Choosing the right Incoterm is critical for smooth international trade. While Ex Works (EXW) is often seen as a simple option, it can create complications for both importers and exporters. A far better alternative? Free Carrier (FCA).
Why FCA Benefits Exporters
Under EXW, exporters bear minimal responsibility. However, this also means buyers handle export formalities—something they may not be familiar with. This can lead to delays, compliance risks, or even failed shipments if export clearance isn’t completed correctly. With FCA, exporters take care of customs clearance, ensuring compliance and a smoother shipping process.
A major issue for sellers under EXW is VAT liability. If the buyer does not provide valid proof of export, HMRC or other tax authorities may deem the sale domestic and charge VAT—leaving the seller with unexpected tax burdens. Additionally, VAT-registered UK sellers must charge 20% VAT on goods sold within the UK, increasing costs for foreign buyers. If the buyer fails to export properly or provide evidence, the seller may be forced to account for VAT and struggle to reclaim it. FCA helps avoid this by ensuring the seller completes export formalities and obtains valid customs and transport documentation, reducing tax risks.
Why FCA is Better for Importers
Importers using EXW often face hidden costs and risks. Arranging pickup from the seller’s premises can be difficult. Many transport providers require export clearance before collection. Under EXW, this is the buyer’s responsibility, which can lead to delays or failed collections if paperwork is incomplete. FCA eliminates this hassle by allowing exporters to deliver goods to a designated place, such as a freight forwarder’s hub or a port.
EXW also puts loading responsibilities on the buyer, which can create problems. If the seller refuses assistance or lacks the proper equipment, loading can become costly and risky. This increases the chance of damage to goods and disputes over liability. FCA ensures sellers handle loading, reducing risks for buyers. Additionally, under EXW, transporters may struggle to collect shipments if they lack the correct authorizations or paperwork. FCA prevents these complications by ensuring goods are legally export-ready before pickup.
Ultimately, FCA strikes a balance. Exporters ensure legal compliance, and importers gain control over shipping without unnecessary logistical burdens. For businesses looking to streamline trade, reduce tax risks, and avoid logistical headaches, FCA is a smarter, more efficient choice than EXW.
If Incoterms are causing you problems or you feel you need to know more then join our next course to reduce risks, cut costs, and trade smarter. Book now at Import Export Training Courses UK – Exporter Services and stay compliant!
