How to File Export Customs Declaration under EXW Trade Term

Recently, many enterprises have enquired about export customs declaration under EXW trade terms and reported issues where export tax rebates cannot be processed for EXW customs declarations. Today we will learn how to complete customs declarations properly under EXW price terms.

According to Article 26 of the Regulations of the People’s Republic of China on Import and Export Duties: The dutiable value of export goods shall be examined and determined by the customs on the basis of the transaction value of the goods plus the transportation and related charges and insurance premiums for the goods before they are loaded at the place of export within the territory of the People’s Republic of China.

It follows that: Dutiable value of export goods = transaction value (inclusive of domestic transportation charges, charges related to domestic transportation, and domestic insurance premiums). For exports under FOB terms, the transaction value includes domestic transportation and related charges as well as domestic insurance premiums. In the customs declaration form, the term of trade is declared as FOB, and the fields for freight, insurance premium and miscellaneous charges are left blank.

1. Comparing with FOB, we may raise a question: For exports under EXW terms, when EXW is declared in the term-of-trade field of the customs declaration form, should freight, insurance premium and miscellaneous charges be filled in the export customs declaration?

Before answering this question, let us clarify the definition of EXW, the obligations of buyers and sellers, and price composition.

Definition of EXW: The seller completes delivery when the goods are placed at the disposal of the buyer at the seller’s premises or another named place (i.e. works, factory or warehouse). The seller is not required to clear the goods for export nor load the goods onto any collecting vehicle.

Buyer’s obligations under EXW: The buyer must bear all costs relating to the goods from the time of delivery as stipulated (delivery occurs when the seller places the goods at the buyer’s disposal at the seller’s premises or another named place such as works, factory or warehouse).

Price composition of EXW: Based on the definition of EXW and buyer’s obligations, the transaction value under EXW does not include costs incurred after the goods are delivered by the seller at factory, warehouse or works, nor any loading charges. The EXW price is the ex-factory price.

★

As shown above, the transaction value under EXW does not cover domestic transportation charges, charges related to domestic transportation or domestic insurance premiums. Therefore, the EXW transaction value is not the dutiable value. Pursuant to Article 26 of the Regulations on Import and Export Duties, domestic transportation charges, related charges and insurance premiums shall be declared and included in the export dutiable value.

2. How should these charges be entered? Should they be filled separately in the freight and insurance premium fields, or in the miscellaneous charges field?

To answer this, we refer closely to the Specifications for Completion of Customs Declaration Forms for Import and Export Goods of the People’s Republic of China:

Freight field in the declaration header: This field is for transportation charges incurred for imported goods before arrival at the place of import within China, or transportation charges incurred for exported goods after loading at the place of export within China. In other words, it records international freight for all goods covered by this declaration. Domestic transportation charges must not be entered here.

Insurance premium field in the declaration header: This field records insurance premiums for imported goods before arrival at the place of import within China, or insurance premiums for exported goods after loading at the place of export within China. That is, it covers international cargo insurance premiums for the whole shipment. Domestic insurance premiums cannot be filled in this field.

Miscellaneous charges field in the declaration header: This field records charges other than the transaction value that shall be included in or deducted from the dutiable value in accordance with the Regulations of the People’s Republic of China on Import and Export Duties. Domestic transportation charges, related charges and insurance premiums need to be included in the export dutiable value. Accordingly, these items shall be entered in the miscellaneous charges field under EXW terms.

Reminder: Under EXW terms, domestic transportation charges, related charges and insurance premiums must be correctly declared in the miscellaneous charges field.

3. Some enterprises ask: Under EXW terms, can we declare FOB on the customs declaration form and enter freight and insurance premiums as deductions?

Based on the above analysis, the answer is no.

It should be highlighted that many enterprises trading on EXW terms simply declare FOB for customs declaration to apply for tax rebates. This crude practice carries substantial risks.

Detailed analysis:

1. Simply declaring FOB for an EXW shipment constitutes a declaration error and impairs the accuracy of customs statistics. If the enterprise applies for export tax rebates using such a declaration form, tax authorities in strict audits may deem the supporting documents for tax rebates untrue.

2. Where the actual trade term is EXW, the buyer nominates its carrier for pickup and bears all inland transport, terminal and port charges. If the declaration is falsely changed to FOB, the seller/exporter cannot obtain the invoices for inland transport, terminal and port expenses. Even though the export transaction is genuine, the lack of these supporting documents may cause tax authorities to question the authenticity of the transaction.

3. Another common question: Under the integrated export declaration mode of the China International Trade Single Window, when the term of trade is entered as 7‑EXW in the declaration header, why does the freight field turn yellow indicating a mandatory entry while the miscellaneous charges field remains white and optional?

We believe this is a system bug. Reminder again: Under EXW terms, domestic transportation charges, related charges and insurance premiums must be correctly filled in the miscellaneous charges field.

After this analysis, do customs declarers understand how to correctly complete export customs declarations for EXW shipments? Feel free to leave comments for discussion and mutual learning.