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A Guide to Selling Ex Works

Posted On : Aug-03-2009 | seen (1272) times | Article Word Count : 1480 |

Ex Works enables the buyer to take control of the transport, it’s mode and associated costs such as cargo insurance and is one of the most common incoterm terms of sale used globally. The seller however still has to attend to certain tasks and criteria to ensure the smooth transit of cargo and clearance at destination. This article discusses best practices in documentation, loading and booking a shipment as well as the benefits to the seller/exporter in doing so.
A Guide to Selling Ex Works

Ex Works enables the buyer to take control of the transport, it’s mode and associated costs such as cargo insurance and is one of the most common incoterms of sale used globally.

EXW – EX WORKS
The seller places the goods at the disposal of the buyer. Normally all costs occurring from the sellers loading platform are for the account of the buyer, who is responsible for selecting the carrier, mode of transport, carriage, insurance, export and import clearance and all other risks and costs, after the goods have crossed the exporters dock.

The seller however still has to attend to certain tasks and criteria to ensure the smooth transit of cargo and clearance at destination.

Documentation
Cargo does not move without documents. Completing them properly is the first step to a trouble free export.

The Commercial invoice is the anchor document and should have all of the elements that drive the bill of lading, export clearance form, export permit if required. Apart from seller, buyer, item description, unit price and value, the currency, incoterm, payment terms and HS codes (Harmonized Tariff code) should be clearly visible. If there are discounts applicable, this should be displayed. Although not mandatory, the no of pcs, gross weight and volume for the order should be clear so that cost estimates, freight rate calculations can be as accurate as possible. This of course, is the seller’s bill of sale.

Export Clearance in most industrialized countries is a formality that is simple yet mandatory. Each country has their own version of the form or electronic submission (e.g. Canada CAED) with the key elements being taken from the commercial invoice. The seller if a regular exporter will already have electronic submission set up or in the case of an occasional exporter can submit the form to the carrier who will file it on their behalf.

Export Permits are used by governments to control the sale of certain types of goods to specific countries that are on the “watch “or “prohibited “list. The majority of cargo moving does not require an export permit however and exporter whose goods or customers may fall into this category will have to obtain the export permit well in advance of the actually conclusion of the sale. Normally, at destination, the import permit will not be granted unless the export permit is issued.

Agricultural Certificates for certain foods products, plants or plant matter, animal derivatives may well be mandatory in order to clear and pass Customs at destination and the seller/exporter will need to ensure these are completed correctly and submitted before the cargo is despatched.

Fumigation Certificates are now required by most countries for any wood packaging, whether skids or kitting or actual products. The seller/exporter is required to provide this in order to ensure that the cargo is not seized at destination.

Dangerous Goods Certificates are an absolute must for any type of hazardous material. It is the manufacturer/exporter who is solely responsible for the issuance of this document and cargo will not be loaded or accepted unless this is submitted to the carrier.

The Packing List is of course an itemization of the goods within a carton or skid and is invaluable in identifying the contents, especially so when there are many and the buyer wishes to access a specific product. Customs when inspecting goods may then only target certain pieces of the consignment rather than opening everything.

Loading and Packaging
Marking and numbering the cartons or pieces is one of the best things an exporter can do ensure identification of the shipment in transit if they have not invested in RFID tags. Even so, when a skid is broken down by the carrier or inspected, there is a reasonable chance that the entire shipment or piece may be misplaced or misdirected. Marking only the skid and not the cartons on the skid will not be an aid in this circumstance. Visual identification is still the first response in warehouses and terminals today when searching for freight. If theft or disappearance occurs, then that specific piece can be identified quickly and replacements can be issued by the exporter without huge delays. Other markings that must occur are dangerous goods labels and placards.

It is the exporter’s responsibility to use the correct packaging and kitting for the cargo and to minimize any inherent risk of damage. This includes specified packaging for the transport of dangerous goods. Loading of containers and trucks at the exporter’s warehouse is the first step of the physical cargo handling and the seller /exporter would need to be in a position to handle this appropriately. For small shipments, the cartons or skids can be simply fork lifted or manually transferred. For containers, the exporter is recommended to skid all cartons and forklift them in as they are normally allowed 1-3 hours free for loading. This will allow the buyer to destuff the container efficiently, without extra manpower or delays. On occasion, a drop off (leaving the container at the premises overnight) is required and the seller should inform the buyer about this as the additional costs will be for the buyer’s account.

At the time of pick up and loading, there should be at least a warehouse receipt issued, with a signature, carrier identification, transaction no, no. of pcs, and any other relevant data to document this occurrence. Quite often, a driver will already have a truck bill on hand or the shipper issues a truck bill.

Booking
Once the buyer has confirmed their carrier or freight agent, the documentation and packaging is completed, the exporter makes the call to the agent to book the shipment. This includes submission of documents, confirming pcs, weight, dimensions and basic details of the transaction. The carrier will then confirm transaction numbers, flights, vessel, ETS, ETA and make the arrangements for pick up or container placement.
In most cases, the carrier will make a phone call to the shipper, but quite often the goods are not ready for despatch and the shipper will be required to re-call the carrier when all is ready to go.

A reputable forwarder will have a checklist of the key requirements and will work with the shipper to ensure that the documentation and packaging is in good order. Normally, as they are an agent of the buyer, they would have already provided a quotation to the buyer and confirmed the mode of transport. The shipper however should have already confirmed the mode of transportation with the buyer for good order’s sake.

Carrier Selection
From time to time, the shipper may be asked to select the carrier and obtain rate quotes, even though they do not pay for the freight costs. Some buyers may be inexperienced and do not have a freight agent. Perhaps they are only an occasional importer and prefer to trust the more experienced shipper and their pricing. Exporters, who sell ex works all the time, are still recommended to partner with a global freight forwarder so that they are in a position to provide shipping and quotations to their customers. All too often, the terms of sale are re-negotiated and the seller would comply, after all, they would not jeopardize their sale just for incoterms.

Communication
It is a best practice for the exporter to confirm the shipping details, house bill of lading or air waybill numbers as well as pcs, weight, volume, invoice no, and purchase order no. to the importer directly. Regardless of modern tracking portals and reliance on the freight forwarder, the exporter’s confirmation of despatch along with the required documents carries the most weight with the buyer, and builds their respect and confidence in their exporter or seller.

An Ex Works seller has to do more than get paid, issue a commercial invoice and package the goods. To be truly respected and ensure repeat sales, getting ready for export has to be done right and with the best interests of the customer in mind. Having a shipment go awry due to a shipper’s inattention or incompetence surely must be an embarrassing moment for any company. Additional costs mostly due to delays or disputes are not guaranteed but are very likely and could sour the relationship with the buyer.

Article Source : http://www.articleseen.com/Article_A Guide to Selling Ex Works_2070.aspx

Author Resource :
Gloria Rubaine, Second Review Business Analysts, July 25, 2009. www.secondreview.ca

Keywords : exworks, incoterms, documentation, export clearance, dangerous goods, packing list, loading, commercial invoice,

Category : Business : Sales

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