The realities of international trade are such that there may be a misunderstanding between counterparties, due to which there will subsequently be problems with the delivery of the goods, with their payment or something else. In order to avoid such problems, created an international directory of abbreviations.
Franco Factory
To better understand what this term means, it is worth translating the word "free." It came from the English word "free", which means "free." In other words, ex works is a designation of the free export of goods from a warehouse, factory, factory, etc. It is also worth mentioning that Incoterms 2010, which includes not only this term, is a fully unified publication. It gives a breakdown of abbreviations in only one single sense. This greatly simplifies the contract process and minimizes the risks of misunderstanding between the parties to the contract. For example, in Incoterms, "ex works" is designated as EXW - Ex Works. However, all these abbreviations have one thing in common. All of them relate to the supply of goods. That is, Incoterms is a directory that contains all possible types of deliveries of goods by sea, air, land. In addition to the ex-factory, there are several more terms that are deciphered in the directory. It is also worth adding that all definitions in this collection are denoted by three letters.
Franco factory - what is it?
The most accurate definition of the term is approximately as follows. The fulfillment of all requirements will be considered final at the moment when the goods reach the control point at which the seller was supposed to deliver it. However, there are some reservations. They consist in the fact that the seller himself does not transport this product. The term "ex works" means that the seller is not responsible for the transportation and loading of goods. And also he does not answer for him at all while the goods are on the way. All risks that arise during the transportation of the product are assumed by the buyer.
Ex Works for counterparty
If at the conclusion of the contract a delivery method was chosen ex works (EXW according to the Incoterms directory), then it is worthwhile to understand that the risk and all responsibility for the goods lies with the buyer or the carrier of this cargo, and not with its seller. Since the conclusion of such a transaction, the seller of the goods is in no way responsible for its quality and safety. However, this statement is true only if no additional agreements have been concluded. There is an option in which it is possible to assign all responsibility for loading the goods to the seller, as well as transfer all the risks associated with transportation to him. However, for this, both parties must agree on the conditions, as well as fix them in the document. It should clearly state that the risks and responsibilities lie entirely with the seller. Otherwise, the standard term "ex works" means that all this lies with the buyer. It is worth saying that on the territory of the Russian Federation EXW can be replaced by a simpler and more understandable expression "pickup".
Seller Responsibilities
At the conclusion of the contract, each of the parties undertakes to fulfill any conditions. So, the seller must do the following:
- The seller undertakes to provide all the goods that were agreed in the contract of sale. In addition, he is obliged to provide all the necessary documents for the goods that the buyer may require. The papers, as a rule, confirm the quality and quantity of products.
- If the buyer turns to the seller with a request to help him in obtaining all the papers for the export of goods, the seller must help. However, all the costs and risks associated with this case, still fall on the buyer.
- The seller’s duties also include the delivery of goods to the place specified in the contract. The goods must be in unshipped condition. The time and place of unloading is most often agreed upon by the parties in advance, however, if the place, for example, has not been indicated previously, the seller has the right to deliver the goods to the nearest and suitable point for this.
- An important condition is that until the goods are delivered to the place of delivery to the buyer, all risks lie with the seller.
- An important point is that the seller is obligated to notify his buyer about where and when his cargo will be located so that he can pick it up for further transportation.
Buyer Responsibilities
Naturally, the contract of carriage is a paper that assigns responsibilities to both parties to the contract. The following items relate to the buyer's obligations:
- The first thing that the buyer must make is the payment for the goods he receives, indicated in the previously concluded contract.
- Obtaining export or import licenses initially lies with the buyer of the goods. In addition, all risks that may arise when receiving securities, as well as all future expenses must be paid by the buyer.
- The party that purchases the goods is obliged to receive the goods on that day and at the time when it will be delivered to the place of loading.
- An important point in the buyer's responsibilities will be that he assumes responsibility for the goods from the moment they were delivered by the seller to the loading point. This can also include the fact that all the costs that may be required, for example, if the goods are damaged, are also borne by the buyer from the moment the goods arrive at the loading point.
- An important point will be that the buyer is obliged to notify the seller of the goods that he has received his goods.
Transaction risks
It is important to note that the conclusion of the contract with the subsequent self-delivery of goods should be carried out with caution, since there are some pitfalls.
A very unpleasant clause of this agreement is that loading falls on the shoulders of the buyer, although most often it is the seller of the goods who is in the best position to perform this action. It is also worth noting that if the seller is still loading, all the risks will still lie with the buyer. That is why it is better to conclude agreements with the abbreviation FCA, which transfers the risks of loading from the buyer to the seller.
What else is dangerous pickup
In addition to the fact that loading takes place due to the efforts of the buyer, there are several more unpleasant moments.
An important point is that when concluding a contract on the terms of EW Works, the implementer is not responsible for customs formalities. All of them also fall on the shoulders of the buyer. Because of this, it is recommended to conclude such a contract only if the buyer is confident that he is able to carry out all customs operations, if any are required in the future.
And the last thing that a buyer can still expect when concluding a pickup agreement is the provision of various securities. Although the rights to provide securities are severely limited, the seller may require them in order to provide the tax service or his own company for reporting.