What documents can we show to a bank to evidence supply under letter of credit terms when we sell Ex Works (EXW)? Often, we do not receive the air waybill or any logistic receipt to evidence export even for VAT purposes, which means we charge VAT on the supply. A particular customer in the UAE has been quite happy with that, but now wants to pay us under a letter of credit.


With my due diligence brain, I’m suspicious about this situation. Why is your customer in the UAE happy to pay UK VAT? And if you don’t see where the goods actually go — how can you be certain they aren’t diverted to sanctioned markets or to an unauthorised end use? At least they haven’t offered to pay you in advance! Perhaps everything is fine though, your customer could be VAT registered in the UK as a business and undertaking the role of exporter from the UK. I am assuming you also do not see the customs export declaration. I would look into this more thoroughly though and ensure that you are not being named as the exporter on the customs declaration because if you are that makes you legally responsible for the export regardless of selling EXW and charging VAT.

To address your question, if the customer wishes to pay you under a letter of credit but you cannot provide “normal” evidence of export ask for a Forwarder’s Certificate of Receipt (FCR) to be added as evidence that you have supplied the goods. Whoever picks up the cargo should be able to corroborate the pickup and collection. If it is a true EXW then your customer will advise you when the forwarder is going to collect and also arranged for the goods to be lifted from the floor to be loaded. An FCR is an official document but you may have to discuss this further with the company your customer is using for transport to ensure they understand the process.

Source – Croners Wolters Kluwer Business

For further information please contact Stephanie Warrington on 01254 356473 or s.warrington@chamberelancs.co.uk