Export Advise Hub: Incoterms® and Russian sanctions

Aug 17, 2022


Question:

Just before the Russian invasion of Ukraine we were in the process of preparing a shipment to go to Yoshkar-Ola in Russia. We were using Incoterm® FCA for this shipment, as we understand Ex works doesn’t work well for shipments being exported outside of the UK.

It reached the UK border but, before it was physically exported, the sanctions were put in place and therefore the items were returned to us to stock until shipment is possible again.

Now our customer in Russia is saying we failed in our obligation to clear the goods for export.

It is my understanding that we did prepare the shipment for export, by issuing an invoice with all information required and instructing the courier to come and collect / ship the items to our customer. Please can you advise on the use of this term?

Answer:

Yes, FCA is the better option because the seller is responsible for loading, export customs and any export documentation.

It would be unlikely that the buyer would be able to carry out their responsibilities under EXW.

The customer may think that you have failed in your obligations, but the goods could not be supplied because of the restrictions that were put in place. It would be a breach of UK trade controls to attempt to supply listed goods to Russia.

Though the customer thinks this means you have not carried out your responsibilities at export this was outside your control.

Incoterms® Rules do not cover the effect of sanctions and they cannot hold you responsible for not exporting under FCA under a breach of Incoterms ® Rules.

Hopefully, within your contract terms you have clauses that cover things such as frustration of contract and force majeure, and it is recommended you include a specific clause covering export licensing considerations. It is these areas of the contract that would be reviewed if the Russian customer wanted to peruse a claim on failure to supply, not the Incoterms® Rule.

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