Question

Incoterms are a central part of export sales. In this case, a seller is confronted with a choice of terms of sale. Incoterms are described in Module B of the text. Read the case below and answer the questions that follow. Carol Beal is the export manager at Gudrun Sjoden USA, a licensed distributor for a Swedish designer. Carol has North America and all of Asia in her territory. She has just formed a joint venture to run retail branches in Tokyo, Shanghai, and Seoul. Her plan is to ship directly from the Gudrun Sjoden warehouse in Stockholm. Her Asian partner has requested she ship to her DDP, but Carol would prefer to ship Ex Works. Carol knows that there are critical differences between the two terms of sale and is reviewing what decision to make. She wants to keep her U.S. expenses as low as possible, and she would be funding the shipping out of the United States. She also wants to continue to build a good, solid, trusting relationship with her joint venture partner.
Which statement is true if Carol shops goods to Ex Works?
A. The buyer would cover all shipping and insurance costs and assume the risk at the factory door.
B. The seller would cover all insurance costs while the buyer would cover the cost of shipping.
C. The goods ould be shipped from Stockholm at the seller's expense.
D. The seller would cover all the shipping and insurance costs and assume the risk at the factory door.
E. The buyer would cover all insurance costs while the seller would cover the cost of shipping.

Answer 1

Answer:

Correct option is A.

The buyer would cover all shipping and insurance costs and assume the risk at the factory door.

Explanation:

Ex works means that the seller fulfils his obligation to deliver when he has made the goods available at his premises (i.e. works, factory, warehouse, etc) to the buyer. The buyer bears all costs and risks involved in taking the goods from the seller's premises to the desired destination.