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Postby dinesh2476 » Sun Dec 11, 2011 10:38 pm

Dear Experts,

Exworks, the seller risk,responsibilties and cost will be ceased once the goods have packed and available at sellers premises for buyer to take delivery. I have doubt that

Letter of credit calls for ocean bill of lading wherein the incoterms is EXW. when the sellers responsibilities ceases
at his own premises,How could the seller be able to produce original bill of lading to bank for payment.

Where the seller could get the original bill of lading?
How could the bill of lading evidences shipper as seller?

Who would arrange duties,customs clearance,licence,shipping etc on behalf of buyer. Would the buyer agent in seller country would arrange then how could the bill of lading evidences seller as shipper instead of buyer agent.

Would the seller arrange everything and would add these charges in the unit price,then if something happeed during
transiting goods from the seller primes to port of loading who would bear risk?

Have the same doubt in all incoterms

Please clarifiy


phill doran
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a spanner in the ex-works

Postby phill doran » Sun Dec 11, 2011 11:34 pm

Hello Dinesh
Firstly, let me reassure you that I believe you are correct to “have the same doubt in all Incoterms”. Commercial terms in general and Incoterms in particular are not relevant to the workings of a credit. I honestly think, if anything, they could form part of the application – so that the issuing bank may advise the applicant on inconsistencies – but even that link in tenuous and I do feel that thereafter they should NOT form part of the credit itself – they add nothing to the credit as your example illustrates.

In an EXW sale, there is no real documentary evidence of compliance other than a beneficiary’s certificate stating that they did in fact place the contract goods on the ground at the specified time/date. The only ‘security’ the buyer/applicant could arrange is for a pre-shipment report but if this is paid for by the beneficiary, there may be doubts as to its integrity anyway – whereas if it is paid for by the applicant, they can avoid the credit if they wish, simply by not instructing the inspection to take place.

The credit is ideally designed to work with the versions of C&F and CIF that came out of the 1800’s. Once you start to apply it as a “wonder instrument” to every possible sale’s contract – sooner or later you will have problems. Yes it may work – but as I have said here: I can change an electric plug using a knife, the fact that I can does not prove that the screwdriver was not the better choice.

But, business is not the coming together of good guys for the greater good of mankind. Getting it ‘wrong’ in your favour can be an advantage – and that is what you have before you. The seller’s right to be paid precedes the beneficiary’s trigger for payment. The beneficiary is actually pinning their hopes on a document they do not control and which may not arise. But, if you were the applicant – why not do just this? Why not control the document which triggers payment – have the goods shipped and then take a commercial decision as to whether to let the seller have it to get paid, or not.

Remember, the seller is NOT the beneficiary – the buyer is NOT the applicant. The endeavour is to align these roles – but which is wrong here? Is it that the seller is right, it is EXW but the beneficiary is wrong in accepting a credit OR is the beneficiary right in accepting the credit and the seller is wrong in agreeing to EXW?

A final point: the credit states CIF Incoterms but calls for an airwaybill marked freight-collect and no evidence of insurance is required.
If the beneficiary presents the airwaybill (CIF is a seafreight term) marked freight collect (CIF is prepaid) and no evidence of insurance (CIF makes insurance compulsory) – they have every expectation of being paid as their presentation is compliant – so what value did the commercial term add?

Good on you Dinesh: Doubt illuminates the first steps on the road to mercantile enlightenment.


phill doran

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Postby he123 » Wed Dec 14, 2011 1:14 pm

Dear Dinesh

Here is conclusion based on your query:
Firstly i will refer to go through ICC Publication on INCO TERMS 2010 W.E.F 01 Jan 2011

As per inco terms 2010 definition of Ex works as under:
A. It is suitable for domestic trade, cause: seller delivers the goods to the buyer at own factory , warehouse, works) even seller is not responsible to load the goods on trucks or any mode of transport in case of Ex works.

Seller obligation as under as per your query:
1. Seller responsibility will end (A5 Transfer of risk) : once goods deliver to the buyer from agreed point (works, warehouse, or factory).
2. Seller responsibility will ceased here (A2 & A10): seller is responsible to assist to buyer at buyer request to obtain export licences, custom formality at buyer cost and expenses,
3. Buyer will provide form H to seller for exemption of excise duty and sales tax (vat) in case of export from India etc.
4. Who would arrange duties,customs clearance,licences,shipping etc on behalf of buyer (A2 seller obligation): buyer it self, or its agent or representative office or nominated forwarder etc. however this is not obligation of seller & need not bear any cost. Must assist to buyer to obtain licences, authorization, security clearance or other formality.

Whatever as per L/C terms if shipment is Ex works basis: As per ISBP para 2 applicant bear the risk for any ambiguity. This is not happening in general terms.

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Postby dinesh2476 » Sun Dec 18, 2011 10:34 pm

Dear phill doran & he123,

Phill always try to teach me about this terms. I am clear when i read this experts forum but when i doing document and when i try to apply this forum into document examination i am strucking somewhere and getting more and more doubts.

Dear He123,
I tried to find the 'ICC Publication on INCO TERMS 2010 W.E.F 01 Jan 2011'. But i could not find it.
Please update the link here

My email id.


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