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Ex Works incoterms | What EXW Means and Pricing

This article will provide all the details on EXW, what it means, how it’s priced, and the benefits or drawbacks of using it.
Ex Works incoterms | What EXW Means and Pricing

Table of Contents

Every industry and trade has its terms, and international trade is no different. There are 11 incoterms (International Commerce Terms), one of which is Ex Works (EXW). Standardized by the International Chamber of Commerce, these terms describe routine processes and scenarios in international trade. 

This article will provide all the details on EXW, what it means, how it’s priced, and the benefits or drawbacks of using it. 

Incoterms General Table,DDP, FOB, DAP, EXW, CIF, FCA, FAS,CFR, CTP, CIP, DAT

What does Ex Works mean in Incoterms?

Ex Works or EXW is an incoterm that refers to a seller making goods available at a location, after which the buyer is responsible for shipping the cargo and bearing the costs.

What is EXW(Ex Works)

It’s an agreement in which the seller packages the goods and transports them to an agreed-upon location, such as a warehouse or port.

From there, the buyer collects the cargo and is responsible for moving it to the destination and paying customs.

The scope of seller's responsibilities under EXW

The seller is typically responsible for packing the goods and getting them to the nearest warehouse or port. From then on, the buyer is responsible for moving the shipment and arranging documentation.

The seller may help the buyer obtain licenses and other documentation, but the buyer bears the expenses.

The scope of buyer's responsibilities under EXW

In EXW, the buyer pays the loading and freight costs and prepares the customs approval documentation. The buyer bears the lion’s share of the logistics responsibilities and expenses.

These may include:

  1. freight charges
  2. loading/unloading charges
  3. terminal charges
  4. insurance
  5. export/import duty

Simply put, in EXW, the buyer assumes the maximum risk as they’re responsible for safely shipping the cargo to its destination and paying all the freight costs, duties, and taxes.

The Pros and Cons of EXW

EXW is more beneficial for the seller as their responsibility is minimal. However, there are benefits for buyers as well. Similarly, there are cons for both parties with this type of trade arrangement.

The Pros and Cons of EXW

EXW is more beneficial for the seller as their responsibility is minimal. However, there are benefits for buyers as well. Similarly, there are cons for both parties with this type of trade arrangement.

Pros

  • Lower costs for the seller

The cost to the seller is low, which is beneficial for them, but also the buyer who doesn’t have to pay markups charged by the seller for shipping products.

  • Greater control for the buyer over the shipping process

For buyers, EXW offers complete control over shipping, which can be beneficial in three ways:

They can consolidate shipments from different suppliers.

They can choose the cheapest logistics provider.

They can conceal their suppliers from competitors.

Cons

  • Higher risks and responsibilities for the buyer

The buyer basically assumes all the risks and costs associated with the shipment, which means they bear the loss should anything go wrong.

  • Potential for misunderstandings and disputes due to lack of clarity

Although the buyer is responsible for the better part of logistics, collaboration with the seller is still required.

However, there can be disputes, mainly due to poor communication. This is typically the case when trading with another country/region where language and laws differ.

When to Use EXW

EXW is accompanied by greater risks for the buyer, which may deter some from taking this option. However, an EXW agreement can be ideal in certain scenarios.

It may make sense for a buyer to consolidate multiple goods from different suppliers in a country and ship them together. This can help lower the overall shipping costs and speed up the delivery.

Buyers may also need to resort to EXW if the seller doesn’t export their products. In such a case, you, as a buyer, must arrange the transportation and pay all the costs and duties to acquire the products.

EXW is a tricky undertaking, which buyers, even those familiar with international trade, avoid. Particularly, those new to trade tend to use other incoterms because of the risks of EXW.

On the other hand, those who work with trustable logistics partners in the country they’re importing from may opt for EXW more readily.

How does EXW differ from other Incoterms?

There are other incoterms that dictate the duties and responsibilities of the buyers and sellers in international trade.

The main alternatives to EXW are Free on Board (FOB) and Cost, Insurance, and Freight (CIF).

What is the difference between FOB and Ex Works?

In FOB shipping arrangements, the buyer is responsible for paying export taxes and loading the shipment onto the cargo vessel. From then on, the buyer assumes all the responsibility and associated costs, including freight costs, insurance, and customs at the destination.

In Ex Works, the buyer only moves the product to a pickup location, such as a port. From then on, the buyer has all the responsibilities.

What is the difference between CIF and Ex Works?

CIF is an international shipping agreement where the seller assumes most of the responsibilities and bears most of the associated costs, unlike Ex Works, where the buyer does the same.

In CIF, the seller ensures the goods clear exports and are loaded onto the vessel. They also pay for the transport and insurance of goods to the final destination.

Final thoughts on the implications of using EXW in International Trade

EXW can have benefits and drawbacks for both sellers and buyers.

For sellers, it lowers costs and frees them from any liability. On the other hand, buyers have more control and may also save money.

There are also legal implications of EXW, and in certain jurisdictions, it may not be possible to use this trade agreement. For instance, in the European Union (EU), a foreign corporation can’t complete exportation requirements. In other words, sellers are required by law to handle the export responsibilities.

It’s important to use a trusted freight partner when taking the EXW routes. Gorto is a freight forwarder in China with experience in both air and sea shipping. It can help buyers with an EXW agreement seamlessly handle the logistics out of China and to their destination.

EXW FAQ’s

  • Does EXW Incoterms include duties and taxes?

Under the EXW incoterms, the buyer is responsible for all duties and taxes, including those at the origin and destination. The buyer pays all the export and import duties and customs charges.

  • what does exw mean on Alibaba?

If a buyer mentions EXW or quotes EXW pricing, they expect the buyer to pick up the goods from their location and bear all the shipping and export costs. They will only prepare the goods for export.

  • Does EXW include shipping.

    EXW doesn’t include shipping from the seller, as it’s typically paid by the buyer. The seller is only responsible for moving the goods to a warehouse or dock, from where the buyer ships them to their final destination, and the shipping costs are paid.

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