Ex Work Trade Term in Business Nature

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When an international trade is using Ex Work trade term, buyer arranges carriage from seller's premises. Both seller and buyer should understand about this condition.

But, in business practice, sometimes there is a little bit different from. One shipment is called Ex Work, but, why forwarder ask a shipper to send the goods to their warehouse? It's really happened.

Ex Work as like as door to door service usually a courier use. All the cost and risk is to be buyer's responsibility. Seller provides the goods in seller's warehouse only, make sure the cargo ready at a certain time promised or agreed.

So that in this term shipper or seller provides only Bill of Lading, Invoice, and Packing List, the Insurance for the goods is not seller's responsibility. If the goods is loss, or is damage in an accident, for instance, all those risk is not seller's responsibility. All the risks are to be buyer's responsibility, instead.

When buyer and shipper are preparing a sales contract, both parties have to understand well the term and condition.

The Ex Work term in Italy is commonly use. When seller are willing to pay the freight cost, it means Ex Work trade term, instead of FOB. I have ever handled a shipment from Italy at the first time. Usually I decide FOB term for by sea shipment mode with a little volume. I didn't know at that time the business nature there. I choose a forwarder, and asked them to check all conditions and all the costs would be. The forwarder reported to me that the trade term was Ex Work. So that you should be careful and understand the business nature, too.    

Choosing FOB Trade Term.

When we have a shipment from around the globe, we have to check first all the costs of shipment comprehensive. Not all shipment with any trade term is cheaper than other. It all depends on the port of loading and the quantity of our shipment, and the shipment mode, too.

Sometimes, FOB term is more expensive than CIF when the shipment is by air.

I want to put here my experience regarding shipment from China by sea with the CIF trade term. When we don't mention the trade term in our order sheet, they will automatically decide the term is CIF. The sound is so great, means shipper will pay the shipment cost until port of discharge, and the Insurance fee is included.

It's several years ago. The time was coming to us to clear the goods here, in Indonesia port. It's not a big volume, was arranged by LCL. We were so shocked watching the invoice unusual and maybe unreasonable. The local charges in Jakarta port were very expensive.

I tried to check to the forwarder and warehouse why did the cost so high. I got the information from them that, they got an offer to handle our shipment with the high price, too. They advised us to check directly to the origin. After I checked to the shipper, they didn't know too, why the cost was  so high.

I asked the forwarder to give us a discount. They then were willing to give us a discount with a requirement, that we had to make a contract with them, would use their service.

This case gave us a warning to use CIF trade term for sea shipment from China especially for LCL shipment.

I don't now until know, to whom should I blame on. Is it forwarder or shipper? 

FOB Term is Common Uses

There are several trade terms could buyer taken for their shipment besides FOB. But, why do they choose only FOB?

FOB is one of the trade terms, which buyer or shipper will covers the cost of shipment from on board at the port of loading until they receive the goods at their warehouse. Shipper or beneficiary only has the obligation to send the goods to the port and pays all the cost until, the clearance cost included.

There are two reasons why does they always choose FOB:

1. Getting the fixed cost.
When the shipment term is FOB, buyers will freely finding the forwarder out and compare one to each other. They make an agreement for a certain period. They also will get the fixed warehouse during clearance process, then, of course, by this condition, they will get lower cost because they promise to place all their goods in a certain warehouse. Usually they are getting a special rate because all the party can get the fixed job.

2. Getting the fixed lead time.
Deadline is the second major factors that shipper has to keep in time. Because buyer has prepared the market, the distribution, and the time of the goods on sale. Buyer wants to control all the things to make all are going smoothly. By taking FOB trade term, buyer will be able to control whether the goods has been on boarded or not.

3. Checking the cargo readiness.
Buyer could also checks the goods via forwarder for schedule agreed. Sometimes buyers in doubt when they received an information about cargo readiness. Buyer usually ask forwarder to check the goods with shipper. Forwarder will ask the shipment booking for a certain on board date. By doing so, buyer could get the the fixed schedule.