Iranpars Trading Co., the buyer of the goods residing in Iran, agrees with XYZ freight forwarding Co. to take care of the shipment from China to Iran. The purchase term is EXW and the goods should be moved in sea freight from China to Iran.
XYZ freight forwarding Co. releases the empty container to the Chinese seller, the goods get loaded to the container and the shipment is arranged smoothly and the container arrives in Bandar Abbas port - Iran.
After taking delivery of the container with intact seals and going through with import customs formalities, Iranpars agent notices sever damage to a pallet resulting a loss of USD 6000. Iranpars trading claims against XYZ freight forwarding about the damage and the freight forwarder rejects the claim by pointing at the intact seal. The seller also sends the cargo inspection documents to Iranpars which clearly shows the goods are in sound conditions and placed safely in the seller's warehouse before loading the cargo onto the container.
1. Who's fault is this?
2. Who should pay for the loss?
3. What preventive actions could have been taken?
Having gone through with the details, we can safely conclude that there are 2 possibilities:
- Damage could have been as a result of improper cargo stowage and lashing inside the container resulting in damage to the pallet during normal shipping movement, which is easily provable by taking a look at inside the container.
- Damage could have happened during loading, as the details of the case says the goods have been in good conditions before loading.
In both above possibilities, the seller is at fault as the operation has been done by the seller. This is the reply to the question No. 1
However, the reply to the question No. 2 is, though the seller is at fault, but is not responsible as the purchase is based on EXW terms and according to Incoterms rules, the seller is not responsible for loading, and even if the loading operation is done by the seller under EXW terms, it is an operation done on behalf of the the buyer and at buyer's risk and responsibility!
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So, what are the preventive actions? The following 3 preventive actions are the reply to question No. 3:
- If you are the buyer and if the shipper does not have any strict obligation on using EXW, do not use EXW and instead, choose FCA in which the seller is responsible for loading.
- Even if it has to be on EXW term, agree with the seller on the contract that the seller is going to be responsible and liable for the loading. Yes, you can always consider such exceptions to the incoterms rules.
- Do buy a high quality cargo insurance, like Clause A for all your shipments on EXW, FCA, CPT, FOB, FAS, CFR and even CIF.
For any questions on any shipping case, you can get in touch with us and we will guide you through the case for free.
If you have any inquiries for any air, road, sea and multimodal shipping project, do not hesitate to get in touch with us.
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