The seller makes the goods available at their premises, or at another named place. This term places the maximum obligation on the buyer and minimum obligations on the seller. The Ex Works term is often used while making an initial quotation for the sale of goods without any costs included.
EXW shipping means that a buyer incurs the risks for bringing the goods to their final destination. Either the seller does not load the goods on collecting vehicles and does not clear them for export, or if the seller does load the goods, he does so at buyer's risk and cost. If the parties agree that the seller should be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract of sale.
There is no obligation for the seller to make a contract of carriage, but there is also no obligation for the buyer to arrange one either - the buyer may sell the goods on to their own customer for collection from the original seller's warehouse. However, in common practice the buyer arranges the collection of the freight from the designated location, and is responsible for clearing the goods through Customs. The buyer is also responsible for completing all the export documentation, although the seller does have an obligation to obtain information and documents at the buyer's request and cost.
These documentary requirements may result in two principal issues. Firstly, the stipulation for the buyer to complete the export declaration can be an issue in certain jurisdictions (not least the European Union) where the customs regulations require the declarant to be either an individual or corporation resident within the jurisdiction. If the buyer is based outside of the customs jurisdiction they will be unable to clear the goods for export, meaning that the goods may be declared in the name of the seller by the buyer, even though the export formalities are the buyer's responsibility under the EXW term.
Secondly, most jurisdictions require companies to provide proof of export for tax purposes. In an EXW shipment, the buyer is under no obligation to provide such proof to the seller, or indeed to even export the goods. In a customs jurisdiction such as the European Union, this would leave the seller liable to a sales tax bill as if the goods were sold to a domestic customer. It is therefore of utmost importance that these matters are discussed with the buyer before the contract is agreed. It may well be that another Incoterm, such as FCA seller's premises, may be more suitable, since this puts the onus for declaring the goods for export onto the seller, which provides for more control over the export process.
FAQs
EXW Incoterms: Meaning & Explanation
What does EXW mean in incoterms? ›
Incoterms. When goods are bought or sold "Ex Works" (EXW) it means that the Seller is making the goods available at their factory or warehouse. The buyer is then free to come and pick up the goods. Ex Works places full responsibility for cost and risk with the buyer, as the buyer has to arrange everything.
Which is better, FOB or EXW? ›
Supplier Relationships: If you have a strong, established relationship with your supplier and trust their handling of the goods, you may be more inclined to choose EXW. FOB can be a better option if you are less certain about the supplier's capabilities.
Who pays for shipping on EXW? ›
Key Takeaways. Ex Works (EXW) is a shipping arrangement in which a seller makes a product available at a specific location, but the buyer has to pay the transport costs.
What does the EXW term indicates an actual delivery? ›
Under Ex Works (EXW), the buyer pays for all aspects of the shipping process. This includes loading charges, delivery to port, export duties and taxes, origin terminal charges, loading on carriage, carriage charges, destination terminal charges, delivery to destination, and import duty and taxes.
What is the disadvantage of using EXW? ›
Ex Works assigns the buyer with the risk for loss and damage to the goods during loading. Though the seller normally loads the merchandise as common procedure, under Ex Works, it is the buyer who's at risk if the goods are damaged during loading. At first, this scenario may seem preferable from the seller's standpoint.
Who is responsible for loading in EXW? ›
Incoterms EXW: Frequently Asked Questions (FAQs)
The seller's responsibility ends once the products are made available for pickup at their premises. The buyer must handle all aspects of loading, transportation, and any associated costs and risks from that point onward.
What are the benefits of EXW? ›
To sellers EXW's advantage is obvious, that they only cover the minimum scope of responsibilities and costs. To buyers, the EXW agreement can also bring benefits. As the shipping costs and responsibilities are on the buyers' side, they can control the entire shipping process to ensure the products are safe.
What is the most buyer friendly incoterm? ›
Best Incoterms for Buyer
- Freight On Board (FOB) In this Incoterm, the buyer just has to hire the shipping services. ...
- Delivered At Place (DAP) This Incoterm is a good pick for buyers because it allows you to buy as cheaply as possible and involves low risk and responsibilities for the buyer. ...
- Ex-Works (EXW)
Ex Works (or EXW for short) is a door-to-door shipping term – and one that has the least risk for sellers. That's because the buyer (you) is responsible for the entire transportation process, from the supplier's warehouse to your UK port. That means you must: Arrange for transport from your supplier's warehouse.
EXW places all transportation responsibility on the buyer, meaning, they must organize the aspects of the export, transportation, import duty, taxes, & customs clearance. Unless shipping via China Air Freight, EXW is rarely advisable for new Alibaba buyers.
Can a shipper benefit more from EXW? ›
EXW can benefit sellers, because they have minimum obligations in the transaction and therefore take on less risk. In some cases, EXW can also serve buyers by helping them save money on shipping costs, since they can shop around for a logistics provider.
Does EXW include customs clearance? ›
Ex Works Frequently Asked Questions (FAQs)
Does EXW include delivery costs for the seller? No, the seller is only responsible for making the goods available at their premises. The buyer covers all delivery costs, including transportation, insurance and customs duties.
What is a growing concern about the use of EXW as an incoterm? ›
Disadvantages. High responsibility for buyers: Buyers must handle all aspects of transportation, export, and import, which can be complex and time-consuming. Risk management: Buyers assume all risks once the goods are made available under EXW Incoterms, meaning they need robust insurance and risk management strategies.
How does EXW work? ›
Using the EXW shipping term, the seller provides the goods to the buyer in a designated area, like a production site or warehouse. The buyer bears the full risk and costs from there to the destination - including the loading of the cargo and is responsible for all transportation.
How to calculate EXW cost? ›
The ex-works price includes the value of all the materials used and all other costs related to its production, minus any internal taxes, which are, or may be, repaid when the product obtained is exported.
What is the difference between Free Carrier and EXW? ›
With EXW, the seller has minimal obligations beyond making the goods available at their premises. In contrast, FCA requires the seller to arrange for transportation and ensure the goods are ready for collection by the carrier.
Can you use EXW for export? ›
One of the main advantages of using EXW for exporters is that it is the simplest and most flexible Incoterm. It allows the seller to avoid any involvement in the export formalities, customs clearance, or transportation arrangements.
What are the advantages of EXW for buyers? ›
To buyers, the EXW agreement can also bring benefits. As the shipping costs and responsibilities are on the buyers' side, they can control the entire shipping process to ensure the products are safe. The shipping method is favorable to subsequent local transportation.
