Industry professionals from Made in the Midlands and Made in Yorkshire gathered online to discuss the complexities of international freight on 22nd May 2024. The discussion focused on the use of Incoterms, with a spotlight on Ex-Works (EXW) - a term used when determining how freight should be delivered. The industry leaders shared their insights on the challenges and advantages of utilising various Incoterms, supported by real-world examples and expert opinions from the manufacturing sector.
Incoterms (International Commercial Terms) are essential guidelines in international trade, defining the responsibilities of buyers and sellers in the delivery of goods. These terms ensure clarity and reduce the risk of misunderstandings by standardising the allocation of costs, risks, and responsibilities. The discussion highlighted the critical role these terms play in international trade, with a special emphasis on the limitations and potential pitfalls of relying solely on Ex-Works (EXW).
The Limitations of Ex-Works (EXW)
Ex-Works is a commonly used Incoterm where the seller makes goods available at their premises, and the buyer bears all costs and risks involved in transporting the goods from there to the destination. While EXW is often perceived as straightforward and convenient for sellers, it can introduce significant challenges, as noted by Ben Shenton, Sales and Marketing Director at Pinnacle Freight. Ben emphasised that "using EXW means leaving shipping to chance," highlighting the lack of control sellers have over the shipment once it leaves their premises.
The Benefits of Exploring Other Incoterms
Ben, who was speaker at the event, underscored the advantages of using more inclusive Incoterms like Delivered at Place (DAP) and Delivered Duty Paid (DDP). These terms can enhance a company's control over the shipping process, ensuring better compliance and visibility. Ben noted that offering a variety of Incoterms can attract more buyers by providing a hassle-free purchasing experience. This approach not only broadens market reach but also ensures that products arrive in the expected condition, thereby protecting the company's reputation and investment.
Christopher Greenough, CEO of SDE Technologies and another participant in the discussion, echoed these sentiments, stating that "EXW used to be easy, but now it's as complex as other terms due to increased regulatory requirements." He pointed out that using comprehensive Incoterms, supported by experienced freight forwarders like Pinnacle, can alleviate the burden on exporters, ensuring compliance and smooth operations.
Real-World Applications and Success Stories
Participants gave practical examples and success stories during the conversation too. For instance, Graham Allison, Technical Sales Manager, from Brandauer shared how adopting DDP has been pivotal in winning international contracts. By managing all logistics, including customs duties and taxes, Brandauer has made its offerings more competitive and attractive to global customers. As a result Brandauer won an International Trade Award from the then Queens Award for Enterprise. This year the company secured the Kings Award for Enterprise for the second time - a rare honour.
Lewis Wild, Technical and UK Sales Manager, from Transicon highlighted challenges related to inconsistencies in customs duties across different countries, as the conversation steered towards the importance of understanding and correctly applying commodity codes to avoid unexpected costs and delays. Participants also discussed the benefits of obtaining Authorised Economic Operator (AEO) status, which can streamline customs processes and enhance trust in the supply chain.
Encouraging Export Growth
In summary, the discussion highlighted the need to increase the number of UK SMEs engaging in export activities. Despite the complexities introduced by Brexit, the potential benefits for individual business growth and the broader UK economy are substantial. Less than 10% of SMES currently export from the UK, doubling the number could potentially add £30 billion a year to UK GDP. In addition “Raising the number is essential for individual business growth, with global presence, translating to increased profitability, sustainability and competitiveness” - as pointed out by Jonny Williamson, Contributing Editor at Made in Group.
Online Industry meet-ups organised by Made in the Midlands and Made in Yorkshire provide a valuable platform for discussing strategic use of Incoterms in international trade as well as other relevant topics in the sector. The insights shared underscored the importance of moving beyond Ex-Works to more inclusive terms that offer better control, compliance, and customer satisfaction. As businesses navigate the complexities of global trade, such knowledge-sharing sessions are crucial in fostering a robust export culture among UK SMEs, ultimately contributing to economic growth and competitiveness.
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