Exporting to the USA and limiting liability through EXW

[neilog]

We are about to start exporting a drinks product to the USA for sale through a US distributor.

The distributor takes responsibility for the goods at the point they leave our warehouse through an EXW agreement.

The invoice states: INCOTERM:EXW then our Warehouse Name

I'm trying to understand if the above actions absolve us of all public and product liability or if we still need to take out separate insurance ourselves. I also want to be sure that one line on an invoice is sufficient to enforce our terms.

Thanks

 

[Frank the Insurance guy]

INCOTERM:EXW

Incoterms relate to the shipping and transportation of products. Ex Works means that the buyer is responsible for the goods from the moment they collect the goods from your premises.

Where Incoterms refer to "Liability" they mean for loss or damage to the goods that have been bought/sold and the liability for the costs of shipping, duty etc.

Incoterms do not change the liability of the seller for injury loss or damage caused by the goods - You will still be liable for this and will therefore still need your own Products Liability Insurance.

 

[MikeFoulds]

Terms of shipment do not absolve any liability, they are just a transference of risk.

I would strongly recommend insurance and covering yourselves.

 

[Paul Kelly ICHYB]

They will need product liability insurance in the US.

You need the same in the UK.

 

[AmazonGeek]

You also need cargo insurance for the goods in transit. There is also an obscure rule where, if the carrier declares 'general average' (usually under extreme conditions like a storm, terrorist attack, fire, etc) then all the cargo owners must contribute towards the costs of sorting the situation out. This is calculated by looking at the value of your goods as a proportion of the total value of goods on the ship. So always have cargo insurance. You can get an annual policy to cover multiple shipments.

 

[neilog]

You also need cargo insurance for the goods in transit. There is also an obscure rule where, if the carrier declares 'general average' (usually under extreme conditions like a storm, terrorist attack, fire, etc) then all the cargo owners must contribute towards the costs of sorting the situation out. This is calculated by looking at the value of your goods as a proportion of the total value of goods on the ship. So always have cargo insurance. You can get an annual policy to cover multiple shipments.

Would this be required even if the ownership has shifted, at the point the items left our Warehouse?

 

[Frank the Insurance guy]

You also need cargo insurance for the goods in transit. There is also an obscure rule where, if the carrier declares 'general average' (usually under extreme conditions like a storm, terrorist attack, fire, etc) then all the cargo owners must contribute towards the costs of sorting the situation out. This is calculated by looking at the value of your goods as a proportion of the total value of goods on the ship. So always have cargo insurance. You can get an annual policy to cover multiple shipments.

Not if shipping is Ex-Works.

You are quite right though on some of the quirks of Cargo Insurance. Its all to do with Globally agreed insurance standards (Institute Cargo Clauses). A similar point is if the ship deliberately jettisons your cargo/container into the see, for the benefit of the rest of the cargo and the safety of the ship - In this case, the other shippers (and their insurers) will all be responsible for the cost of the jettisoned cargo!

Would this be required even if the ownership has shifted, at the point the items left our Warehouse?

Cargo Insurance is not required if you are Shipping Ex-Works. The buyer would need to arrange this cover.

 

[TCH]

EXW as strictly understood is improbable

it requires the carrier to load the collection vehicle

what you want is FCA

 

[Frank the Insurance guy]

EXW as strictly understood is improbable

it requires the carrier to load the collection vehicle

what you want is FCA

Sorry but that is rubbish. Under FCA the seller is also responsible for

"Export/Import clearance
All export clearance expenses (license, security, inspection, etc). Assist with import clearance"

Far better for seller to sell EXWorks - it is then the buyers responsibility for all costs etc once collected!

 

[Customs Geek]

Yes agree FCA is more accurate especially if the goods are being exported. FCA still allows collection from your premises.
In addition a non UK company cannot export in their own name so the likelihood is that they will declare using your name . The declaration accuracy then becomes your responsibility .
FCA means you have some control over the export declaration which is particularly important if you zero rate the VAT ( if applicable) for export and need proof of the export.

 

[Frank the Insurance guy]

FCA still allows collection from your premises.

...But creates a bigger burden, responsibilities and costs to the seller!
I have many clients that sell EXWorks, as well as others on FOB/FCA etc etc. Each one chooses the method that best suits their needs.

If the OP is looking to sell with no additional liabilities or costs, then why should they not choose EXWorks? It is then all the buyers responsibility!

 

[AmazonGeek]

Not if shipping is Ex-Works.

I was looking at it from the buyer's perspective.

Ex Works - the factory is responsible for the goods until they are collected. From that point on, they belong to the purchaser and he/she is responsible for insuring them, including on the ocean.

FOB - the factory is responsible until they pass the rail on the ship and again, from that point on, the purchaser is responsible.

Edit - I've just re-read the OP and of course, the question is from the point of the manufacturer! Oops! Sorry, I am so used to dealing with people who buy from factories that I looked at it from the wrong end lol

 

[marsikBirm]

With an EXW (Ex Works) agreement, your liability for the goods typically ends once they leave your warehouse, as the buyer (your US distributor) assumes responsibility for shipping, duties, and any risks associated with transportation. However, EXW does not necessarily absolve you of all liabilities, particularly product liability. If the product causes harm to a consumer in the US, you could still be held responsible, regardless of the shipping terms.

 

[Customs Geek]

...But creates a bigger burden, responsibilities and costs to the seller!
I have many clients that sell EXWorks, as well as others on FOB/FCA etc etc. Each one chooses the method that best suits their needs.

If the OP is looking to sell with no additional liabilities or costs, then why should they not choose EXWorks? It is then all the buyers responsibility!

Yes true the option of which Incoterm to use always lies between the buyer and seller provided both sides fully understand what they are agreeing to. I suspect most never actually read the full terms of each Incoterm so they are often used inappropriately.

Even the ICC who publish the official Incoterms only recommend EXW for domestic sales.

 

[Customs Geek]

FOB - the factory is responsible until they pass the rail on the ship and again, from that point on, the purchaser is responsible.

Not strictly as part of the OP’s question but this is a bit out of date as the concept of ‘ passing the ships rail ‘ was removed back in the old 2010 version of the Incoterm rules .

 

[TCH]

Wikipedia offers an article called Incoterms

The EXW seller, in the simplest case, "makes the goods available at their premises" to quote from the article. He does not load the collection vehicle

The reality of course is that the seller has the men and the fork-lift trucks

This matter may be addressed by other clauses in the contract of sale, but it seems simpler to just agree FCA and be done with it

As Customs Geek has reminded us, the Incoterms rules have been through several revisions. The usual thing is to mention the version, like

FCA [our warehouse] Incoterms 2020

Be careful when discussing ex-works with an American customer, in the Uniform Commercial Code it means something a bit different

 

[Customs Geek]

It may be useful for the OP to look at the following articles on the ICC website.
//academy.iccwbo.org/incoterms/article/how-laws-and-regulations-in-the-usa-affect-the-use-of-the-incoterms-rules/

//academy.iccwbo.org/incoterms/article/incoterms-2020-exw-or-fca/

 

[Customs Geek]

Sorry I don’t appear to be allowed links at the moment so you will need to add https: to each of the above references

 

[Socio South West]

They will need product liability insurance in the US.

You need the same in the UK.

I recommend that you urgently research the product liability angle thoroughly with your insurer.
The litigious nature of the USA is such that in the event of a claim against the distributor in the USA they will be very likely to pursue you in turn, and you should make sure your PL insurance covers you for this and all other liabilities.

The Incoterms under discussion apply only to shipping and damage in shipping as others have stated.

 

[Damian Franko]

Really interesting discussion. The question of liability when using EXW can definitely be tricky, especially when exporting to markets like the US with more complex legal frameworks. In my experience, clear communication with logistics partners and buyers is essential — misunderstandings over risk transfer points can be costly. I’ve seen this firsthand working with small-scale exporters from Latin America. One example is APEOSAE, a cooperative in Ecuador that exports organic coffee, cacao, and bananas. They’ve had to navigate similar challenges while staying true to sustainable and fair trade practices. Curious if anyone here has worked with EXW in agricultural exports and how you handled documentation and insurance?