The EU Commission has issued a factsheet shedding light on the relationship between Incoterms and EU sanctions compliance. It makes clear that the Incoterms “Ex Works” rule—which shifts responsibility and risk to the importer/buyer from the moment of collecting the goods—does not exempt EU-based exporters or sellers from their legal obligations under EU sanctions law. The Commission underscores that adherence to EU sanctions is mandatory for all individuals and entities under EU jurisdiction, regardless of the contractual terms governing a transaction.
On 27 May 2025, the European Commission published a factsheet clarifying the relationship between Incoterms—specifically the “Ex Works” (EXW) rule—and EU sanctions compliance. The document addresses a common misconception in international trade: that contractual terms like EXW, which shift responsibility for transport and risk to the buyer at the point of collection, can somehow limit or eliminate the exporter’s legal obligations under EU sanctions law.
The Commission makes it unequivocally clear that private law agreements, including those based on Incoterms, do not override or diminish the obligations imposed by EU sanctions regimes. In other words, while parties are free to allocate commercial risk through contract, such arrangements have no bearing on the mandatory legal duties of EU-based exporters and sellers.
Under EU law, exporters must for example ensure that certain goods do not end up in prohibited destinations—such as Russia or Belarus—regardless of the terms of sale. This obligation applies to all persons and entities under EU jurisdiction, including EU nationals, companies established in the EU, and foreign businesses operating within the EU.
The factsheet also highlights the serious consequences of non-compliance. Violations of EU sanctions—whether intentional or due to negligence—can lead to administrative and criminal penalties, as well as significant reputational harm. Importantly, liability cannot be avoided by relying on contractual clauses or by failing to conduct adequate due diligence.
In short, the use of EXW or similar Incoterms does not absolve EU exporters from their responsibility to comply with EU sanctions regulations. The Commission urges all operators to take proactive measures to ensure compliance, including verifying end-users and destinations, and to consult available guidance on due diligence and circumvention risks.
So, what should companies do?
EU operators engaged in the export or sale of goods must remain vigilant: contractual clauses that shift risk to the buyer—such as those found in EXW or similar Incoterms—do not exempt them from their legal responsibilities under EU sanctions law. Even when a contract specifies that the risk transfers to the buyer at a certain point (e.g. upon delivery or shipment), this does not diminish the exporter’s obligation to fully comply with EU sanctions, including restrictions on the sale, export, or transfer of certain goods.
Background facts
Incoterms, short for International Commercial Terms, were first introduced in 1936 and are currently governed by their 2020 version. These 11 standardized terms are used globally in contracts for the sale of goods. They define the responsibilities of exporters and importers, including who handles delivery, risk, freight, and insurance costs—helping to clarify key aspects of international trade agreements.
The EXW (Ex Works) rule is an Incoterms provision under which the seller fulfills their obligation by making the goods available to the buyer at a specified location—typically the seller’s own premises, such as a factory or warehouse. The seller is not required to load the goods onto the buyer’s vehicle or handle export clearance. Once the goods are made available, the risk transfers to the buyer, who then assumes full responsibility for transportation, customs procedures, and all subsequent obligations. Under EXW, the majority of responsibilities related to transport and delivery rest with the importer or buyer.
