and Freight), the seller pays freight to the destination port and arranges insurance, but only minimum cover. Risk still passes when the goods are on board.
For customs value, costs up to the UK port of arrival are included. On EXW you add freight from the factory, including the leg inside China. On FOB you add the sea freight. HMRC says the Incoterm does not limit which valuation method can be used.
Sources
- GOV.UK: Incoterms (HMRC customs valuation guidance) (opens in a new tab)
- GOV.UK: Delivery costs to include in the customs value (opens in a new tab)
A summary of the public sources above, checked when it was published. General information, not legal, tax or financial advice.