Shipping with EXW Ex Works Incoterm does not relieve the exporter of all risks. In fact...

Procedure, export customs documentation, and the Ex Works term

With an Ex Works sale, the seller makes the goods available to the buyer at their premises. The term Ex Works is equivalent to Free Factory.

Italian companies often use the Ex Works [EXW] term to export to the USA, believing that this way, all risks and issues of the export process are transferred to the American customer. This is a false belief because European customs regulations prohibit declaring the customs declaration in the name of an American entity. In practice, what happens in an Ex Works sale to an American customer is that the latter will list the name of the Italian company as the exporting party in the Export Declaration, unbeknownst to the Italian company.

When the export customs documentation is not properly handled, the consequences for the Italian company can be severe due to VAT regulations. Proof of export must be provided in order to sell and invoice VAT exempt. When selling under Ex Works terms, the company does not control the export procedure, and recovering the documentation proving export to the United States can become difficult, if not impossible, with all the resulting consequences (penalties up to two and a half times the evaded VAT).

Another risk of EXW Ex Works shipments

One of the worst-case scenarios could be as follows: the exporter sells under Free Factory terms and does not insure the goods (because under EXW Incoterms, it is not the exporter’s responsibility but the importer’s). The ship sinks or suffers a general average loss, the goods are lost or damaged, and the shipowner claims compensation from the shippers, which may include the unfortunate EXW exporter, asking them to reimburse the damage proportionate to the value of their goods.

The export customs procedure to the United States

To export to the United States, the Export Customs Declaration must be completed, which consists of two parts:

• The Single Administrative Document (DAU), completed by the exporter and sent to the Customs Offices for the registration of the export customs declaration. It contains all the data related to the goods to be exported.
• The Export Accompanying Document (DAE), produced by Customs after checking the goods and verifying the DAU, and delivered to the exporter or their representative, which accompanies the products throughout the export procedure.