Incoterms 2020: Ex-Works & Free Carrier
How well do you know your Incoterms rules? In this video, you will learn about Ex-Works and Free Carrier, which apply to any mode of transport.
Ex-Works describes when a seller makes a product available at a designated location, and the buyer of the product must cover the transport costs. Once the goods are with the buyer’s agent or representative, the buyer is responsible for other risks, such as loading the goods onto trucks, transferring them to a ship or plane, and meeting customs regulations.
Remember the following:
- Under Ex-Works, the seller hands off the goods to the buyer at a named place, which does not have to be seller’s own premises. For example, the named place could be a forwarder’s warehouse, as agreed upon by the seller and the buyer.
- The seller is not obligated to load the goods onto the buyer’s collecting vehicle.
- The seller is not obligated to clear the goods for export. He or she is only required to safely package the goods, label them appropriately and deliver them to a previously agreed-upon location.
- The risk transfer happens when the seller places the goods at the disposal of the buyer for collection at a named place. It’s highly recommended to specify a precise point within the named place at which risk and costs transfer to the buyer.
- This rule is most suitable for domestic trade or for trade within a customs union.
FCA: Free Carrier
For international trade, Free Carrier (FCA) could be used. It obligates the seller to clear the goods for export at the country of origin and make the goods available at a set location, with the risk of loss or damage during that operation clearly remaining with the seller.
Keep this in mind:
- All risk and costs beyond delivery pass on the buyer.
- It’s highly recommended to specify a precise point within the named place at which risk and cost transfer to the buyer.
- The seller has the right to select the point “that best suits its purpose,” if no specific point has been agreed between the parties.
- In Incoterms 2020, FCA has added an optional mechanism to allow the parties to agree for the buyer to direct the carrier to issue the on-board bill of lading to the seller. The on-board bill of lading is a document that certifies that the goods have been received in good condition from the seller (or a named shipper or consignor) and have been taken on board the truck, ship, or vessel on the stated date.
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