What is the EXW incoterms? By requiring the seller to only make the goods available to the buyer at their warehouse or dock, an EXWorks Incoterm maximizes the buyer’s risk and responsibility.
After that, the buyer is free to come and pick up the items. Due to the fact that the buyer must make all arrangements, Ex Works places all costs and risks on the buyer. Read on to discover more about EXW.
Table of Contents
What Is EXW?
Ex Works (EXW) is a term used by Incoterms 2020 to refer to a seller’s delivery of goods at their place of business, which is typically a factory, office, or warehouse. The remainder of the shipment is the buyer’s responsibility (for example, loading a truck or ship with the remaining items). overseas shipment and customs duty). Therefore, EXW is better for the seller because they don’t have to worry about the freight once it has left their location. Important to keep in mind that, even though the goods are still in the seller’s possession and under his or her physical control, the buyer is still responsible for payment once the seller informs the buyer that the goods for the contract have been identified and set aside and delivery has occurred.
Buyers & Sellers’ Responsibilities Under EXW Agreements
In the sections that follow, we’ll go over each party’s obligations under an EXW contract.
The seller’s obligations are incredibly minimal under the EXW Incoterms. They essentially only ask that the cargo be prepared for export and that it be able to be picked up at their location. This indicates that the goods are generally already placed in export cartons for shipments. The location of the cargo must allow the buyer to pick it up from the seller once it is prepared.
The seller only has these obligations.
Once they have picked up the goods from the seller, the buyer assumes all risks and obligations. These responsibilities include the following:
- Loading Charges: Loading the cargo at the pickup location will enable it to be transported to the port for export.
- Delivery to Port/Place: transporting the goods to the export process’s starting point, the port of origin.
- Export Duty, Taxies & Customs Clearance: completing all export paperwork and paying any duties associated with shipping the goods. Buyer is forced to rely on their own export strategies.
- Origin Terminal Charges: All terminal fees must be paid in full by the buyer.
- Loading on Carriage: the duty involved with stowing the cargo on the carriage.
- Carriage Charges: each and every freight charge incurred when transporting the cargo between ports.
- Insurance: Covering the freight against loss, theft, or damage even though it is not necessary.
- Destination Terminal Charges: any and all fees imposed by the terminal and port of destination. In order to unload the shipment from the ship and move it around the harbor after it has arrived at the destination port, the terminal charges a fee.
- Delivery to Destination: the expenses involved in moving the cargo from the destination port to the final location.
- Unloading at Destination: the expenses related to unloading the cargo from the final carrier after the goods have reached their destination.
- Import Duty, Taxes & Customs Clearance: all import duties and taxes related to the cargo into the destination nation.
Advantages And Disadvantages For The Buyer
EXW is occasionally the most sensible choice for shipping goods. Businesses that frequently purchase from one nation, for instance, can benefit from EXW if they intend to consolidate products from multiple suppliers and combine the products. As it enables the buyer to export the cargo as a single export in this situation, EXW is ideal.
The ability to conceal the identity of suppliers is another benefit for buyers. They can use a different exporter name on the shipping documents and ship under the EXW incoterm.
EXW is typically the least expensive option when comparing the price to buy a product. There are some circumstances where sellers can get a tax refund on the goods they export, and if a seller relies on this refund as the entirety of their profit, FOB may end up being less expensive for both the buyer and the seller. However, since EXW requires very little additional work from the seller, it is typically the least expensive choice.
EXW may be the best choice if a business regularly buys from a particular nation and has an export license. We like to point out that the risks involved with EXW can be substantial, so we advise buyers to typically rely on a reputable business to handle everything on their behalf.
A buyer would want to use EXW in certain nations, such as China, where there are many domestically focused manufacturing options that are of high quality and reasonable prices. Ex-works permits the foreign buyer to buy in the domestic market and rely on their means of export when a seller is unable to export.
Numerous producers only concentrate on making top-notch goods for the local market; they never apply for export licenses or advertise their products abroad. If you are a skilled source, you can locate some of these factories to benefit from their local prices and enter into purchase agreements with ex-works clauses.
Although the unit cost of EXW is lower than that of other Incoterms, the disadvantage to the buyer is much greater.
All risks and expenses related to the export, transportation and import of the cargo are, first and foremost, the buyer’s responsibility. Most International Commercial Trade Agreements permit some sharing of this burden; EXW is the only term that exempts the seller from having to load, deliver, and export the cargo to the terminal.
When dealing with a reliable seller, loading the cargo, delivering it to the origin terminal, and exporting the goods are not particularly risky processes in and of themselves. However, because these tasks are carried out in the seller’s nation rather than the buyer’s nation, any issues that do arise must be dealt with by a competent partner. Since ownership has already been transferred, buyers are at risk if there is ever a problem that prevents the cargo from being exported from the country of origin.
Last but not least, EXW may require a buyer to pay more than they had originally planned to if they are unaware of the steps or costs associated with exporting a product.
Finding a third-party logistics provider or freight forwarder who can help you with the export is your best option if your supplier will only sell their goods under EXW incoterms. By designating a company to act as the exporter on your behalf, for instance, if you are exporting from China, we can help. Our business is capable of acting as an exporter to handle the export in certain situations. It is crucial that you speak with your forwarding agent and find out if they have the appropriate export licenses to serve as the exporter.
Potential Issues For The Seller
The exporter must demonstrate that the goods have left the EU when exporting goods, for instance, from the EU. In the case of Ex Works, the buyer is accountable for this but is under no obligation to provide that proof or even to export the shipment. Sales tax will be due as if the goods were sold to a client inside the EU if the goods leave the EU and the seller is unable to provide proof. The goods are exempt from sales tax with the proof.
Potential Issues For The Buyer
The exporter of goods must be a natural person or legal entity registered in an EU country under the customs jurisdiction in order to export goods (for example from the EU). If the buyer is not registered there, the seller might have to ask the buyer to declare the goods because the buyer is in charge under the Ex Works conditions.
When To Use An EXW Agreement?
The majority of companies will choose to use an EXW agreement when the seller is unable to export or the buyer wants to combine multiple shipments and export them under one name.
If the buyer is shipping by air express, they may also want to choose EXW. Express couriers frequently pick up the cargo from the seller’s location, and all of the export and transportation formalities are included in their service. Therefore, by switching their terms to EXW, buyers shipping cargo via express shipments may find some savings.
In other cases, seasoned importers might open offices in the nation where they are exporting goods to make it simpler to process their shipments. However, the majority of sellers who are knowledgeable about international trade will quote a different Incoterm unless there is a valid reason why a buyer wants to use EXW.
Are EXW Agreements For China Imports A Good Idea?
When using Air Express to import from China, EXW is a practical choice.
In other cases, sellers typically quote their products as EXW and anticipate the buyer to arrange pickup and export when a buyer travels to China to buy directly from markets, such as Yiwu Market.
Due to the fact that the unit price can frequently be lower, buyers have been known to believe EXW to be more affordable than FOB.
However, EXW still necessitates that the buyer arranges inland shipping and all export paperwork.
Once these extra costs are taken into account, the cost difference is frequently insignificant or even more expensive than shipping FOB.
Therefore, the buyer has complete visibility and control over the cost of logistics with EXW, which is obviously advantageous. But keep in mind that it’s crucial that you understand what you’re doing.
We excel at completing all EXW agreement requirements on behalf of our clients because we are the top China Freight Forwarder.
Last but not least, regardless of the Incoterm you choose, be sure to also contract China freight insurance. It’s an affordable way to reduce stress and safeguard your supply chain from severe loss.
How to calculate EXW pricing?
When shipping through EXWorks, the buyer is responsible for paying all shipping expenses, including obtaining the cargo from the factory, inland shipping, exporting, importing, and transporting to the final location. Every stage of the journey must be taken into account when estimating the costs of this kind of shipment. Guided Imports can provide a detailed quote for your specific shipment if you’re shipping from China.
Difference between EXW and FOB
In an EXW shipment, the buyer is in charge of paying all shipping costs and is required to pick up the products from the seller. In a FOB shipment, the seller is in charge of exporting and footing the bill for the costs associated with loading the cargo onto the ship. The Buyer shall pay all costs of transportation after the Cargo has been loaded.
Does EXW Incoterms include duties and taxes?
The buyer is in charge of paying all import duties, taxes, and customs clearance when shipping under EXW Incoterms. With EXW, the buyer is responsible for managing every aspect of the importation, shipping, and exportation processes. The seller’s only obligation is export packaging.