EXW vs FOB: Differences Between these Incoterms

What is the difference between FOB and EXW?

Ex Works (EXW) and Free On Board (FOB) are two Incoterms used for standardising and easing international freight transport. As with all Incoterms, they are used to establish the responsibilities and risks of the seller and buyer – but which one is better for you? Although FOB and EXW share some similarities, it is important to understand the differences between Ex Works and FOB before you organise your shipment.

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Differences between Ex Works and FOB

The main difference between Ex Works and FOB is the point where the responsibility shifts from the seller to the buyer. Under FOB shipping terms, the seller is responsible for loading the goods on board the selected vessel, which means the buyer’s responsibility starts. Under Ex Works, the seller is not obligated to load the goods in the selected vehicle, only to make it available at a designated location.

Another significant difference between EXW and FOB is that under FOB terms, the seller is the one that pays for transporting the goods to the vessel before loading them. Under EXW, once the seller makes the goods available at the designated location, any further transport costs are borne by the buyer.

Since FOB’s shipping rules are closely related to the vessel, this Incoterm mainly applies to maritime and waterway transport. On the other hand, EXW can be used for all modes of transportation.

Read more about each Incoterm:

EXW vs FOB: Pros and cons of each Incoterm

Advantages and disadvantages of shipping with EXW

For the buyer:

One of the main benefits of using EXW is that they get a clear picture of what is their total cost since most of the responsibility falls on them. Since the buyer has control over the entire process, the risks of extra charges or fraud are essentially none. However, the disadvantage for the buyer is the responsibility of having to deal with the export clearance in the origin country. Not always will the buyer have the necessary documents or expertise to conduct the process alone.

For the seller:

EXW is a good option if their operations are only local-based and they do not have the permit or experience with exporting goods. If they get a customer from abroad and they sell under EXW, it means the buyer will have to deal with all the documents and export procedures, so the transaction is easy for the seller.

Advantages and disadvantages of shipping with FOB

For the buyer:

Using FOB is usually a good option if you do not have experience with export and transport in the country of origin because the seller will then be responsible for clearing the goods and arranging the domestic transport. FOB usually turns out to be a more affordable solution exactly because you benefit from the seller’s local logistics network instead of having to arrange it yourself. The biggest risk for the buyer is when you have to deal with inexperienced or unprofessional sellers/freight forwarders, which may result in losses.

For the seller:

Sellers should only agree to ship under FOB if they do indeed have the experience to arrange all export procedures and transport themselves. For sellers not experienced in exporting goods, it may be without having the proper knowledge and network.

Customs procedures with Ex Works vs FOB: import and export duties

Another difference when comparing Ex Works vs FOB is who pays for import and export duties.

  • Under FOB, the seller must deliver the goods cleared for export on board the selected vessel. This means the seller must pay for export clearance and cover all taxes, duties and documentation in the country of origin.
  • Under EXW, the seller is only responsible for making the goods available to the buyer at the named location. This location is usually a warehouse or pick-up point outside the seller’s premises, so all export procedures are the buyer’s responsibility

Learn more about customs procedures

Ex Works vs FOB: a summary

Type of transportAll modes of transportSea freight
Export dutiesBuyerSeller
Loading the goodsBuyerSeller
Freight chargesBuyerBuyer
Import chargesBuyerBuyer
Unloading and handling at arrival at the named placeBuyerBuyer
Domestic transport to the named destinationBuyerBuyer
Risk transferWhen the goods are made available at named locationWhen the goods are loaded on board the selected vessel
InsuranceNot an obligation of either partiesSeller until the loading, buyer after that point

Want more information about Incoterms?

There are many differences between Ex Works and FOB, mainly because FOB can only be used for sea cargo. If you want more information about FOB, EXW, and other Incoterms by reading our complete guides.

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What is the difference between FOB and EXW: FAQ

What is better, EXW or FOB?
It depends on the size of the cargo, the type of transport and the bargaining power of both parties. When comparing FOB and EXW terms, it is important to know that although both Incoterms establish the seller’s responsibilities end at the country of origin, EXW is the one with the most responsibilities for the buyer as they have to deal with export procedures instead of the seller.
To evaluate which Incoterm is better for your case, EXW or FOB, check our pros and cons sections above.
Is it mandatory to add insurance when using EXW or FOB?
Purchasing insurance is not mandatory for either party when shipping under EXW.
Under FOB, the seller is not obliged to purchase insurance, but he must provide the necessary details if the buyer wishes to do so. In most cases, the seller has insurance for the cargo until the loading point, and then the buyer takes over the insurance from that point on.
What is included in EXW or FOB prices?
EXW prices include the commercial value of the goods. Everything else (export and import duties, loading, unloading and handling, freight charges, insurance and domestic transport in the country of destination) has to the paid by the buyer separately.
FOB prices include the commercial value of the goods, domestic transport, export clearance and loading of the goods on the selected vessel.
What is cheaper for the seller, EXW or FOB?
When comparing FOB and EXW, EXW shipping terms are cheaper for the seller because their only responsibility is to leave the goods packed and ready for loading outside their premises in the country of origin. Generally speaking, EXW is the cheapest option for the seller, as it includes the least responsibilities.