Policy & Compliance
The problem with Incoterms ‘Ex-works’
This article looks at the friction between contractual terms of sale and UK legislation governing export procedures. It also looks at the legal reasons why a UK established seller should become an exporter of record when using the ex-works term
M embers regularly contact BIFA regarding the practical application of Incoterms. On export movements, a high proportion of such enquiries concern ‘Ex-works’ (EXW) consignments. Their concerns about Ex-works can be summarised as follows: • Issues at the loading point • Regulatory issues • Terminology is not always in line with what trade uses. On the last bullet point, Incoterms refers to ‘buyers’ and ‘sellers’, whereas a forwarder is more likely to refer to the main parties to any commercial contract as ‘importers’ and ‘exporters’. Also, under the terms of a contract the ‘seller’ and ‘exporter’ may not be the same party and, in a couple of recent enquiries, not even in the same country. The book Incoterms 2020 highlights the problems surrounding the term. “A note of caution to buyers” on page 22 highlights the seller’s minimal responsibilities, particularly regarding loading of goods and export customs clearance. There is a particularly telling comment in the guidance: “Where the buyer intends to export the goods and where it anticipates difficulty in obtaining export clearance, the buyer would be better advised to choose the FCA rule.” The main issue for the UK export freight forwarder occurs where the seller does not wish to be shown as the ‘exporter of record’ on the export documents or customs declaration. In this scenario, from a customs perspective the BIFA Member is likely to find itself acting as an indirect customs agent, increasing its responsibilities and liabilities.
In many cases, EXW sellers understand that helping with loading and being willing to be shown as the exporter simplifies the process. The purpose of this article is to look at the friction between contractual terms of sale and UK legislation governing export procedures. Also, we consider the correct legal arguments to persuade a UK established seller to become an exporter of record when using the ex-works term. Export of controlled goods The first area to examine is the export of controlled goods. Clause 27 of the Export Control Order 2008 (Article 27) defines when the exportation of goods to a authority of a UK licence held by a specific person (the licence holder). Article 27 of the legislation states: a) The licence holder is the person on whose behalf the exportation declaration is made where an export declaration is required, and b) The licence holder is established within the UK. destination outside the UK is considered to be under the Where a UK seller trades under EXW and leaves the buyer to manage export clearance, there is a mismatch where the buyer (often non-UK established) appears as the exporter on the customs declaration. However, the seller remains as the licence holder under UK law. Where an export licence is required, it must be held by the exporter, regardless of the Incoterms used. Members may use this legislation to ensure that the UK seller is shown on all documents and the export customs entry as
the ‘exporter of record’ appointing the customs agent as its direct representative. Evidence of export for VAT purposes UK VAT law, (VAT notice 703 (Section 6)) states that goods exported from the UK may be zero rated, provided the seller holds valid evidence that the goods have left the country. Without such proof, HMRC can treat the sale as a domestic UK supply, requiring VAT to be charged. Under EXW, problems arise where the seller is not willing to be shown as the exporter of record. In this case, the seller will not be shown as the exporter on the customs declaration nor on transport documents, which are usually used as proof of export. The seller may be unable to substantiate a claim for zero-rating the supply of the goods as it will have no evidence
“ Where the buyer intends to export the goods and where it anticipates dif fi culty in obtaining export clearance, the buyer would be better advised to choose the FCA rule
22 | November 2025
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