“Ex Works” is still a widely used Incoterms rule, honoured by custom and practice. However in today’s regulatory environment it is hardly ever appropriate for cross-border transactions.
This is the only rule that requires the buyer, and not the seller, to undertake export clearance.
However under most jurisdictions this is simply not safe or practical.
- The exporter will still need to liaise with the authorities on a range of issues, e.g. if the goods are being excused from local taxes such as VAT, there will need to be evidence that they are going to leave the country.
- The buyer will in any case depend on the exporter for information on which to base the export clearance application.
- Exports from the US – the authorities are clear that responsibility for the accuracy of information supplied for export clearance rests with the seller. Furthermore the exporter may still be US Party in Principal Interest (USPPI), which gives rise to various obligations.
Beyond this, this rule poses other danger. If there are exclusive distribution arrangements for certain markets, the exporter needs to be sure that goods will not find their way back onto these, upsetting existing business relationships.
So for cross-border transactions, the obvious alternative
is Free Carrier (seller’s warehouse)
One legitimate use for Ex Works in cross-border transactions may be for issuing of quotations – i.e. the cost of the goods without any “extras”.
One caution here – the rule requires the seller to provide packaging for the goods, and when the quotation is issued, the transport mode may not have been decided. This may affect the type of packaging needed, and so the total transaction cost.
For domestic transactions, Ex Works still has a place, but there are still some drawbacks
- The seller is not required to load the goods, even though they may have the necessary lifting gear. If the seller agrees to load goods, this will be at buyer’s risk
- The seller has no obligation to give the buyer a delivery document. So this matter needs to be addressed in the sales agreement.