What do EX Works (EXW) mean in Incoterms?
EXW(EXWorks Incoterm) is an agreement that maximizes the risk and liability of the buyer by requiring the seller to supply goods to the buyer only at its warehouse or terminal. Once the buyer takes delivery of the goods, the buyer assumes all other responsibilities, including delivery to the port of destination.
Ex Works is an international trade term that applies to all forms of transport, regardless of the mode of transport or journey. Under this clause, once the goods have been packed in export packaging and collected, the buyer will assume all responsibility of the shipper.
EXW means that the buyer must arrange all shipping, and export documents, pay all freight, and complete the import and delivery process. Once the goods are recovered from the seller’s property, the risk passes to the buyer.
This mode of transportation places all risks and responsibilities on the buyer, so novice and buyers unfamiliar with exports are advised to use freight and logistics companies to avoid errors and unforeseen costs associated with transporting and transporting goods.
What are the responsibilities of the buyer and seller of the EXW agreement?
Next, we will discuss the responsibilities of the buyer and seller under the EXW agreement.
Seller’s responsibility under EXW Incoterms
The seller’s liability is very low according to EXW Incoterms. In essence, their only requirement is to ensure that the goods are packed and ready for export and can be collected from their location. For most shipments, this means the product is already packed in export cartons. When the goods are ready, they must be in an area where the buyer can pick them up from the seller. These are the sole responsibility of the seller.
Buyer’s liability under EXW Incoterms
The Buyer assumes all risks and responsibilities after taking delivery of the goods from the seller. These responsibilities include:
Loading charge: loading at the place of pick up for shipment to port for export.
Transport to port/place: Transport of goods to the port of origin to begin the export process.
Export duties, taxes and customs clearance: all export documentation and payment of duties on any exported goods. Buyers must rely on their own means of export.
Port charges of origin: The buyer is responsible for paying all charges at the port.
Loading on Carriage: the responsibility associated with Loading goods into a Carriage.
Shipping costs: All freight charges associated with moving goods from one port to another.
Insurance: To ensure goods against damage, theft or loss, although not necessary.
Destination Terminal Charges: All charges associated with the destination port and terminal charges. When the cargo arrives at the port of destination, the dock charges a fee to unload the cargo from the ship and transfer it throughout the port.
Shipping to the destination: The costs associated with shipping goods from the port of destination to their final destination.
Discharging at destination: Charges associated with discharging the goods from the final carrier upon arrival at destination.
Import duties, taxes and customs clearance: All duties and taxes related to the importation of goods into the destination country.
Advantages and disadvantages of EXW
The advantages of EXW Incoterms
In some cases, EXW is the most practical product transportation solution. For example, businesses that frequently source from one country can take advantage of EXW if they plan to integrate and integrate products from multiple suppliers. In this case, EXW is ideal because it allows the buyer to export the goods as a single export.
Another advantage is if buyers wish to hide who their suppliers are. They can ship under EXW Incoterm and use different names of exporters on shipping documents.
EXW is usually the cheapest option when considering the cost of buying a product. In some cases, sellers can get tax returns for their exports, and if the seller keeps this refund as part of all their profits, then FOB may end up being cheaper for both buyer and seller. In most cases, however, EXW will be the cheapest option as it requires little extra work from the seller.
If a company regularly sources from a particular country and they have an export license, EXW may be an ideal choice. We would like to point out that the risks associated with EXW can be high and therefore we recommend that buyers generally rely on trusted companies to manage everything on their behalf.
Specific countries, such as China, with quality and cheap domestic manufacturing options are perfect examples of buyers wanting to use EXW. When the seller lacks export capacity, the factory allows international buyers to buy in the domestic market and rely on their export methods.
There are a large number of manufacturers who are completely focused on producing quality products for the local market, never getting an export license and getting their products out to the outside world at the same time. If you are a savvy purchaser, you can find some of these factories to take advantage of their local prices and sign purchase contracts under ex-factory terms.
The disadvantages of EXW Incoterms
While EXW sounds attractive to buyers because its unit cost is lower than other Incoterms, the disadvantage to buyers is much higher.
First, the buyer is responsible for all risks and costs associated with exporting, transporting and importing the goods. Most international commercial and trade agreements allow for partial responsibility in this process, and EXW is the only provider that does not require the seller to load, deliver and export the goods to the dock.
By itself, loading goods, transporting them to the point of origin and exporting them is not very dangerous when working with legitimate sellers. However, since these tasks are performed in the country of the seller rather than the country of the buyer, problems that do occur need to be addressed by qualified partners. If there is a problem that the goods cannot be exported from the country of origin, the risk lies with the buyer because the transfer of ownership has already taken place.
Finally, EXW may cause buyers to pay more than they originally intended to if they are unsure of the processes or costs involved in exporting the product.
If your supplier is only willing to sell their products under EXW Incoterms, your best option is to look for a third-party logistics company or freight forwarder who can help you export. For example, if you export from China, we can help by designating an entity to represent you as the exporter.
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