The international trade agreements are full of terminology, and this can get really tricky, especially when terms like EXW Incoterms are used. In this guide, we can explain the Ex Works shipping process in simple terms to clearly define the role of both buyers and sellers. You will learn exactly when risk is transferred and understand why Ex Works best fits your shipping strategy.
Join us in a deep dive into EXW Incoterms, and find how that term could make your shipping process easier and give more control over logistics.
What Is Ex Works Incoterms ?
EXW Incoterms include one of the more customary international trading terms and, in that respect, define the least engagement of the seller in the shipment process. The only thing the seller is obliged to do with regard to the Incoterms EXW is to make goods ready for pickup at premises or another agreed place. As soon as the goods are ready, the seller’s responsibilities just end.
With the meaning of Ex Works, the subsequent costs and risks should be borne by the buyer, covering transport, export documentation, and customs procedures. In a nut-shell, most of the shipment burdens fall on the buyer’s shoulder in the case of EXW meaning; he looks after all the procedures starting from pickup to the final delivery stage.
In short, the meaning of Exwork Incoterm is that the seller’s obligation is discharged when the goods are made available, whereas a buyer becomes fully responsible for its delivery to a final destination.
What Is EX Work Meaning?
The Incoterms EXW definition refers to a trade term wherein the seller holds the least responsibility within a transaction. By the meaning of the Ex Works-EXW Incoterm, the obligation of the seller is extended only to making the goods available for pickup at his premises-say, a factory or warehouse, or any location agreed upon.
This means that the buyer is responsible when the products are ready to be collected at a place specified by the seller. The remaining buyer obligations would include arrangement of transportation, export documentation, acquiring relevant permits, paying for the cost of transportation, and carrying all the risks for moving those goods to their destination.
What, then, is EXW? Quite simply explained, Ex Works Incoterm means that the buyer takes care of the whole shipping process right from the moment goods are made available by the seller. That therefore makes the meaning of ExWorks Incoterm one of the most buyer-responsible Incoterms in international trade.
What is EXW shipping?
EXW stands for Ex Works. It is a shipping term that denotes the point at which a seller within an international trade is only obliged to make the good ready for pickup at his own facility or some location agreed upon by the two parties to the transaction. Once the good is ready for pickup, the seller’s responsibility ends, and the buyer takes over.
From that point onwards, everything now lies in the hands of the buyer, right from planning transportation to logistics and customs. In addition, the buyer will have to pay all costs and also bear all risks from the premises of the seller right to the destination.
In other words, EXW places weight on the buyer as far as the whole shipping process is concerned, with the seller only preparing the goods for collection.
Seller’s Responsibilities:
Under EXW Incoterms 2024, the primary obligation of a seller is to get the goods ready for collection and to make the goods available at the place to be specified by the seller, usually its premises or another named location. The seller is under an obligation to package the goods properly and to complete the export customs formalities. Loading is not required, but the seller may assist in loading the goods onto the buyer’s transport vehicle if agreed.
The buyer would be responsible for all transportation arrangements from the seller’s premises, or another location he designates, to take goods right through to the final destination. He would have to identify appropriate carriers who deal in the delivery of shipped goods, attend to all shipping arrangements, import customs clearance formalities, and all duties, taxes, or fees that may be required in the buyer’s country.
Risk Transfer:
The risk of loss or damage would pass from the seller to the buyer when goods are made available for pickup. Conclusively, from this point on, every risk concerning losses or damages while in transit lies solely with the buyer. EXW shipping allows room for flexibility between the two parties, but it considerably burdens the buyer with responsibility in handling transportation logistics and mitigating risks. As such, Incoterm 2024 EXW is best deployed when the buyer is experienced in international shipping or when there is sufficient relationship trust and cooperation between buyer and seller.
What are the responsibilities of Buyers and Sellers in EXW?
EXW contract, buyer and seller roles defined and that clearly means less confusion in the shipment process.
The responsibilities in this case would look something like this:
Seller’s (Exporter’s) Responsibilities:
Goods Preparation:
The seller should present the goods at the place that was previously agreed upon. Items needed for transport would also be included.
Clearance for export:
The seller is the sole person that is responsible for all of the customs clearance procedures for the exportation of the goods. They take care of the documentary and legal issues in their own country. It also considers the expenses covering the goods being loaded to a vehicle or transport that the buyer provides. Delivery: The seller is thus gaining his obligation when the goods are at the pickup point.
Buyer’s (Importer’s) Responsibilities:
Transportation:
The buyer is the one who arranges and pays for the transportation between the seller’s place and the final destination. It is the phase where the transport method is set, the contractors or carriers are hired, and the logistics are taken care of.
Import Clearance:
When in the country of the buyer, he transfers responsibility for the customs clearance his country requires, which means he has to pay all import duties, taxes, and fees.
When does risk transfer to the Buyer in the EXW agreement?
In an Ex Works Incoterm agreement, the risk transfer to the buyer occurs upon making the availability of the goods at the premises of the seller or some other agreed place. This means all the risks concerning the goods revert to the buyer from this point onwards. Once the goods are prepared for pickup, the seller becomes free from every responsibility and is not obliged to load the goods onto any vehicle or clear them for export.
Consequently, by the fact that any loss or damage during transport or handling after taking delivery is at the buyer’s risk and all costs related to it, buyers need to be informed that under EXW terms, the responsibility of arranging all transportation, insurance, and customs clearance rests on them. Therefore, they have the efficiency in organizing these issues. As such, buyers would be well-advised to evaluate their capability and purchase insurance that could provide some cover during transit.
what is Ex works price?
How to calculate ex works price
When Should I Use EXW?
You should use the Ex Works Incoterm if you want maximum control over the shipping process and its costs. This is the perfect term if you are competent in handling transportation from the seller’s location to your destination. This is especially useful if you are well-versed in local regulations and logistics, as you assume all responsibilities and risks once the merchandise is made available for pickup.
Another good time when EXW would do nicely is when you would like the role of the seller to be at an absolute minimum, only preparing the goods for collection. Remember, though, that you will have to handle everything from loading and customs clearance right through to shipping. To those who have no problem handling such issues, EXW would be ideal for shipping your goods.
What Is the Difference Between EX Works and FOB?
The main difference between Ex Works Incoterm and Free On Board (FOB Terms Incoterms) lies in the responsibilities and risks associated with shipping. Under EXW, the seller’s obligation ends once the goods are made available at their premises, transferring all risks and costs to the buyer from that point. In contrast, FOB means the seller is responsible for delivering the goods to the shipping vessel, covering costs and risks until the goods are on board. This means the buyer takes on risk only after the goods are loaded. Therefore, EXW places more responsibility on the buyer than FOB does.
What Is the Difference Between EX Works and FCA?
The primary difference between EXW and FCA Terms in Incoterms relates to where the risk and responsibility of the products that shift from the seller to the buyer take place.
Under an EXW contract, a seller is said to have discharged his obligation once he makes available the goods at his premises or another location agreed upon. The buyer then assumes all risks and costs thereafter, which include loading and transportation.
Conversely, the seller is obliged to deliver goods under FCA agreement with a named place of delivery or to a carrier nominated by the buyer. The risk would thus be transferred to the buyer when the goods are delivered to the carrier. To say it differently, the accountabilities that FCA Incoterms places on a seller are considerably higher than those in EXW, since in the former the goods are to be loaded and accountability for its transportation to location. Arguably, due to its clarity in stating the different obligations, in general FCA is better than EXW.
What Is the Difference Between EX Works and CPT?
EXW and Carriage Paid To differ in that responsibility for transportation and risk falls on different parties. In the case of EXW, the obligation of the seller ends when goods are made available at his premises; thus, all risks and costs transfer to the buyer from that point. On the contrary, CPT is where the seller pays the transportation cost to a nominated destination but, at the very moment the goods are handed over to the carrier, risk passes to the buyer. That makes CPT more favorable to a buyer because the seller will handle the initial shipping cost as the buyer then assumes the risk during transit.
What Is the Difference Between EX Works and DAT?
The difference between Ex Works Incoterm and Delivered at Terminal – DAT: under Incoterms, this would include responsibilities and risk transfer during shipment. In an EXW agreement, the obligation of the seller ends when the goods are made available at their premises for the buyer, transferring all costs and risks to the buyer from that point onwards. Conversely, DAT means the seller is obligated to deliver the goods to a named terminal at destination, bearing all costs and risks of delivery until the goods arrive there. Thus, in DAT, more protection is given to the buyer, while the seller is in charge of transportation and delivery to the terminal, whereas in EXW, responsibility lies more with the buyer.
What Is the Difference Between EX Works and CIP?
The difference between EXW and Carriage and Insurance Paid To basically lies in the responsibility for transportation and risk management. While under EXW the liability of the seller stops once the goods are made available at his premises and from then on it is at the buyer’s risk and cost, in the case of CIP, the seller has to bear the cost of transport and insurance up to a stated destination. Although the seller pays these costs, once the goods are handed to the carrier the risk, in any case, transfers to the buyer. Hence, CIP looks after buyers a little more than EXW because it includes the coverage of insurance during transport.
What Is the Difference Between EX Works and DAP?
The difference between EXW and Delivered at Place DAP Incoterms Incoterms is that in the former, transportation and risk transfer lie with the buyer, while under EXW, the responsibility of the seller is discharged upon making the goods available at their premises, transferring all costs and risks to the buyer from that point onwards. Consequently, DAP will come to mean that the seller delivers the goods at an exact place. That means all the costs and risks are on the account of the seller until the very moment of their arrival to the certain place. Thus, for the buyer, DAP is more beneficial because it means the seller will organize logistics and transportation, whereas the buyer incurs the risk only from the moment the goods arrive at the designated place.
What Is the Difference Between EX Works and DDP?
Basically, the difference between Ex Works Incoterm and Delivered Duty Paid rests in the sphere of responsibility and risk taken on by the seller and buyer. While under an EXW contract, the responsibility of the seller extends to the availment of the goods at his premises, all further risks and costs are transferred to the buyer from that point. Conversely, in DDP, the delivery of goods to the place of the buyer is taken by the seller with all the costs, risks, and customs duties of delivering the goods at the location of the buyer. That means DDP offers protection for a buyer to the maximum limit because the seller is responsible for logistics, transportation, and customs clearance, while EXW burdens the buyer.
Is EXW or FOB shipping cheaper?
Who handles customs clearance in EXW shipping?
EXW freight requires the importer to handle customs clearance, which simply means that a seller is only bound to have the goods available at his premises or any other place agreed upon by the buyer and seller, while the buyer bears all responsibilities and costs of transportation of the goods to the final destination, including customs clearance processes.
Customs clearance includes filing of documents, payment of duties and taxes, and execution of the import regulations imposed by the customs authority of the importing country.
The buyer shall assume responsibility for properly completing and submitting to the relevant authorities all customs papers which they consider necessary while allowing the undertaking of clearance by the forwarding company.
EXW shipping, on the other hand, requires the buyer to have a very good understanding of the import regulations, documentation, and procedures that apply at a given country of destination upon customs clearance.
They may use the services of customs brokers or freight forwarders for clearing customs in case they have no experience or expertise in customs clearance.
Due to this fact, the buyer must learn about his responsibilities in having merchandise customs-cleared on the EXW shipping method and integrate the requirements into the big picture of logistics and shipping plans with the view to moving the goods through customs efficiently and on time.
Who pays freight costs on Ex-Works?
EXW freight is where the buyer takes all responsibility and risks for freight costs regarding shipment of the goods from the premises of the seller or some other location named by him to their destination. This would involve the placing of carriers, transportation, and any additional cost arising in shipping.
Under EXW, the responsibility of the seller is extended only to the point of making the goods available for pickup at the designated location. From that moment onwards, ownership is taken over by the buyer, and he has to bear all charges, including freight charges, that are incurred in the movement of shipment.
As EXW is the term that puts all transportation responsibilities on the buyer, it’s highly important for buyers to include these freight costs in their budget and shipping arrangements. Buyers will often have to consult with freight forwarders to negotiate a good price, with buyers also able to choose appropriate, cost-effective transportation options suitable for their needs.
In other words, under EXW delivery, freight expenses related to the removal of goods to their final destination are for account buyers, with the seller’s liability ending when such goods are made available for pickup.
Conclusion
EXW gives a lot of flexibility and control to buyers and sellers. It leaves buyers with the prerogative to look after transportation as they want and as it suits them, hence enabling them, potentially, to reduce costs and make transport more efficient. This incoterm, however, puts heavy demands on buyers for their expertise in international shipping logistics and customs procedures.
The thing the buyer has to do here is consider whether his needs, capability, and associated costs and risks are evaluated, just in case EXW shipping is under consideration. Buyers and sellers must communicate and coordinate their efforts to ensure that EXW shipments are executed as smoothly as possible.
Ultimately, with EXW shipping comes a lot of flexibility and control, yet it may not always be the best option in every situation. It is very important that buyers analyze their needs about shipment with care and find other shipping incotermswhich suit them best.
At Topshipping company, we can help you make such decisions for the best approach towards your international shipping.
