Are Incoterms® EXW rules suitable for international trade..??

Question from a reader Yves..

Dear sir,

I’m an importer to  Nepal. The product goes from Belgium to Kolkata by boat and than by truck to Kathmandu. exw

With the supplier i have an exw understanding and all the other cost are arranged with the freight forwarder that i had to pay once the goods arrived in Kolkata.

After the payment they figured out that the bill of lading was not correct. The amount of kgs was not exact one what was mentioned on the  packing list and the name of our company was not mentioned correct on the bill of lading. On top of this all there was no commercial invoice, but a regular invoice in Dutch language.

So the custom clearance in Kolkata (India) was delayed and the goods have by now a delay of more than two months.

What are my rights in this case? The expiry date of the product has come closer and the value of my product has decreased by this.

I sought the help of Alexander Robertson – of Robertson’s Cargo Consultancy (Pty.) Limited, an accredited trainer with SAICC for Incoterms® 2010 rules to answer this question and he responds as below..

Under A1, “the seller must provide the goods and the commercial invoice in conformity with the contract of sale and any other evidence of conformity that may be required by the contract.”  These documents can be sent electronically, i.e., by e-mail.  Under B1, it states that “the buyer must pay the price of the goods as provided in the contract of sale.”

From this it is evident that the seller has to provide a commercial invoice, plus it is always vital to ensure that details and requirements of the sale contract have as much detail as possible.

As for delivery, the seller must make the goods available by placing them at the disposal of the buyer at the agreed point, unloaded on any collecting vehicle.

It is for this very reason that the EXW rules is not suitable for international trade even though some traders may think it gives them better control of the goods but it does given them many grey hairs.

It is vital the any freight forwarder has sight of the invoices, which are also required for the export clearance, as your appointed freight forwarder needs to customs clear for export to you.  These documents should include the packing list.  In this instance it is obvious that your freight forwarder has not checked the documents correctly to ensure what needed to be collected for export, plus they have not framed the bill of lading correctly to match with the documents supplied by the seller. Trade

From all that I see the seller has complied with the order save that they gave a regular Dutch invoice for a local sale and not a commercial invoice for an international sale.

You need to look at the instructions which you gave to the freight forwarder to establish if your instructions have been followed or not.  You need to get the freight forwarder to immediately apply to the ship to establish where the error on the bill of lading arose by having the ship check the mates receipt of cargo actually loaded in the event of break bulk cargo. 

If this cargo was containerized by the freight forwarder at their warehouse, what was packed into the container?  The warehouse should have good records of this.  They should have a record of what was received by the warehouse and what was packed into the container.  Some warehouses even take photographs of the packing of the container.

Perhaps it was a clerical/typing error in the framing of the bill of lading.   This should be easy to establish from the rough copies of the documents which were prepared.

The unfortunate thing is that errors are not easy to correct and are very time consuming and given the fact of the product having an expiry date does not assist in the matter.

There is unfortunately nothing that can be done against the seller other than requesting a correctly formatted commercial invoice.  As for any error made by the freight forwarder, there is also very little you can do other than requesting them to confirm exactly what was shipped and to correct any errors on documents.

I trust that this gives you some guidance on how to resolve the problem.

What did you think of the above article..?? Comment below..

8 comments on “Are Incoterms® EXW rules suitable for international trade..??

  1. Conrado Couto says:

    Hi,

    It’s possible to do EXW but not very correct. I think more suitable the FCA in the international trade.

  2. C. Bracamontez says:

    As Mahesh mentioned the buyer/importer should request emailed copies of all documents prior to loading cargo at the origin facility. I’d add that these documents can be reviewed by the buyer/importer and forwarded to the customs broker at the destination port to ensure import compliance.

  3. Mahesh says:

    Hi!

    The basic point of “Incoterm:EXW” not suitable for international sale of goods is amply highlighted by the plight of the importer from Nepal.

    What causes delay to custom clear the goods?

    Is it due to the shipping line not releasing the cargo due to problems in BOL? Is it incorrect name of the buyer on BOL? Where does the name of the buyer appear on BOL? Does it appear as shipper or as consignee? Is the BOL negotiable i.e. made to order?

    If the BOL is negotiable, the importer has to simply transfer the BOL by endorsement to the correct name of his establishment and present it to the shipping line for delivery.

    As far as the actual quantity matches with the figure mentioned in the Packing List, the shipping line may not hackle the issue provided the actual quantity is not less than the BOL figure.

    Even if the quantity is less than BOL figure, the importer may satisfy the shipping line for not claiming loss of the goods by way of giving in writing in the form required by the shipping line.

    The forwarder is liable to compensate the losses suffered by the importer.

    Mahesh

  4. Jaspreet Singh says:

    Well explained

  5. Yes, this was a good analysis of what would be required in an EXW international shipment. However, Alexander Robertson did not answer the initial question posed and that was “Are Incoterms® EXW rules suitable for international trade..?? ”

    And the simple answer is “NO”, and which is found in the Incoterms® EXW rules, which unequivically states, “It is suitable for domestic trade, while FCA is usually more appropriate for international trade.

    The problem with EXW is that the buyer has no affirmative obligation to provide export documentation. Incoterms® rules FCA is the proper term to use in place of EXW. Also in an EXW transaction, the buyer must load the goods, often necessitating access to the seller’s warehouse, use of forklifts, etc. This is unacceptable and therefore normally the seller would do the loading. Then why not use FCA, which allows this?

    All too often EXW and FOB are used for international container shipments. The Incoterms® rules are specifcally clear that neither of these Incoterms® rules should be used for containerized shipment of goods in international transactions. And there are many reasons why that is true. Those reasons only come to light when something goes wrong.

    1. Hi David, in his response, Alexander Robertson has answered the title question “Are Incoterms® EXW rules suitable for international trade..?? ” with below statement..

      “It is for this very reason that the EXW rules is not suitable for international trade even though some traders may think it gives them better control of the goods but it does given them many grey hairs.”

  6. christian uchenna says:

    I think it is well explained, nd well understood

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