What is Ex-Works in Shipping?-EXW terms

Let’s face it. The shipping process can be a complicated and daunting experience, especially if you’re working in international trade. Apart from planning and working through the shipping documents from export documents and customs paperwork, you also need to grapple with various international commercial terms (incoterms).

The main function of incoterms in international trade is to designate the responsibility for cargo insurance and freight at the different stages of the shipping process.

The international commercial terms we will discuss for today’s post will be on Ex-Works incoterm.

What is EX Work (EXW)?

The ex-works (EXW) incoterm specifies that the buyer is entirely responsible for the EXW shipment, from dispatch to delivery. Buyer is responsible for all costs. This is published by the international chamber of commerce.

EXW terms indicates that the goods are delivered to the buyer after being placed at a designated location or predetermined location.

The seller is under no responsibility to load the delivery into any collecting vehicle or freight forwarder or clear them for export. That rule puts few obligations on the seller.

How does EX-works Work in Shipping?

EX-works shipping is a trade term that stands for “Exclusive Works.” This term is used in international shipping and refers to how goods are delivered to the buyer. With EX-works, the seller delivers the goods to a specific location, usually their warehouse. The buyer is then responsible for picking up the goods from that location and arranging for transport to their final destination.

Advantages of EX Works terms

The EX Works term of sale is advantageous to they buyers and the sellers in several ways.

First, it is a very simple term of sale to understand. There are only two elements to it – the Exportation and the Incoterm. This makes it easy for buyers to know what they are purchasing and for sellers to understand what they are selling.

Second, EX Works is a very cost-effective option. No transportation costs are involved, so buyers do not have to worry about paying extra for shipping. And the Sellers also have no need to worry about covering shipping costs, which can be expensive.

Third, EX Works is an excellent way for buyers to get products quickly. Since there are no transportation costs, usually the buyer can receive their products sooner than if they were using another term of sale.

Fourth, EX Works is perfect for smaller shipments. Because there are no transportation costs involved, it does not make sense for larger shipments to use this term of sale. However, smaller shipments can be a great option since there are no added costs.

Fifth, EX Works EXW terms are perfect international commercial terms. it makes Buyers and Sellers very clear about their responsibility.

Disadvantages of Ex Works terms

The only disadvantage to this EXW agreement is focused on customs clearance in the country of origin.

Usually the supplier provides the information when arranging customs clearance in the country of origin. However, if that information is wrong, the buyer is responsible for the ENTIRE shipping costs. Moreover, the buyer pays any costs if goods are picked up for a customs inspection.

The majority of the International Chamber of Commerce enables some share in the responsibility of this process. EXW is the only term that doesn’t need the seller to load, deliver and export the free carrier cargo to the terminal. This is the cheapest option for the seller.

EXW Shipping terms Buyer’s responsibilities.

The buyer shoulders all other risks and obligations once they collect the goods from the seller. Buyer is responsible for the below items:

·        Load the cargo at the pickup location so the freight can move to the port for export.

·        Sending the goods to the port of origin.

·        Provide documentation and export licenses.

·        The buyer is liable for paying all the costs at the terminal.

·        Load the cargo into the carriage and ensure the carriage paid.

·        Ensure the freight protects it from loss, damage, or theft.

·        Pay all costs associated with fees charged by the receivers’ country and terminal.

·        Pay the costs of shipping the cargo from the destination port to the final destination.

·        pay the costs associated with unloading the cargo from the shipping company or freight forwarders once the goods have arrived at the destination.

·        Pay all duty and taxes associated with importing the cargo to the destination.

EXW Shipping Terms Seller’s responsibilities.

Under the EXW agreement, the only responsibility of the seller is low. They only need to guarantee the cost insurance and freight is settled and responsible for the preparation of the goods. so it’s ready for export, waiting for the buyer to collect from their factory.

Attention for sellers is that the products should be packed into export cartons for most shipments with the necessary export documentation and licenses.

FAQs about EX-Works shipping terms

Have more questions about Ex-Works terms? Here are more answers to them.

Q: Who is the shipper in EXW?

The shipper in EXW is the party that initiates the transport of goods from one location to another.

Q: What is the advantage for the shipper in EXW?

The seller is responsible for transporting the delivery into any collecting vehicle or clearing them for export. That rule puts a lot of benefits on the seller.

Q: What is the difference between FOB and EXW?

FOB terms stand for free on board (FOB). Its rules oblige the seller to prepare the goods and deal with all the shipping responsibilities until the goods are loaded into the shipping vessel at a port agreed upon with the seller.

Note that EX-Works (EXW) assigns all the risks of shipping to from the seller to the buyer. Meanwhile, FOB origin shares the risks with both buyers and sellers. In light of that, if you are not experienced in dealing with the supply chain or are risk-averse, it may be best to choose FOB shipping.

Further, the buyer in Ex-Works (EXW) would bear the risks until the goods are on board, and you can take out insurance to cover them until they arrive at the port.

Q: Which is Better, DDP or EXW?

DDP (delivered duty paid) is another international shipping term. With DDP, it obliges the seller to take full responsibility for delivering the goods and paying all fees from the supplier’s factory throughout the buyer’s final destination.

Unlike CFR or FOB (free on board), both terms allocate the mode of transport and may be applied to the transportation of goods through the air.

Q: What is the EXW price?

Ship through Ex-works needs the buyer to cover all the shipping costs, including inland shipping, cargo from the factory, importing, exporting, and transport to the shipping point. Each leg of the journey should be considered to compute the costs of this kind of shipment.

Conclusion about EX-works Trade Terms

In a word, EXW Terms price only includes the product cost. and the Supplier delivers goods to the buyer within their factory. The whole Transportation process steps like Pick up, customs clearance, international shipping, Destination country inland transportation, and final mile delivery, should be paid for by the buyer. So When doing EXW terms with suppliers, it is better for the buyer to have his Freight forwarding providers to cover all the risks and save shipping costs.

 Under Exw terms, the buyer can control the Shipping process with his freight forwarders. Meanwhile, if EXW prices with the supplier, the buyer can get a much lower unit price to get their goods. The Most Important is to Find a Reliable Freight Forwarder.