EX WORKS LIABILITIES WHEN SHIPPING

Question

We are a UK company with a representative office in Hong Kong. We ship goods from a factory in China direct to various customers worldwide. For some of these customers, our terms are ex works. Our understanding of the term ‘ex works’ is such that our liability ends once the goods have been collected from the factory door. Our customers will nominate their chosen forwarder and our Hong Kong office will contact their local agent to arrange the collection. I now understand that many (all)? express air freight carriers, such as UPS, Fedex, have a policy in their terms and conditions that allows them to re-direct the unpaid charges to the shipper in the event of non payment by the customer. In normal circumstances, we would not deem ourselves to be the shipper, given that our responsibility ends at the factory door. However, these terms and conditions seem to over-ride this. Is this correct? Whilst we trust most, if not all, of our customers to pay their freight bills, our concern is what would happen in the event of a claim for non receipt of goods. In this instance, I am guessing that the customer would refuse to pay both the freight cost and our own cost of goods and this would then leave us with the responsibility of chasing the claim through the courier. Could anybody confirm if my understanding is correct and if so, what steps could we take to limit our liability here. We obviously do not want to take out a cover all freight insurance when we operate on an ex works basis.

Answer

Hi Frances. Most integrators (Fedex/UPS/DHL etc) pay little attention to your terms of sale and supply (Ex Works / DAP etc). Their T&C’s will apply regardless. However if your customer has made the booking with an integrator direct and has done so using their account number then as far as contract law is concerned my understanding is that you have not been made an “offer” by the integrator and therefore there is no contract for the integrator to fall back on with you. The only contract they have is with your customer and therefore they cannot hold your company to account. If however you arrange a booking with an integrator on behalf of your customer and you send charges “collect” then you have established a contract and the integrator’s T&C’s will apply to you.

Answer

Totally agree with Gary, any unpaid shipping and duty/tax fees would be applied to the account number of the shipper, the couriers cannot make you liable.

If your goods went missing or were damaged in transit, then this is the responsibility of the company collecting the goods from you (on an ex-works basis) to claim with their carrier. You should not have to get involved at all and this should not affect or delay payment of the goods shipper by your customer.

My advice is this….absolutely make sure you can PROVE that the shipment was handed over to the care of the collecting courier. This may be a manifest showing the date, time, number of parcels/items collected which would need to be signed by the collecting driver. You could use CCTV footage of the collection taking place, photos of the collection taking place. Basically anything to prove to your customer that the goods left your premises in a good and complete condition.

This would mean that whatever happens between your factory door and the customers location doesn’t affect the fact you have the right to be paid for completing your part of the contract.

As you can imagine, if the courier only delivered part of a consignment, your customer may try to withhold payment saying you never shipped it!

Answer

Hi Frances. Most integrators (Fedex/UPS/DHL etc) pay little attention to your terms of sale and supply (Ex Works / DAP etc). Their T&C’s will apply regardless. However if your customer has made the booking with an integrator direct and has done so using their account number then as far as contract law is concerned my understanding is that you have not been made an “offer” by the integrator and therefore there is no contract for the integrator to fall back on with you. The only contract they have is with your customer and therefore they cannot hold your company to account. If however you arrange a booking with an integrator on behalf of your customer and you send charges “collect” then you have established a contract and the integrator’s T&C’s will apply to you.

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