Ex-Works (EXW) Meaning
EXW Incoterm stands for EX Works, an international commercial rule published by the International Chamber of Commerce. Having an EXW arrangement means that there is minimum obligation for the seller, whereby he is responsible only till the delivery of goods at the named place, and the buyer covers the entire shipping cost.
EXW appears to be more in favor of the seller as he has no charges to pay once the goods have left the premises. However the buyer may have certain advantages, if he manages to reduce the transportation costs and handle the shipping process more efficiently.
Shipping Terms in Ex Works (EXW)
Following are the ex works shipping terms:
- The seller is only responsible for maintaining goods at the initial stage.
- The whole shipping procedure rests with the buyer.
- Buyer is only responsible for loading goods from place of origin to ultimately his warehouse/factory.
- All legal formalities are taken care of by the buyer.
- All the charges, risk and responsibility of goods is again the buyer’s duty, from the warehouse to his place.
Ex Works (EXW) terms for Buyer & Seller
Seller’s Responsibilities
Transportation
The seller is responsible only for transporting goods till the seller’s warehouse or the nearest port to the seller.
Factory terms
Seller Goods provided by the seller are mostly from his own factory/warehouse. He is obliged to prepare the goods for collection, after which the buyer will inspect and load the goods for transport in accordance to the factory terms and conditions agreed between the buyer and the seller.
BuyerBuyer has to arrange transport of goods from the seller’s factory to his own factory. He has to take care of loading goods from the seller’s factory and then complete the shipping process and finally unload goods at his factory.
Packaging terms
Seller These Packaging terms include the checking, marking and packaging of goods in international trade. Seller has to ensure that the packaging is done in a manner which is approved for export, and has to do so at his own cost.
BuyerThere can be few exceptions to the packaging terms such as the seller providing invoice or labelling/marking of goods, but in addition to that, the buyer has no obligation for packaging of goods.
Delivery terms
The seller has to deliver the goods at the named place, within the stipulated time frame. In the delivery conditions of ex works Incoterms, where there is no mention of the named place, then it can be assumed that the goods will be made available at the factory.
Loading and unloading
SellerIn the incoterm EXW, the seller has no obligation to help the buyer with loading and unloading, as he is only liable till delivering the goods at the specified place, which is usually his own warehouse. However the seller may load the goods, but at the buyer’s risk and cost.
BuyerAs the procedure is carried on by the buyer the loading and unloading of goods at all stages rests with the buyer.
- Initial stage: Loading of goods from seller’s factory/warehouse.
- Second stage: Unloading them and preparing them for shipping procedures.
- Third stage: Loading of goods for shipping.
- Fourth stage: Unloading them at the port (buyer’s port).
- Fifth stage: Loading them from port to transporting them till the factory (buyer’s warehouse).
Documents
Seller Seller has to provide the buyer with the following documents for the documentation:
- Bill of Lading - Check the template here
- Commercial Invoice
- Insurance Certificate
- Packing List
- Export License
These are needed in situations where the seller is entitled to carry out the delivery process.
BuyerSeller provides proof to the buyer, as goods are arranged by him. The seller may provide documentation to the buyer such as quality product, license, certifications, receipts, and more.
Freight Charges
SellerBecause the seller is not involved in any activities related to the transportation of goods, he is not responsible for bearing freight charges according to freight terms. But at the buyer’s risk and cost, he may provide assistance to the buyer during the export process.
BuyerBuyer has almost full control over shipping and transport activities. He is responsible for paying the truck charges, ocean freight charges and shipping charges. Further, he is also responsible for all the future costs associated with delivering the goods.
Customs Clearance
SellerThere is no obligation for the seller for clearing the goods in customs, as he has no role to play in the process of delivery and transportation. However if the buyer requests, the export clearance documents can be provided by the seller, but at the buyer’s risk and cost.
BuyerAs the whole process is carried out by the buyer, he has to pay for custom duties and bear all import and export charges.
Insurance
SellerSeller has no obligation to provide any insurance cover. However, he may provide assistance to the buyer in arranging insurance cover for the goods while they are in transit, at buyer’s cost.
BuyerRisk of goods is the buyer's responsibility. Any damage of goods during the process will be borne by the buyer. So the decision of insuring goods rests with the buyer, and he may or may not insure the goods accordingly
Transfer of Risk
Since the complete shipping procedure rests with the buyer, the risk and responsibilities from the seller's warehouse to the buyer completely lies with the buyer. As the buyer is responsible from the start to the end of the shipping process, there is no transfer of risk.
Buyer’s Responsibilities
Transportation
The buyer is responsible for transporting the goods from the seller’s warehouse or the seller’s port, loading goods onto the carrier, unloading goods from the carrier, and moving them from the buyer’s port to their warehouse.
Factory Terms
The buyer has to arrange transport of goods from the seller’s factory to their own factory. They have to take care of loading goods from the seller’s factory and then complete the shipping process, and finally unload goods at their factory.
Packaging Terms
There can be few exceptions to the packaging terms for a buyer such as the seller providing invoice or labeling/marking of goods, but in addition to that, the buyer has no obligation for packaging of goods.
Delivery Terms
Delivery point in the process of ex work is the seller's factory, so the buyer’s pickup and delivery starts from the place of origin. Stages involve picking up from the factory, delivering to port, shipping process, and then getting it delivered at their own warehouse.
Loading/Unloading
As the EXW Incoterms places the responsibility of the entire shipping process on the buyer, the loading and unloading of goods at all stages rests with the buyer.
- Initial stage: Loading of goods from seller’s factory/warehouse.
- Second stage: Unloading them and preparing them for shipping procedures.
- Third stage: Loading of goods for shipping.
- Fourth stage: Unloading them at the port (buyer’s port).
- Fifth stage: Loading them for transport from the destination port to the factory (buyer’s warehouse).
Documents
Seller provides proof to the buyer, as goods are arranged by them. The seller may provide documentation to the buyer such as quality product, license, certifications, receipts, and more.
Costs borne by Buyer
The freight charges, import and export customs clearance fees, charges for loading and unloading goods, and any other shipping costs are paid by the buyer. The buyer also pays the insurance premium if they opt for it.
Customs Clearance
As the whole process is carried out by the buyer, they have to pay for custom duties and bear all import and export charges.Freight ChargesBuyer has almost full control over shipping and transport activities. They are responsible for paying the truck charges, ocean freight charges, and shipping charges. Further, they are also responsible for all the future costs associated with delivering the goods.
Insurance
Risk of goods is the buyer's responsibility. Any damage of goods during the process will be borne by the buyer. The decision of insuring goods rests with the buyer, and they may or may not insure the goods accordingly.Transfer of RiskThe complete shipping risk and responsibilities lie with the buyer from the seller’s warehouse to the buyer’s warehouse.
When to Use EXW Incoterms?
The buyer can opt for EXW Incoterms when they want to combine multiple shipments and export them together under a single name. Another instance for using EXW Incoterms is when the seller is unable to export. The buyer might already have offices in the exporting country, so they may opt for this Incoterms to process shipments easily. Unless there is a valid reason for the buyer to use the EXW Incoterms, most sellers experienced in global trade usually quote other Incoterms.
Ex Works Incoterms Example
The quotation for Ex works is mostly calculated by the buyer to reduce the value, i.e., added cost imposed by sellers in the shipping process.
Ex Works transaction is often undertaken in situations where the buyer perceives that the shipping terms can be better handled by himself.
For instance, say Company A has 100 generators to export to Company B, wherein Company A charges USD 400 per generator, including the shipping cost, and quotes USD 300 without the shipping cost. Now if the buyer can arrange for a shipping cost lower than what company A is charging them, say at a minimum rate of USD 70, then they can save USD 30 for every generator and can thus manage their cost of importing.
EXW vs FOB
Also read:
Ex-Works FAQs
Who pays freight in ex works?
The buyer is responsible for all freight charges under ex works. The seller may carry out few carriage related responsibilities but only at buyer's risk and cost.
How do you calculate ex works cost?
In ex works, for a seller the cost or price that he will quote to the buyer will be the price of goods as decided by him, and it may also include cost of shipping if the shipping procedure is being carried out by him as per the agreement between him and the buyer (the buyer has to pay him back the cost of shipping since its not his responsibility to cover it).
Who handles the custom clearance procedure under ex works?
Since, in the process under ex works, the entire responsibility for moving the goods from the beginning itself rests with the buyer, he remains liable for export as well as import customs clearance procedures. The seller at buyer’s request/demand may pick up few customs clearance proceedings but again at buyer's risk and cost.
What is the difference between Ex Works and FCA?
In ex works the responsibility for the goods is on buyer from the warehouse / point of pickup whereas in FCA the export cleared goods are delivered by the seller to the carrier to the defined location as per the terms and conditions that both seller and the buyer have agreed upon. From the said point of delivery the buyer needs to take the entire responsibility.
What is the difference between Ex Works and DDP?
When it comes to DDP it is the opposite of ex works, in ex works the seller has no responsibility of the goods after the pick up from the warehouse/ point of pick up by the buyer. Whereas in DDP (Delivery Duty Paid) the seller the seller bears all costs & risks involved in delivering the goods to the nominated place.
What is the difference between Ex Works and CIF?
In , the seller has to bear the charges related to the cost of transportation, any loss or damage to the product, custom duties, inspection or rerouting & more of the goods until they are loaded at the buyers end. Once the goods are loaded the buyer needs to take care of the rest. Whereas in ex works the seller has to bear no such costs.
Also Read:
- FAS Incoterms 2020 | Free Alongside Ship | Meaning and Shipping term
- CIP Incoterms 2020 | Meaning and Shipping terms
- CPT Incoterms 2020 | Meaning and Shipping Terms
- What is a Customs Bonded Warehouse?
