Incoterms® EXW (Ex Works)

Thursday, June 23rd, 2016

Incoterms® EXW (Ex Works)

Expert knowledge is required by those using any of the Incoterms®. We highlight the pitfall(s) for those nominating EXW as the basis for the deal. What does it mean? At first sight it seems simple. All Incoterms® define the responsibilities of buyer and seller. A common misunderstanding is that with EXW the seller is responsible for all risks up to the point where the goods leave the factory gate. NOT TRUE!

Essentially, EXW is a situation where the seller makes the goods available to be collected at their premises and the buyer is responsible for all other risks, transportation costs, taxes and duties from that point onwards. The contract price is stated in the contract as £X Ex Works.Cologne (or wherever).

Here is a theoretical scenario. A supplier has an EXW deal with a buyer. The seller is in Morocco and the buyer is in Edinburgh. The supplier, at his factory in Morocco, packages the goods, advises the buyer that they are ready for collection. The buyer acknowledges that he will arrange collection, next day. Overnight, there is a fire at the seller’s factory and the goods are destroyed.

What is the buyer’s position now? Is it a claim against the sellers insurance? Is the seller obligated to manufacture the goods again, at no cost to the buyer? Is it a claim on the buyers insurance? If it is the latter, would you be sure that the buyers insurance would include cover for goods on someone else’s premises in Morocco?

The above situation isn’t theoretical. It happened to one of our clients. If you have the answer ring Ray Gambell on 01744 20698. The best answer will enter a draw for a copy of Dr Farrington’s 9th Edition of Procurement & supply chain management. We look forward to hearing from you. Alternatively, you can email Ray at r.gambell@brianfarrington.com giving your personal email address. Closing date for your answer to enter the draw is the 15th July 2016. We look forward to hearing from you.