GLOBAL SELLING BLOG

Ex Works (EXW) Incoterms: Definition, benefits and example

EX Works Incoterm specifies responsibilities between exporters and importers in global trade. Learn more about it in this blog.

In international trade, clear communication is key to ensuring smooth transactions, especially when goods cross borders. That’s where Incoterms come in — standardized rules by the International Chamber of Commerce (ICC) that define who is responsible for tasks like shipping, insurance, and customs clearance. Among these, the EX Works (EXW) Incoterm is one of the simplest, outlining that the buyer handles all logistics once goods are made available at the seller’s premises. In this blog post, we will explore the meaning of EXW Incoterm, its uses, benefits, examples, and the advantages and disadvantages associated with it.

What is EX Works Incoterm (EXW)?

EX Works (EXW) is a shipping arrangement in international trade by which a seller makes goods available at their premises (like a factory or warehouse) and the buyer handles all other aspects, including transportation, insurance, and other costs in the export process. An EXW Incoterm assigns risk and accountability to the buyer.¹

Learn the term - Incoterms

Incoterms or International Commercial Terms are a set of 11 rules or terms published by the International Chamber of Commerce (ICC) to clarify the rules and responsibilities of buyers and sellers use in international domestic trade contracts. Incoterms were first developed in 1936 and are updated periodically to conform to changing trade practices. Incoterms were most recently updated in 2020.

EX Works Incoterm 2020 rule — major changes and updates

Under Incoterms 2020, the EXW Incoterm states that the seller must deliver goods at their own place of business, generally in their factory, officers, or warehouse. The seller does not need to load items onto a truck or worry about the freight once it has left the premises; the delivery is considered complete and all export responsibility is on the buyer.

However, EX Works Incoterm can create some challenges as many countries only allow an entity registered in the country to export goods. The buyer may also face VAT/GST issues unless the seller has evidence of the export. These concerns complicate the application of EXW Incoterms in international trade.²

Example of EX Works Incoterm

Typically, importers prefer EXW transactions when they can handle transportation arrangements cost-effectively. For example, Business A offers 500 generators at $1,000 per unit, including shipping, while Business B counters with $900 per unit without shipping. This opens an opportunity for Business B to explore cheaper shipping options. If Business B identifies a cost-effective shipping deal, they can manage the logistics independently and save money by using EXW Incoterm. This arrangement empowers Business B to weigh their options and make a decision that minimizes overall cost.

Exporter’s obligations under EXW Incoterm

Exporters in an EXW arrangement have minimal obligations. These include:
• Making the goods available at their premises (usually a factory or warehouse).
Packing the items for loading and shipping.
Coordinating the pickup location and time with the importer.³

Importer’s obligations under EXW Incoterm

Importers bear various obligations under EXW Incoterms, some of which include:
• Loading fees
• Export customs fees
• Loading on carriage
• Carriage charges
• Insurance
• Import customs fees
• Terminal charges
• Destination delivery
• Unloading costs
• Transport to port of origin⁴

Advantages of EXW Incoterm

Some advantages of EXW Incoterms are as follows:

Minimal exporter responsibility

Exporters face minimum risk and responsibility as they are only responsible for making goods available at their own premises. They do not have to bear the cost or responsibility of loading and shipping goods, or paying insurance.

Access to domestic markets for importers

EXW allows importers to purchase from markets where domestic sellers may not have export licenses, such as in China.

Local pricing options

Importers have the option to source products from local manufacturers at domestic market prices, gaining cost advantages.⁵

Disadvantages of EXW Incoterm

Some disadvantages of EXW Incoterms for importers are as follows:

High responsibility

The importer assumes all risks and costs, including export, transport, and import, unlike other Incoterms that share responsibilities between exporter and importer.

Complex logistics

Managing the loading, delivery, and export process from a foreign country can be risky, and the importer may need local resources to resolve problems.

Unexpected costs

Without a clear understanding of export processes, importers may face unforeseen expenses, making the initial cost savings less beneficial.

When should you use an EXW agreement?

EXW agreements can be useful in certain circumstances. Some of these are as follows:

Consolidation of multiple shipments

Businesses choose EXW when the importer wants to consolidate multiple shipments under a single export.

Exporter limitations

EXW is beneficial in circumstances where the seller is unable to export.

Air express shipments

EXW is also beneficial for air express shipments, as couriers typically handle transport and export formalities, reducing costs for the importer.

Aspect

EXW

FOB

Used for

Air express or consolidating shipments.

Sea freight

Responsibility

Importer manages all transport and export formalities.

Exporter manages transport to the port and export formalities.

Risk transfer

At exporter's location.

At port of origin after goods are loaded.

Importer control

High, with cost-efficient logistics options.

Moderate, as exporter handles initial transport.

Conclusion

EXW Incoterm is beneficial for sellers and provides flexibility of importing to buyers. It is used when the seller does not have the capacity to export, or when the importer is looking to procure multiple shipments from the same country. If you are a exporter looking for tailored guidance and support on how to export products via e-commerce, programs like Amazon Global Selling can help you grow your business globally.

Easy e-commerce exports with Amazon Global Selling

If you are a business owner and you want to sell your products to the world, Amazon Global Selling enables you to list and sell ‘Made in India’ products on 18 Amazon global marketplaces. As an e-commerce export program, Amazon Global Selling provides support and guidance at every step of your export journey, connecting you to Amazon’s Service Provider Network for tailored compliance, payments, and logistics support.

Registered sellers can choose to ship their products by themselves through Merchant Fulfilled Network (MFN) or they can opt for Fulfillment by Amazon (FBA) and outsource order fulfillment to Amazon including packing, storage, delivery, and returns. Amazon Global Selling simplifies the process of international shipping to the world, helping businesses navigate customs and reach a vast audience.

More blogs on incoterms

1. What is Delivered at Terminal (DAT) incoterm?

2. What is a Cost and Freight (CFR) incoterm?

3. All you need to know about Free Alongside Ship (FAS) incoterm 2020

4. Guide to FCL shipping: Everything exporters need to know

5. What is Carriage Insurance Paid (CIP) in incoterms?

6. What is Freight on Board: How does it work in shipping?

7. What is a Container Freight Station (CFS) and its role in shipping?

8. What is Cost, Insurance and Freight (CIF) in shipping?

9. What is a Free Carrier (FCA) incoterm?

10. What are incoterms in exports: Here’s everything you need to know

Frequently Asked Questions

Does EXW Incoterm include duties and taxes?

Yes, EXW Incoterm includes duties and taxes. In EXW Incoterm, the responsibility to take care of all taxes, import duties, and customs clearance is on the importer.

How to calculate EX Works costing?

Calculating EX Works costing involves totaling all the expenses that the importer must pay from the time the items are picked up from the importer’s location until they reach their destination.

Who handles the custom clearance procedure under EX Works?

The importer is responsible for customs clearance under the EXW Incoterms.

Who determines the place of delivery for EXW?

The place of delivery for EXW is determined by the seller or exporter. The seller is only required to make the goods available for the buyer and does not bear any transportation costs.

What is the difference between EXW and Delivery Duty Paid (DDP)?

EXW and DDP are types of commonly used Incoterms. In EXW, the seller just has to pack the goods and the buyer is responsible for most of the costs and risks. On the other hand, in Delivery Duty Paid (DDP) the seller takes care of almost everything, from packing and checking in the warehouse to delivery at final destination. This includes export and import charges as well. The buyer is responsible for the transportation charges from destination port to the final destination only.

Who pays freight on EXW?

The importer is responsible for all costs including freight under EXW Incoterms.

How does insurance work with EXW?

In EXW Incoterms, the insurance coverage for goods after they are ready for pickup is the responsibility of the buyer.

Published on November 29, 2022.

Sources:
1. https://guidedimports.com/blog/what-does-exw-mean-Incoterms/
2. https://www.tradefinanceglobal.com/Incoterms/ex-works-exw/
3. https://www.investopedia.com/terms/e/exw.asp#:~:text=Understanding%20Ex%20Works%20(EXW),Storing%20or%20reselling%20products
4. https://www.investopedia.com/terms/e/exw.asp
5. https://guidedimports.com/blog/what-does-exw-mean-Incoterms/
6. https://guidedimports.com/blog/what-does-exw-mean-Incoterms/

What is Carriage Insurance Paid (CIP) in incoterms?

CPT Incoterms 2020: Meaning and shipping terms