The Ex Works Incoterm is part of 11 shipping terms defined by the International Chamber of Commerce (ICC) to ease international trade. When shipping under the EXW Incoterm, the seller bears only the responsibility of making the goods available at a chosen location, and the buyer takes care of the rest. This article will explain more about how the Ex Works Incoterm works for senders and buyers, including information about customs clearance and insurance.
The EXW Incoterm is one of the shipping terms that establishes the least responsibilities for the seller. Under EXW trade terms, the seller has to pack and make the goods available for the buyer at the agreed location, which can be the seller’s premises, a port, or a warehouse. In turn, the buyer is responsible for arranging and paying for the goods transport, customs fees, and loading and unloading of the cargo.
Since the buyer is responsible for arranging the transport, the final price does not include shipping fees when using EX Works for exporting and importing.
The EXW Incoterm can be used for all modes of transport, but it is not advisable for buyers with little logistics experience because most of the risk when shipping under the EXW Incoterm is borne by the buyer. If you don’t have the required logistics knowledge, contact us, and we will help you ship your goods wherever you need them.
See below the diagram that explains the responsibilities of the seller and the buyer when shipping under EXW Incoterm.
When shipping under EXW terms, the risk transfers from the seller to the buyer when the buyer makes the goods available at the agreed place of delivery. Even though it is not a rule, it makes things smoother if the delivery location is decided upfront and included in the contract.
The seller is not responsible for loading the goods in the transport vehicle. However, in practical terms, they can be paid to do so if they agree on the contract beforehand. It is important to make it clear that even if the seller loads the goods, the buyer still holds the risks during loading because the risk transfer point is the point where they make the goods available.
As mentioned, the Ex Works price does not include the shipping costs. The price you see in the invoice refers to costs related to purchasing the goods, packaging, and making them available at the delivery location.
The seller may also help get any documentation required for export, but the buyer bears the fees related to customs clearance.
Suppose an Irish company (the seller), headquartered in Dublin, sells 100,000 units of merchandise to a US company (the buyer) under EXW freight terms. The agreed Ex Works delivery location is the seller’s hub at the port of origin in Cork, Ireland.
EXW TRADE TERMS
When using EXW for import and export, buyers will be responsible for all customs clearance procedures, fees and taxes. This means that the buyer will have to deal with the local trade authorities in the export country too.
The seller may help with the documentation for export with the local authorities, but if there is any additional cost related to incorrect or lacking information, the buyer is the one that bears the costs following the EXW Incoterm specifications.
It is important to note that it is not always possible for the buyer to be fully responsible for the export procedures according to local jurisdictions. For instance, in the EU, a non-resident individual or business cannot do the export declaration documents himself. In this case, it is better to ship under another Incoterm, such as the FCA, where the seller is responsible for clearing the goods for export.
According to the EXW shipping specifications, neither the seller nor the buyer is required to make an insurance contract. However, since the buyer bears the risk during most of the transaction, they are advised to purchase insurance for their goods.
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