Ensuring clarity on Incoterms when shipping for customers – EXW/DAP
Question
On occasion our customers would like us to ship on our courier account (mainly as it is cheaper) and recharge the cost to them, I would like to know the implications this has on our Incoterms stance that we ship everything EXW.
My interpretation of it is that, as the customer has in essence arranged shipping (by asking us to deliver it to a specified location), which we then charge the customer for, the terms are still EXW’s, however I can understand how a customer could mistake this for DAP. I was just hoping for some clarity in relation to this point.
Any comments/guidance would be greatly appreciated.
Thank you.
Answer
Hi Simon,
When working under the DAP incoterm, I rarely ever see the actual cost of the freight mentioned separately on my invoice. It is simply built into the unit price of the good, with the understanding that my supplier is taking full responsibility for delivery of the to point X.
If my supplier was reluctant to give DAP terms (but could still helpfully arrange the freight and get me a cheaper rate for the shipping separately), I would probably agree to having one invoice for the goods under the EXW incoterm, and then have a second invoice showing how much the courier was costing.
Keeping the two items separate (with the commercial invoice clearly stating EXW), maybe this will help give better clarity that you are not taking responsibility for the delivery to point X ?
Regards
Answer
The description of obligations for DAP Incoterm describes state that the seller “… contract at its own expense for the carriage of the goods to the named place of destination… “. If you are arranging transport and paying for it, you are fulfiling this condition, and in my opinion, this is a DAP sale. The fact that the client has asked you to do this and has asked you to use your usual carrier does not change this fact. At the end of the day, you are arranging, and paying for the transport costs to their destination, whether you list the transport costs as a separate item on your invoice, or include it in the sales price of your goods.
Bearing this in mind, you may wish to review your obligaiotons under DAP terms, particularly in relation to the “risk” in case of any loss or damage, and take appropriate measures to protect your risk (ie cargo insurance).
Answer
Thank you both for your comments it is greatly appreciated.
Mike,
Where you mention.
….”The description of obligations for DAP Incoterm describes state that the seller “… contract at its own expense for the carriage of the goods to the named place of destination… “”
It ceases to become our expense when we recharge this to the customer and we are in essence acting as an intermediary in this transaction (the same as them contacting a transport broker perhaps?). Or would you still consider this to be DAP?
Thank you once again,
Simon