Incoterm – EX WORKS (EXW)
EX Works (EXW) is an Incoterms 2020 shipping term that assigns minimal responsibility to the seller, placing the onus on the buyer for most of the tasks involved. In this arrangement, the seller’s primary obligation is to guarantee proper packaging of the goods made available at a predetermined location, typically their factory or depot.
However, the bulk of responsibilities in an EXW agreement falls upon the buyer’s shoulders. These responsibilities include loading the goods onto a vehicle, even when the seller may be better equipped for this task. The buyer is also responsible for managing all export-related procedures, overseeing the onward transportation of the goods, and covering all costs incurred after taking possession of the goods.
While EXW is a widely used shipping term with all transportation modes, it can present practical challenges in many cross-border transactions. In reality, the exporter may still need to be involved in export reporting and clearance processes, as delegating these responsibilities entirely to the buyer may be challenging and practical. In such cases, it might be more advisable to consider the Free Carrier (seller’s premises) Incoterm instead or hire a professional freight forwarder to minimize the occurrence of mistakes and unexpected fees.
Choosing EX Works
- Export Limitations: When sellers cannot export, EXW allows buyers to take control of the export process.
- Consolidating Shipments: Buyers seeking to merge multiple shipments under a single entity for export purposes often opt for EXW.
- Air Express Shipping: For shipments via Air Express, where couriers handle cargo pickup and export formalities, EXW terms can lead to potential cost savings.
- Established Importers: EXW may be a consideration in cases where established importers have set up offices in export countries. However, it’s important to note that experienced international trade sellers often propose alternative Incoterms unless there’s a specific reason for choosing EXW.
Understanding the Responsibilities
Seller’s Responsibilities: Under the EXW Incoterms, sellers have limited obligations. Their primary responsibility is to ensure the goods are adequately packaged for export and positioned where the buyer can easily collect them. This often involves packaging the products in export-ready cartons.
Buyer’s Responsibilities: Once the buyer collects the goods from the seller, they assume comprehensive responsibilities, which include:
Duties, Taxes, and Custom Clearances
The buyer must independently prepare documentation and payments for import and export procedures.
Loading and Unloading Charges
The buyer must cover charges for cargo loading at the origin collection point and unloading at the destination from the final carrier.
Terminal Charges
The buyer is responsible for expenses at origin and destination terminals, including fees for unloading shipment from the destination vessel and transporting it within the harbor.
Carriage Charges
The buyer is responsible for cargo loading onto vehicles and covering all freight costs for inter-port transportation.
Transportation Charges
The buyer is accountable for the transportation charges from the point of origin to the destination, including transit through the destination port.
Insurance
While not obligatory, the buyer may opt to secure insurance for the shipment to protect against potential damages.
In summary, sellers’ duties in an EXW agreement are minimal, primarily centered on packaging and making the goods accessible. In contrast, buyers assume a comprehensive set of responsibilities once they take possession of the goods, encompassing various aspects of transportation, documentation, and compliance with customs regulations.
Pros and Cons for Buyers
Exploring the choice of Ex Works (EXW) terms in international trade unveils a range of advantages and disadvantages for buyers. These terms, stipulated in the Incoterms framework, can significantly impact a buyer’s experience and cost considerations when procuring goods from foreign suppliers. In this discussion, we delve into the key benefits and drawbacks that arise when buyers opt for EXW, shedding light on the factors that influence their decision-making in the global marketplace.
Supplier Confidentiality
Buyers can hide suppliers using a different exporter name on shipping documents under EXW.
Export License
Ideal for buyers with export licenses and routine purchases from a specific country.
Local Market Advantage
Helpful in accessing quality, locally focused manufacturers without export licenses.
Consolidation Opportunity
EXW is practical for consolidating products from various suppliers in one shipment, reducing complexity.
Cost Efficiency
Typically, EXW is the most cost-effective option, requiring minimal seller involvement.
Transfer of Risk
Cargo transfer occurs in the seller's country, leaving the buyer vulnerable to export issues.
Comprehensive Responsibility
Buyers bear all risks and costs for export, transport, and import, unlike other Incoterms.
Cost Uncertainty
Buyers familiar with export processes may face unexpected expenses, potentially exceeding their budget.
Seeking assistance from a 3rd party logistics or freight forwarder when dealing with EXW terms can better ensure smooth export processes and minimize risks.
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