Incoterms® 2020: Why moving from EX-Works to FCA could be beneficial for your business
Updated: Jan 29, 2021
The International Commercial Terms or Incoterms® are terms published by the International Chambers of Commerce that are used worldwide and that dictate who is responsible for what during international transactions. Essentially, they explain all the tasks, risks and costs involved in the transaction of goods from seller to buyer. Incoterms are reviewed every 10 years with the latest version having come into effect in January 2020.
One of the most used Incoterms is EXW or Ex-Works, in which the buyer assumes all costs and risks throughout the process, and the seller’s responsibility is only to make the goods accessible to the buyer. Consequently, under this term the buyer is responsible for insurance, customs clearance both at the Export and Import destinations, as well as for loading and transporting the goods, among others.
Although using EXW, may seem the easiest way to avoid weighty responsibility, there are some important aspects that you may wish to consider before deciding on using this Incoterm. One of the main aspects is that under the new rules, exporters must provide irrefutable proof of export if audited by HMRC. However, under EXW, since you are not the “Exporter of Record” you are not legally entitled to the export customs declaration, a key document to prove the goods were cleared and left the country. A further important aspect to take into consideration is that if the buyer is using your GB EORI number, you are liable to HMRC for any errors.
Therefore, you may wish to consider using Free Carrier or FCA instead. This would allow you to be the “Exporter of Record” and by taking on responsibility for the export customs clearance, it will leave you in control of the process and having access to the customs declaration.
All in all, this step would allow you to minimise risk and remain compliant.
Need help with incoterms?
If you would like to acquire more in-depth knowledge on Incoterms, join us on our upcoming Incoterms training course which will be delivered on the 17th of February; or
If you have more specific questions regarding incoterms, please use our Bespoke Service and either a member of our in-house team or GMCC associate can help you clarify any doubts.