EXW Incoterm: Understand all about the Ex Works shipping terms
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.
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EXW Incoterm: Ex Works meaning in shipping
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.
Risk transfer point on the 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.
SHIPPING COSTS
Ex Works Price: charges for seller and buyer under EXW Incoterm
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.
EXW shipping: costs of the seller
- Packaging and labelling the goods
- Making the goods available for inspection
- Deliver the goods to the designated location
EXW shipping: costs of the buyer
- Export fees, customs clearance and documentation
- Loading of the goods onto a vessel or vehicle at the delivery location
- Terminal charges and all freight transportation fees
- Clearing the goods for import, import fees and documentation
- Destination terminal charges and the unloading of the goods
- Last-mile deliveries and storage
Example of EXW shipping term
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.
- The Irish company (seller) pays for packaging the goods and for the inland transport from their base to the designated port in Cork.
- The US company (buyer) pays to load the goods into their or the carrier’s vessels, clears the goods for export, and pays for the export customs clearance at the Irish port.
- The US company (buyer) must arrange all transport details and cover all costs related to freight shipping. They can choose the carrier of their choice.
- Once the cargo reaches the destination port in the US, the buyer pays for import clearance and fees, for unloading the goods from the vessel, and all subsequent US transport.
EXW TRADE TERMS
EXW – Ex Works customs clearance
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.
INSURANCE
Shipping insurance under EXW Incoterm
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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Ex Works meaning in shipping: FAQ
What are the advantages of using the Ex Works Incoterm?
For the seller, the EXW Incoterm requires the least effort because their only responsibility is to make the goods available at the designated location. The designated location can even be on the seller’s facilities, which requires sellers to only pack and label the goods correctly.
In which situations is the EXW Incoterm mostly used?
The Ex Works Incoterm is often used for:
- Domestic transactions, where the buyer does not have to worry about export and import licenses.
- Consolidation, when the buyer gathers goods from different suppliers to transport as one cargo.
- When the seller is unable to export the desired goods.
For other situations, there are usually other Incoterms that are more advantageous such as FCA or FOB.
Who pays for freight transport under the EXW Incoterm?
The buyer is responsible for paying freight transport costs when shipping under EXW terms.
Who chooses the designated location in EXW transport?
Under Ex Works shipping terms, the buyer and the seller have to agree upon the designated location for delivery, which can be the seller’s premises, a warehouse, a hub or a convenient port in the country of origin. The designated location is not regulated by the Ex Works Incoterm and has to be decided when drafting the contract.
What does EXW price with Alibaba mean?
Alibaba, one of the most important online retailers, often uses Ex Works prices for their sales. This means that the Alibaba seller, usually located in mainland China will make their goods available at a designated location. Usually, the seller will already have a location chosen for convenience. As a buyer purchasing goods with EXW Alibaba prices, you will have to pay for clearing the goods for export and import, loading, unloading and shipping fees.
Who is responsible for loading the cargo when using the EXW Incoterm?
The buyer is responsible for loading the goods on the selected vessel. Although with EXW trade terms, the seller can offer the load the goods on the vessel, they are not obligated to. If a buyer needs their cargo loaded on the vessel, they can choose FOB or Free on Board.
What is included in an EXW invoice?
If you are issued an EXW invoice, this only includes the price of the merchandise, which will be available at the agreed delivery location. This means you (the buyer) will have to cover export charges at the country of origin, taxes and licenses, as well as all freight costs, including the loading and unloading of the goods.