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Also see our complete Incoterms Guide 2023
Incoterms are essential to international shipping, and understanding them is crucial for businesses to ensure smooth transactions.
One such incoterm is Ex Works (EXW), a term that serves as a starting point for goods being shipped from one party to another. With 35.2% of quotes requesting EXW, it is the second most popular Incoterm.
In this article, we will explain what EXW is, outline its obligations for exporters and importers, the point of risk transfer associated with EXW, the benefits and drawbacks of using it, and more.
Let's explore EXW in detail and determine whether it is the right choice for your business.
What is Ex Works (EXW)?
Ex Works (EXW) is an ideal shipping incoterm for those looking to transfer goods from the seller to the buyer expeditiously. This arrangement requires that the seller delivers their products directly to a desired place of destination, like a factory, warehouse, or workplace.
Through EXW shipping, buyers bear the most responsibility, and sellers incur minimal obligations. In terms of payment, Ex Works requires immediate payment upon delivery.
If you're offering a quote, EXW is the perfect incoterm to utilize since it excludes any cost beyond product and packaging. In fact, the EXW rate is then used as a basis to calculate costs with other Incoterms.
EXW Price Calculation: Product cost + packaging + profit share
Obligations Under the EXW Incoterm
- Prepare and package the goods
- Pick up and loading at the seller's location
- Organizing and arranging transportation costs from the seller's location to the final destination
- Import and export customs clearance procedures and fees
- Insurance coverage
EXW Point of Risk Transfer
With Ex Works, the point of risk transfer occurs at the moment the goods are made available to the buyer at the seller's premises – in other words, it is immediately after delivery. This means the seller has no responsibility or liability after this point.
Let’s say a UK-based company is looking to export goods to Canada. The company’s EXW rate includes the cost of product and packaging but excludes any additional fees.
By choosing Ex Works as their Incoterm, the UK company is only responsible for preparing and packaging the goods. It is then up to the Canadian importer to arrange for the pick-up and shipping of the goods. The UK exporter does not have any further responsibility for this transaction.
Benefits and Drawbacks of EXW
Using EXW benefits exporters because it is the least expensive and most convenient Incoterm. With EXW, exporters are only responsible for delivering the goods to the buyer’s premises or collection point, which means they do not have to pay additional costs such as insurance or transport fees.
On the other hand, importers bear the most responsibility with Ex Works and are liable for any risks that may arise after receiving goods. However, it also puts them in the driver's seat for all decisions, which, to a well-connected and knowledgeable importer, can offer full control of the process and significant savings.
EXW can also be a disadvantage for importers as they have to bear the burden of picking up and transporting goods from the seller’s premises to their own. Importers must also pay all customs clearance procedures, insurance fees associated with the shipment, and any other costs involved in the transportation of goods. If any of these procedures are not carried out correctly, the importer will be responsible and liable for any losses.
Is EXW the Right Choice for Your Business?
EXW is ideal for exporters who do not want to incur additional costs, such as transport and insurance fees. It also benefits importers who have the knowledge and resources available to arrange their own shipping, customs clearance procedures, and insurance coverage.
However, it is important to remember that with EXW, the seller has no responsibility or liability once the goods have been delivered to the buyer's premises. Therefore, if you are an importer and unsure how to arrange shipping and insurance coverage, then it is better to use another Incoterm, such as Free on Board (FOB) or Cost, Insurance, Freight (CIF).
If you're still on the fence about which Incoterm to use, contact us to get expert advice and guidance.
What is Ex Works (EXW) price?
EXW price is the cost of the product and its packaging, plus any profit share or other associated fees. It is used as the baseline for calculating costs with other Incoterms.
Who pays for shipping when using EXW?
The importer is responsible for picking up and loading at the seller's location, as well as arranging transport from the seller's premises to the final destination. The importer also has to pay all customs clearance procedures, insurance fees, and any other costs.
What is the difference between Free On Board (FOB) and Ex Works (EXW)?
The main difference between FOB and EXW is that with FOB, the seller is responsible for delivering the goods to a specified port of departure, while with EXW, the risk of loss or damage is transferred to the importer at the seller’s premises.
What does Ex-Factory date mean?
Ex-Factory date is the date on which a seller agrees to have their goods ready for shipping at their premises. It is usually specified in an Ex Works contract.
What is the difference between Free Carrier (FCA) and Ex Works (EXW)?
The main difference between Ex Works (EXW) and Free Carrier (FCA) shipping terms is the point of risk transfer. Under Ex Works, all responsibility and risk transfer to the buyer once delivery is made at the seller's location. Whereas with FCA, the risk and responsibility transfer to the buyer once delivery is made at a mutually agreed-upon location designated by the buyer.
What is the difference between Delivery Duty Paid (DDP) and Ex Works (EXW)?
The main difference between Ex Works (EXW) and Delivery Duty Paid (DDP) terms is the point of risk transfer. Unlike DDP, with Ex Works, all responsibility for taxes, duties, and other fees associated with shipping goods internationally transfers to the buyer once delivery is made at the seller's premises. With DDP, on the other hand, the seller is responsible for all costs associated with delivering goods to their destination. DDP terms also require that goods are cleared for export by the seller prior to shipping.