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From page 12


declarations are concerned and the agent representing a non- established exporter is effectively forced to make a Customs declaration in its own name, declaring itself in box 2, whilst having a contractual background arrangement with the exporter.


VAT law It should be remembered that there is not a contractual relationship under EXW terms between the ‘seller’ and export agent, resulting in the scenario on which the ‘seller’ becomes reliant on the ‘buyer’ for evidence of export, which will allow it to zero-rate its export invoice. If the seller is unable to be sure that it can produce this evidence, it should not zero-rate the invoice, following a complex system of deposits and refunds outlined in Public Notice 703, paragraph 6.6. This states: “Typically, this occurs when goods are supplied


ex-works. If your overseas customer arranges for the goods to be collected from your premises and exported to a place outside the UK member states it can be difficult for you, as the supplier, to obtain adequate proof of export as the carrier is contracted to your overseas customer. For this type of transaction, the standard of evidence required to substantiate VAT zero-rating is high. Before zero-rating the supply and releasing the goods to your customer, you should confirm what evidence of export is to be provided.” The public notice continues:


“You, the supplier, will become liable for payment of the VAT if the evidence of export: • Does not show that the goods have left the UK or EU within the appropriate time limits,


• Is found, upon examination, to be unsatisfactory.” The export freight forwarder is under no obligation to provide


export documentation to the ‘seller’ as there is no contractual arrangement between the two parties. It is often accepted that


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on EXW consignments the seller appoints the Customs agent as its ‘direct Customs agent’. This permits the agent to be the direct Customs agent of the UK-based seller who is shown as the exporter of record on the Customs declaration, which ensures that the shipper can quickly obtain the evidence of export from the agent which substantiates the zero-rating of the export invoice.


The EU-UK Free Trade Agreement There is much which only the seller can substantiate, such as the precise nature of the goods being shipped, origin of components, etc, and to claim preference for those goods being shipped. The recently concluded EU-UK Free Trade Agreement, when covering Rules of Origin, clearly states in Chapter 2, Origin 2(c) that ‘exporter’ means a person, located in a party, who, in accordance with the requirements laid down in the laws and regulations of that party, exports or produces the originating product and makes out a statement on origin.”


Conclusion The freight forwarding sector has become increasingly wary of handling EXW and DDP shipments unless the seller or buyer for the relevant term is willing to empower them as a ‘direct Customs agent’. They are quite within their contractual rights to decline to


handle shipments under either of these terms and some are advising that they are doing so, insisting that EXW is replaced by “FCA shippers’ door.” Based on the above information, under an EXW contract


there are clear benefits, as previously explained, for the agent and ‘seller’ to allow the latter to appoint the former as its ‘direct Customs agent’, relative to Customs formalities to export the goods. As the 2020 Incoterms highlights, in many cases EXW is not an appropriate term, it should be “FCA shippers’ door”.


June 2021


Courtesy of the Port of Felixstowe


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