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What does EX Works (EXW) Mean in shipping terms?
An EXWorks Incoterm is an agreement that maximizes the buyer’s risk and responsibility, by requiring the seller to only make the goods available for the buyer at their warehouse or dock. Once the buyer collects the cargo, the buyer assumes all other responsibilities, including transport to the port of destination.
Ex Works is an Incoterm used for all forms of shipping, regardless of the mode, or legs of the transport. Under this term, the buyer assumes all responsibilities of the shipmen, once the cargo is packed in export packaging and collected.
EXW means the buyer must arrange all transport, export documentation, cover all freight charges, and fulfill the importation and delivery process. Once the goods are collected from the seller’s property, the risk is transferred to the buyer.
This type of transport leaves all risk and responsibility on the buyer, so newbies and buyers unfamiliar with exporting are advised to use a freighting and logistics company to avoid errors and unforeseen costs associated with shipping and transporting the goods.
What are the Buyers and Sellers Responsibilities with EXW Agreements?
Below, we will explore the buyer’s and sellers’ responsibilities under an EXW agreement.
Sellers Responsibilities
Under the EXW Incoterms, the seller’s responsibilities are incredibly low. Essentially, their only requirement is to ensure that the cargo is packaged so it is ready for export, and the goods can be collected from their location. For most shipments, this means the products are already packed into export cartons. Once the cargo is ready, it must be in an area where the buyer can collect it from the seller.
These are the only responsibilities of the seller.
Buyers Responsibilities
The buyer assumes all risks and liabilities once they collect the goods from the seller. These responsibilities include the following:
- Loading Charges: Loading the cargo at the location of the pickup so that the goods can move to the port for export.
- Delivery to Port/Place: Transporting the goods to the port of origin, to begin the export process.
- Export Duty, Taxies & Customs Clearance: All export documentation, and paying any duty to export the cargo. The buyer must rely on their own methods of export.
- Origin Terminal Charges: The buyer is responsible for paying all fees at the terminal.
- Loading on Carriage: The responsibility associated with loading the cargo onto the carriage.
- Carriage Charges: All freight costs associated with moving the cargo from port to port.
- Insurance: While not required, insuring the freight to protect against damage, theft, or loss.
- Destination Terminal Charges: All charges associated with fees charged by the destination port and terminal. When the cargo arrives at the destination port the terminal charges fees to unload the shipment from the vessel and transfer them throughout the harbor.
- Delivery to Destination: The costs associated with transporting the cargo from the destination port to the final destination.
- Unloading at Destination: The costs associated with unloading the cargo from the final carrier once the goods have arrived at the destination.
- Import Duty, Taxes & Customs Clearance: All duty and taxes associated with importing the cargo into the destination country.
Advantages and Disadvantages for the Buyer
Advantages
In certain circumstances, EXW is the most practical solution for shipping products. For example, businesses who routinely purchase from one country can take advantage of EXW if they plan to consolidate products from multiple suppliers and consolidate the products together. In this instance, EXW is ideal, as it allows the buyer to export the cargo as a single export.
Another advantage is if buyers wish to hide who their suppliers are. They can ship under an EXW incoterm, and use a differently named exporter on the shipping documents.
When looking at the cost to purchase products, EXW is usually going to be the least expensive option. There are some instances where sellers can obtain a tax return on the products they export, and if a seller is relying on this refund as a part of all of their profit, then FOB may end up being cheaper to both the buyer and the seller. However, in most instances, EXW will be the cheapest option, as it requires very little additional work for the seller.
If a company is routinely purchasing from a specific country, and they have an export license, EXW could be an ideal option. We like to point out that the risks associated with EXW can be high, so we recommend a buyer typically rely on a trusted company to manage everything on their behalf.
Specific countries, such as China, that have good quality and inexpensive domestically focused manufacturing options are a perfect example as to why a buyer would want to use EXW. When a seller lacks the ability to export, ex-works allows the international buyer to purchase in the domestic market, and rely on their methods of export.
There are a large number of manufacturers who focus entirely on producing excellent products for the local market and never both to obtain export licenses and market their goods to the outside world. If you are a savvy enough sourcer, you can find some of these factories, to take advantage of their local prices and signing purchase contracts under ex-works terms.
Disadvantages
While EXW can sound appealing to a buyer because the unit cost lower than other Incoterms, the disadvantage for the buyer is significantly higher.
First and foremost, the buyer is responsible for all risks and costs associated with the export, transport, and importation of the cargo. The large majority of International Commercial Trade Agreements allow for some share in the responsibility of this process, with EXW being the only term that does not require the seller to load, deliver, and export the cargo to the terminal.
In it of themselves, loading the cargo, delivering it to the origin terminal, and exporting the goods is not incredibly risky when working with a legitimate seller. However, because these tasks are completed in the sellers country, and not the buyers country, problems that do occur need to be handled for a qualified partner. If there is ever an issue where the cargo can’t be exported from the origin country, the risk is the buyers, because the transfer of possession has already taken place.
Lastly, if a buyer is unsure of the process or costs involved in exporting a product, EXW could result in the buyer having to pay more than what they originally intended to pay.
If your supplier is only willing to sell their products under EXW incoterms, your best option is to look for a 3rd party logistics company or freight forwarder who can assist you with the export. For example, if you are exporting from China, we can assist by nominating an entity to act as the exporter on your behalf. Under certain circumstances, our company can serve as an exporter to handle the export. What is important is that you communicate with your forwarding agent and ask them whether or not they have the right export licenses to act as the exporter.
When to Use an EXW Agreement?
Most businesses will opt to use an EXW agreement when the seller unable to export, or the buyer is looking to combine multiple shipments and export them under a single name.
Another instance a buyer might want to opt for EXW is if they are shipping via Air Express. Express couriers often collect the cargo from the seller’s location, and built into their service includes all the transport and export formalities. So, buyers shipping cargo via express shipments might find some savings by changing their terms to EXW.
In other circumstances, established importers might set up offices in their export country for ease of processing their shipments. But unless there is a legitimate reason why a buyer wants to use EXW, most sellers who are experienced in international trade with quote a different Incoterm.
EXW Agreements for China Importing: are they a good idea?
When importing from China, EXW is a viable option when using Air Express.
In other instances, when a buyer travels to China to purchase goods directly from markets, such as Yiwu Market, most sellers are quoting their products as EXW and expecting the buyer to arrange pickup and export.
We have seen buyers think EXW is cheaper than FOB because the unit price can often be lower.
However, EXW still requires the buyer to organize inland shipping and all export documents.
Once factoring in these added charges, the cost difference is often negligible, or more expensive than merely shipping FOB.
With that said, the obvious benefit with EXW is the buyer has full view and control over the cost of logistics. But remember, it’s imperative you know what you’re doing.
As the leading China Freight Forwarder, we’re experts at fulfilling all the requirements of EXW agreements on behalf of our clients.
Lastly, no matter which incoterm you use, make sure you also contract China freight insurance, it’s an affordable way to minimize stress and protect your supply chain from catastrophic loss.
EXW Agreement FAQ’s
How to calculate EXWorks pricing?
Shipping via EXWorks requires the buyer to cover all shipping costs, including collecting cargo from the factory, inland shipping, exporting, importing, and transporting to the final destination. To calculate the costs of this type of shipment, every leg of the journey must be considered. If you’re shipping from China, Guided Imports can give your unique shipment a detailed quotation.
What is the difference between EXW and FOB?
In an EXW shipment, the buyer is responsible for all transportation charges and must collect the goods from the seller. In a FOB shipment, the seller is responsible for exporting and paying the costs to load the cargo onto the vessel. Once the cargo is loaded, the buyer is responsible for all transportation costs after the goods have been loaded.
Does EXW Incoterms include duties and taxes?
When shipping under EXW Incoterms, the buyer is responsible for all import duty, taxes, & customs clearance. EXW requires the buyer to handle all aspects of the exportation, freight, and importation process. The seller is only responsible for export packaging.
What is EXW on Alibaba?
When an Alibaba seller is quoting EXW pricing, they are indicating the buyer must collect the cargo from the sellers loading dock. EXW places all transportation responsibility on the buyer, meaning, they must organize the aspects of the export, transportation, import duty, taxes, & customs clearance. Unless shipping via China Air Freight, EXW is rarely advisable for new Alibaba buyers.
Where can I learn about other types of Incoterms?
Check out: Shipping Incoterms: The Complete Guide
