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What is EX Works (EXW) incoterm in international trade?

EX Works is a common international incoterm that refers to the division of responsibilities between supplier and importer. Learn more about its role with an example in this blog.
exw incoterms
EX Works (EXW or ExWorks) is a common international shipping incoterm that refers to the division of responsibilities between a supplier and an importer in the export logistics process. The sole obligation an exporter has during a transportation process under EX Works shipping conditions is to guarantee that the goods being sold are made accessible for collection at particular premises.

What is EX Works (EXW)?

The term ‘EX Works’ signifies that the exporter has delivered goods. It means that the cargo has been placed at the importer’s disposal at their (seller’s) premises or a particular stated location (i.e., a warehouse, factory, etc.). Usually, the exporter is not responsible for loading these goods into the vehicle provided by the importer or clearing them for export. The importer bears costs and liabilities associated with transporting goods from the exporter’s premises to a specified location. EXW is considered to be advantageous to an exporter because it does not include the responsibility of freight after it has left their premises1.

EX Works shipping terms

Following are some of the common EXW incoterms shipping terms or conditions2:
• Exporter is exclusively responsible for initial maintenance of goods
• Importer is responsible for the entire shipping process
• Importer is exclusively responsible for loading goods from the point of origin to warehouse or factory
• Importer handles all legal processes
• All charges, risks and obligations for products from the warehouse to the importer’s location are the importer’s responsibility.

Example of EX Works

The pricing quotation for an EXW is usually determined by the importer to lower the value of the shipping process. EX Works transactions are commonly used when importers believe that the shipment arrangements can be managed better by them. For instance, suppose Business A has 100 generators to export to Business B. A charges $400 per generator plus shipping charges, whereas B offers $300 without shipping costs. If the importer can find a cheaper shipping cost deal than what A is offering, they mostly opt to handle it by themselves.

The above-mentioned example is fictional and has been used to explain the concept only.

Exporter’s obligations under EX Works incoterms

The role of an exporter in an EX Works transaction is3:
• Products, business invoices and supporting documents
• Place goods at the importer’s disposal on the agreed-upon date and location
• Notice to the importer to facilitate delivery
• Export labelling and packaging

Importer’s obligations under EX Works incoterms:

The role of an exporter in an EX Works transaction is:

• Pay the specified price of goods in the sales contract
• Providing proof of delivery to the exporter
• Loading at the exporter’s premises
• Customs procedures and export licenses
• Delivery charges
• Charges for loading and unloading and main carriage charges
• Discharge and further transportation
• Import procedures and duties
• Pre-shipment inspection fees

Advantages and disadvantages for the importer

Pros

• Businesses that import buy from one country but different exporters can combine goods and benefit from EXW by shipping products together.
• Since importers bear shipping expenses and obligations, they have complete control over the shipping procedure, ensuring the goods safety.
• Importers may also better predict expenses and prevent suppliers from charging a higher delivery price4.

Cons

• One significant drawback of an EXW incoterm for importer is customs clearance. Exporters are obligated under the EXW rules to facilitate the documentation for export approval. If the exporter’s information is incorrect, the importer is liable for additional costs and delays.
• Importers are liable for all risks and costs related to the cargo’s export, transportation and import. If there is ever a problem with the cargo being unable to be exported from the nation of origin, the risk is on the importer because possession has already been transferred.
• If an importer is unaware of the process or fees involved in exporting a product, EXW may be difficult.

When should you use an EXW agreement?

When an exporter is not able to ship the goods or an importer wants to combine many shipments and export them under a single name, an EXW arrangement is considered. Established importers may also set up offices in export countries to facilitate shipping process. In such cases, they might opt for EXW.

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Frequently Asked Questions

What is the difference between EXW and FOB?
In Free-On-Board (FOB) arrangements, exporters are responsible for transporting goods to a terminal, as well as customs fees and loading products on the vessel. The importer gets ownership of the goods and pays risks under FOB shipping conditions, as long as the exporter ships them from the stated ‘shipping point’. In an EX Works agreement, exporters are only responsible for delivering goods to a predetermined location.
Does EXW incoterm include duties and taxes?
The importer is responsible for all import fees, taxes and customs clearance when shipping under EXW incoterm.
How to calculate EX Works costing?
In EX Works, an exporter provides a quotation for the goods as determined by them. If the shipping process is handled by them, they also provide cost of shipping based on the agreement between the two parties. This varies from one trade agreement to another.
Who handles the custom clearance procedure under EX Works?
The importer bears costs for transporting products and is accountable for both export and import customs clearances.
Published on November 29, 2022.

Sources:
1. https://www.investopedia.com/terms/e/exw.asp
2. https://guidedimports.com/blog/what-does-exw-mean-incoterms/
3. https://www.customssupport.com/en/news/incoterms-explained-ex-works-exw
4. https://guidedimports.com/blog/what-does-exw-mean-incoterms/
5. https://transporteca.co.uk/fob-or-exw/
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*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.

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