As well as being wary of DDP, especially in relation to exports from the UK, on the flip side, the most commonly used Incoterm Ex Works is the most onerous for the importer. Let me explain…
Under Ex Works (EXW), the buyer has to perform the sellers export customs duties. Furthermore, the seller is deemed to have ‘delivered’ the goods when placed at door ready for loading to the means of transport. The seller is under no obligation to load them, but generally they do. However, risk passes to the buyer before they are loaded.
Under Free Carrier (FCA), the seller is obligated to perform their export customs duties. But more importantly in respect of risk, it can also mean that the seller does not transfer risk until physically loaded onto the provided means of transport.
It isn’t ‘quite’ that simple as I shall explain further below. However, under EXW, post Brexit, UK importers will not only have import customs charges to pay for, but also the EU export customs charges to pay for. A ‘simple’ job , just for documentation alone, could therefore cost around £90 in customs charges.
As with any Incoterm, you should always suffix the Incoterm used with a named place. So, taking these two Incoterms in order…
Under EXW, the named place is usually the sellers premises. When negotiating Incoterms with suppliers, you could agree by contract that this would also include the risk of loading to the means of transport which you will have provided. You ‘could’ also agree that the seller pays for export clearance, but then it gets more complex and could become unclear for the forwarder, and on this basis it is ill-advised.
Under FCA, the named place can be a variety of places. It could be the warehouse of the carrier, which would then require the seller to transport to the carrier’s warehouse. However, if the named place was the seller’s premises, it serves two-fold. It transfers the point of risk to ‘when loaded on the collecting means of transport’, and also requires to exporter to prepare their export customs documentation.
In summary, given that changing from EXW sellers premises to FCA sellers premises is of very little change in terms of costs, it is cleaner and less likely to be refused by the seller. Given that the importer is likely to have to pay Import Vat and Duties, it is a small ‘give-away’ by the seller to pay for export customs, and still retain the buyers business.
