Transportation of goods within the life sciences sector provides unique challenges, such as critical time restraints or the requirement for specific temperatures to be observed. The terms applicable to the transportation in a manufacturing or distribution contract for medicines or medical devices are therefore crucial to get right.
Ex Works is one of 11 Incoterms rules, which are used in both domestic and international trade contracts. Incoterms rules are published by the International Chamber of Commerce (ICC) to assist traders from different countries in understanding their contractual obligations.
Ex Works can be used for a trade contract regardless of the mode (or modes) of transport selected to carry the goods. Incoterms 2020 Ex Works requires that:
- The seller must package the goods and make them available for collection at its premises or another designated location (this constitutes delivery).
- The buyer must collect from this location.
Ex Works is therefore considered extremely favourable to the seller or contract manufacturer, as it is not required to load goods onto a vehicle or clear them for export. Furthermore, the buyer assumes responsibility for all costs and risks related to the goods from delivery (defined above) onwards.
However, where the goods being supplied Ex Works are medicinal products, the supplier should also take into consideration its obligations under Good Distribution Practice (GDP) and the Human Medicines Regulations 2012. Paragraph 9.1 of the GDP requires a wholesaler "to protect medicinal products against breakage, adulteration and theft, and to ensure that temperature conditions are maintained within acceptable limits during transport". Supplying the products in accordance with Ex Works, and passing the responsibility of transportation onto the buyer under the contract, does not relieve the seller of its obligations under GDP and it must still ensure that it has appropriate visibility and control over the process.
Furthermore, Incoterms rules do not provide a complete contract of sale, and as such are often referred to or incorporated within a fuller set of contract terms or manufacturing arrangements. For example, they may be silent in relation to the price of the goods, method of payment, transfer of title, and the consequences of a breach of contract, which will need to be addressed within the contract itself. Incoterms can deal with the following:
- Which party to the sale contract has the obligation to make carriage or insurance arrangements
- When the seller delivers the goods to the buyer
- Risk
- Which costs each party is responsible for
The appropriate Incoterms for each manufacturing contract will depend on the commercial deal and care needs to be taken to ensure that there is no conflict with other good practice requirements or contractual terms.
Beverley Flynn
Jessica Gregson