Table of Contents
- What are ex-works in shipping terms (EXW)?
- What are the advantages of ex-works shipping terms?
- What are the disadvantages of ex-works shipping terms?
- What is the Difference Between Free-on-Board and Ex Works?
- What are the Buyers’ and Sellers’ Responsibilities with EXW Agreements?
- When to Use an EXW Agreement?
What are ex-works in shipping terms (EXW)?
An EXWorks Incoterm is an agreement that maximizes the buyer’s risk and responsibility, by requiring the seller to only make the goods available for the buyer at their warehouse or dock. Once the buyer collects the cargo, the buyer assumes all other responsibilities, including transport to the port of destination.
Ex Works is an Incoterm used for all forms of shipping, regardless of the mode, or legs of the transport. Under this term, the buyer assumes all responsibilities of the shipment, once the cargo is packed in export packaging and collected.
Ex works shipping terms means that the seller delivers prepare the cargo at his location (workshop, factory or warehouse etc.) and send the goods to buyer according to the exw delivery. Under this term of trade, the seller neither undertakes to load the goods onto the buyer’s prepared means of transport nor is responsible for customs clearance of the goods for export.
This type of transport leaves all risk and responsibility on the buyer, so newbies and buyers unfamiliar with exporting are advised to use a freighting and logistics company to avoid errors and unforeseen costs associated with shipping and transporting the goods.
What are the advantages of ex works shipping terms?
When using these terms all of the costs and risks of shipping the goods lie with the buyer alone. As a result, with the supplier’s assistance, Ex Work’s terms are a good way for the buyer to get a clear picture of all of their costs upfront.
Apart from when the goods are with customs, the buyer is in control of the entire shipment. This gives the buyer full visibility and ensures that the supplier isn’t inflating their local costs or adding a margin to the delivery fee.
What are the disadvantages of ex works shipping terms?
The main disadvantages of EXW surround customs clearance in the country of origin.
Information from the supplier is used when arranging the customs clearance in the country of origin.
If this information is incorrect the buyer will still be liable for any additional costs that can occur as a result.
In addition to this, you’d have to pay for any costs that would occur if your goods were randomly (or otherwise) selected for a customs inspection when being cleared for export in the country of origin.
Another disadvantage is the uncertainty over export licenses. If the supplier doesn’t have an export license, then they often use ex works shipping terms so the buyer has to pay for one. These can be very expensive so if your supplier won’t offer FOB terms. Don’t forget to ask about an export license before committing to buy the products.
Beware of Exworks terms if you travel overseas to source goods from multiple local traders or shops. They won’t tell you but you are effectively buying on an ex works terms from each trader. You could easily end up having to pay a considerable amount in overseas charges if you’re not careful.
Your freight invoice may be higher when using Ex Work’s terms but your overall costs shouldn’t be. They are safe terms as buyers have visibility of all the foreseeable costs as long as you get a complete price in advance.
What is the Difference between FOB and EXW shipping?
If you use the FOB Incoterm, the seller or originator has to get your goods loaded onto your chosen ship before responsibility for the shipment passes to you. If you use the ex works shipping terms, all the seller or originator has to do is provide you with a pickup location, and make the goods available for you to collect, load and transport yourself.
What are the Buyers and Sellers' Responsibilities with EXW Agreements?
Sellers ResponsibilitiesUnder the EXW Incoterms, the seller’s responsibilities are incredibly low. Essentially, their only requirement is to ensure that the cargo is packaged so it is ready for export, and the goods can be collected from their location. For most shipments, this means the products are already packed into export cartons. Once the cargo is ready, it must be in an area where the buyer can collect it from the seller.
The buyer assumes all risks and liabilities once they collect the goods from the seller.
- Loading Charges: Loading the cargo at the location of the pickup so that the goods can move to the port for export.
- Delivery to Port/Place: Transporting the goods to the port of origin, to begin the export process.
- Export Duty, Taxies & Customs Clearance: All export documentation, and paying any duty to export the cargo. The buyer must rely on their own methods of export.
- Origin Terminal Charges: The buyer is responsible for paying all fees at the terminal.
- Loading on Carriage: The responsibility associated with loading the cargo onto the carriage.
- Carriage Charges: All freight costs associated with moving the cargo from port to port.
- Insurance: While not required, insuring the freight to protect against damage, theft, or loss.
- Destination Terminal Charges: All charges associated with fees charged by the destination port and terminal. When the cargo arrives at the destination port the terminal charges fees to unload the shipment from the vessel and transfer them throughout the harbor.
- Delivery to Destination: The costs associated with transporting the cargo from the destination port to the final destination.
- Unloading at Destination: The costs associated with unloading the cargo from the final carrier once the goods have arrived at the destination.
- Import Duty, Taxes & Customs Clearance: All duty and taxes associated with importing the cargo into the destination country.
When to Use an EXW Agreement?
Most businesses will opt to use an EXW agreement when the seller unable to export, or the buyer is looking to combine multiple shipments and export them under a single name.
Another instance a buyer might want to opt for EXW is if they are shipping via Air Express. Express couriers often collect the cargo from the seller’s location, and built into their service includes all the transport and export formalities. So, buyers shipping cargo via express shipments might find some savings by changing their terms to EXW.
In other circumstances, established importers might set up offices in their export country for ease of processing their shipments. But unless there is a legitimate reason why a buyer wants to use EXW, most sellers who are experienced in international trade with quote a different Incoterm.
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