EXW Clause Pitfalls | The consignee suddenly goes bankrupt, leaving three containers stranded at the port for two months—how can the cargo owner break the deadlock?

　“Ten days after the goods arrived at the port, the customer suddenly went offline—and we later found out the company had gone bankrupt! Three 40HQ containers of furniture are piling up at the Port of Los Angeles, racking up $2,000 a day in demurrage and detention fees. Now, returning the shipment will incur hefty freight charges, and if we decide to abandon the goods, there’ll also be disposal fees to pay. What should I do?”

　　This is a plea for help posted online by Mr. Wang, the general manager of a furniture factory—it’s not an isolated case. Under EXW terms, it seems that once the goods are delivered, the shipper’s responsibility is effectively "fulfilled." However, if the consignee encounters financial difficulties or even goes bankrupt, the risks and costs associated with the cargo being stranded at the port often end up falling squarely on the shipper’s shoulders in the end.

Today, Huijetong will analyze real-life cases to uncover the hidden risks of EXW terms and share 5 effective strategies to help you proactively mitigate them—so you can avoid ending up with neither goods nor payment.

　　(PS: The real-life case featured in this article was originally sourced from the internet and has been adapted and compiled here. Our primary intention is to share and exchange experiences on how to avoid common pitfalls—there’s absolutely no intent to infringe upon anyone’s rights. Should our content inadvertently cause offense, please feel free to reach out via the contact information provided at the end of the article. We’ll promptly remove the relevant content upon notification. Thank you for your understanding and continued support!)

　　One 、 How passive is the consignee after the consignee's bankruptcy under EXW terms?

　　Mr. Wang’s factory specializes in cross-border furniture exports. This March, he signed an EXW-term contract with a U.S. customer, stipulating that "the customer will independently arrange for freight forwarding, customs clearance, and ocean shipping," while Mr. Wang only needs to have the goods ready and stored in the factory warehouse.

　　In early April, the freight forwarder entrusted by the customer came to the factory to pick up three 40HQ containers of furniture. After General Manager Wang received the delivery order, he didn’t follow up further.

　　Until mid-May, Mr. Wang suddenly received a notice from the freight forwarder: "The goods arrived at the Port of Los Angeles 10 days ago, but no one has cleared customs or picked them up. Meanwhile, the customer's company has filed for bankruptcy. The terminal is now charging $1,200 per day in demurrage fees and $800 per day in container detention fees—and if we don’t act immediately, the shipment will be auctioned off!"

　　Only then did Manager Wang panic:

　　Want to return the shipment? You’ll need to cover the round-trip shipping cost from the U.S. to China (about $30,000 per container) plus China’s import duties—costing more than the value of the goods themselves!

　　Want to resell? Under EXW terms, once the goods are picked up by the freight forwarder, the title to the goods transfers to the consignee, so Mr. Wang cannot directly resell them.

　　Thinking of abandoning your cargo? At the Port of Los Angeles, abandoning goods incurs a handling fee of $150 per ton—so three containers could quickly add up to a significant expense.

　　In the end, Mr. Wang spent nearly $100,000 to successfully coordinate, through his lawyer, the resale of the goods to another local importer. After deducting all associated expenses, however, this order not only failed to turn a profit but actually resulted in a loss of more than $50,000.

　　Two 、 Why is the shipper most hurt when the consignee goes bankrupt?

　　Many shippers choose the EXW terms because they believe, "The customer handles logistics themselves—no need for me to worry about customs clearance or ocean shipping, which saves me a lot of hassle." However, in reality, EXW is the trade term with the least responsibility for the shipper, yet it may carry the highest risk. The core risks revolve around three key areas:

　　01. Early loss of cargo control leaves limited room for intervention

　　Under EXW terms, ownership of the goods typically transfers to the buyer as soon as the items are picked up from the factory (unless otherwise specified in the contract), and the seller does not retain key documents such as the bill of lading or manifest.

　　Once the consignee goes bankrupt, the shipper can no longer directly contact the shipping company or terminal to handle the cargo—instead, they must rely on a freight forwarder or lawyer for coordination, making the process both passive and time-consuming.

　　02. Logistics环节 "Unseen and Unmanageable"

　　The consignee is responsible for arranging the freight forwarder, customs clearance, and ocean shipping on their own. As a result, the shipper often remains unaware of the cargo's transportation progress or its estimated arrival time at the port—only receiving notification much later, typically after the goods have already been stuck at the port for an extended period. By then, valuable opportunities for timely action may have been missed—for instance, applying for the return shipment within the first 3 days after arrival would significantly reduce costs.

　　03. Port Congestion Costs "Defaulted to Pass-Through"

　　Although the EXW terms stipulate that "the consignee bears all freight and miscellaneous charges," once the consignee goes bankrupt, the terminal and shipping company will not give up on recovering the fees—they will contact the shipper through the freight forwarder. If the shipper fails to act, the goods may be auctioned off, with the proceeds first used to offset port detention charges and container detention fees. Any remaining funds would then be returned to the consignee—but by this point, since the consignee has already gone bankrupt, the shipper still wouldn’t receive payment.

　　Three 、 How to shift from "passive fallback" to "proactive control"?

　　The EXW terms aren't unusable, but you must carefully anticipate and manage risks—especially when dealing with new customers or large orders. These 5 steps will help you avoid 90% of potential pitfalls:

　　01. Before signing the contract: First conduct a "customer qualification due diligence," and avoid engaging with "high-risk customers."

　　For new customers, be sure to check their business credit through a third-party platform to see if there are any funding disputes, excessive debt, or recent operational irregularities.

　　Large orders (exceeding 500,000 yuan) require customers to provide a "Bank Credit Certificate" or a "Prepayment Guarantee," ensuring they have the financial capacity to cover subsequent payments.

　　If the customer is a "startup company" or a "small-scale enterprise," try to avoid selecting the EXW term and instead opt for FOB or CIF, thereby retaining control over the logistics process.

　　02. Amend the terms: Add "Retention of Title" and "Right to Information" clauses based on EXW.

　　Don't directly use the standard EXW terms—instead, add two key clauses to the contract:

　　Goods-ownership reservation clause: "Until the goods arrive at the destination port and the buyer has paid the full amount, ownership of the goods remains with the seller. The buyer shall not resell or pledge the goods. If the buyer fails to collect the goods on time, the seller reserves the right to instruct the freight forwarder to return the goods to the origin or sell them to a third party; any resulting expenses shall be borne by the buyer."

　　Logistics Information Rights Clause: "The consignee shall provide the seller with the freight forwarder's contact details, bill of lading number, vessel name and voyage number, as well as the estimated time of arrival within 24 hours after the goods are collected. Upon the goods' arrival at the port, the consignee must promptly update the seller daily on the customs clearance progress. If customs clearance is not completed within three days, a written explanation of the reason must be provided."

　　03. Monitoring Logistics: From "Hands-Off" to "Key-Node Follow-Up"

　　Even under EXW terms, proactively follow up on 3 key milestones:

　　1. Within 1 day after the goods are picked up: Request the "S/O (Shipping Order)" and a "Draft Bill of Lading" from the freight forwarder, and verify that the consignee and port of destination information are accurate.

　　2. After the goods leave the port: Track the shipment's progress once a week via the shipping company's official website or your freight forwarder, and note the estimated time of arrival (ETA).

　　3. Three days before the cargo arrives at the port: Proactively contact the consignee to confirm whether all customs clearance documents are fully prepared, and remind them to pick up the goods on time. If the consignee cannot be reached, immediately reach out to the freight forwarder and inform them: "If no one picks up the shipment, please notify us immediately."

　　04. Leave a Safety Net: Pre-arrange an "Emergency Response Plan" with the freight forwarder

　　Before the freight forwarder picks up the goods, sign a supplementary agreement with the freight forwarder to clearly outline 2 points:

　　Emergency Instruction Authority: "If the consignee encounters business closure, goes missing, or other similar situations, the seller shall have the right to issue an instruction to the freight forwarder to return or resell the goods. The freight forwarder must comply within 24 hours and shall not refuse."

　　Fee Advance Agreement: "If detention charges or demurrage fees arise, the freight forwarder shall advance the costs for up to 3 days first, giving the seller sufficient time to handle the situation. Subsequent expenses will be deducted from the consignee's prepayment (if any)."

　　05. Purchase Insurance: For "High-Risk Orders," opt for "Cargo Transportation Insurance + Credit Insurance"

　　For orders with high value and a high customer risk level, purchasing "Export Credit Insurance" ensures that if the consignee goes bankrupt, resulting in unpaid invoices or cargo stranded at the port, the insurance company can cover 70% to 90% of the losses.

　　At the same time, purchase "Cargo Transportation Insurance" to cover risks of damage or loss to goods during transit and while they are stranded at the port, helping to minimize additional losses.

　　4. Don’t panic if the consignee goes bankrupt—first take these 3 steps

　　If you actually encounter situations like the consignee going bankrupt or goods being stuck at the port, don't panic like General Manager Wang did—instead, follow these 3 steps to minimize your losses as much as possible.

　　01. Contact the freight forwarder immediately:

　　Issue a "Proof of Cargo Ownership" (such as a contract or draft bill of lading), instructing the freight forwarder to "suspend delivery of the goods to any third party," thereby preventing unauthorized collection of the shipment.

　　02. Evaluate the treatment plan:

　　Based on the value of the goods and the storage fees incurred at the port, quick decisions must be made: whether to "return the shipment," "resell it," or "abandon the cargo." — If the cargo value is high but storage fees are low, prioritize returning or reselling; if the cargo value is low but storage fees are high, consider abandoning the shipment.

　　03. Retain Evidence to Protect Your Rights:

　　Collect all communication records (emails, chat logs) and expense documents (inland detention fees, container detention invoices), then file a lawsuit against the consignee in court to recover the losses.

　　The core of EXW terms isn’t “shifting blame,” but rather “clearly defining responsibilities + managing risks.” For shippers, whether using EXW or other trade terms, “anticipating potential issues and taking proactive control” is the key to avoiding pitfalls.