EXW Incoterms | Ex Works Explained

EXW

1. What does EX Works (EXW) Mean in shipping terms?

EX Works (EXW) is an Incoterm® rule, meaning a standardized international trade term published by the International Chamber of Commerce (ICC). It signifies that the seller makes the goods available at their premises (e.g., factory, warehouse, or place of business). The buyer is responsible for all costs and risks involved in collecting the goods from that location and transporting them to the final destination. Essentially, the seller’s responsibility ends at their own dock.

2. What are the Buyers and Sellers Responsibilities with EXW Agreements?

Seller:

– Make the goods available at the named place (their premises) at the agreed-upon time.

– Package and label the goods appropriately for pickup.

– Provide necessary documentation (e.g., commercial invoice, packing list) to assist the buyer in exporting.

– Not responsible for loading the goods onto the buyer’s vehicle, nor for clearing the goods for export or import.

Buyer:

– Arrange and pay for all transportation from the seller’s premises to the final destination.

– Bear all risks and costs from the moment the goods are available for pickup.

– Handle all export and import formalities, paperwork, licenses, and customs clearance.

– Pay all applicable duties, taxes, and fees for both export and import.

– Arrange for cargo insurance for the entire journey.

3. Advantages and Disadvantages for the Buyer

Advantages:

Maximum Control: The buyer has complete control over the entire shipping process, including the choice of freight forwarders, carriers, and routes.
Potential Cost Savings: A savvy buyer with strong logistics expertise might find cheaper shipping solutions than the seller could offer.
Transparency: The buyer deals directly with all service providers and sees all cost components.

Disadvantages:

High Complexity and Risk: The buyer assumes all logistical, financial, and legal risks from the very start of the journey.
Significant Responsibility: The buyer must handle complex export procedures in a foreign country, which can be challenging without local knowledge or a reliable agent.
Liability for Loading: Under a strict EXW term, the buyer is responsible for the cost and risk of loading the goods at the seller’s location.
Hidden Costs: Unforeseen delays, demurrage, detention fees, or customs hold-ups can quickly erase any potential savings.

4. When to Use an EXW Agreement?

EXW is best used in these scenarios:

Domestic Sales: When the buyer is located in the same country and is simply picking up goods with their own truck.

Experienced Buyers: When the buyer (or their freight forwarder) has a strong presence and expertise in the seller’s country and can efficiently manage export formalities.

Sellers Unwilling to Handle Logistics: When the seller is a manufacturer or supplier that does not want to be involved in any aspect of shipping.

5. EXW Agreements for China Importing: are they a good idea?

Generally, EXW is not recommended for buyers importing from China, especially for small and medium-sized businesses. Here’s why:

Export Restrictions: China has strict export regulations and customs procedures. Without a Chinese entity to act as the exporter of record, the process can be very difficult for a foreign buyer to manage remotely.

Language and Communication Barrier: Navigating Chinese customs documentation and communicating with trucking companies and port officials is extremely challenging without a local agent.

Risk of Delays and Fees: If the buyer’s arrangements are not perfect, goods can be stuck at the factory or port, accruing massive storage fees (demurrage).

Loss of Leverage: The buyer has little recourse if a problem occurs during the initial loading or domestic transport phase, as they are responsible for it.

Recommendation: For most importers, it is far safer and more efficient to use FCA (Free Carrier) or FOB (Free On Board) terms when buying from China. These terms ensure the seller (or their agent) is responsible for delivering the goods to a named carrier or port and handling export clearance, significantly reducing the buyer’s risk and complexity.

6. EXW Agreement FAQ’s

Q: Under EXW, who is responsible for export clearance?

A: The buyer is responsible, unless otherwise agreed in the sales contract. This is a major difference from most other Incoterms® rules.

Q: Can EXW be used for any mode of transport?

A: Yes, EXW can be used for any mode of transport (road, rail, air, sea) or a combination of modes.

Q: What is the biggest risk for a buyer using EXW?

A: The biggest risk is assuming full liability for the goods in a foreign country without the local knowledge or resources to manage the process effectively, leading to delays, additional costs, or loss of goods.

Q: What is the key difference between EXW and FCA?

A: The key difference is export clearance. Under EXW, the buyer handles export clearance. Under FCA, the seller is responsible for export clearance (when the named place is the seller’s premises, the seller loads the goods; when it is another place, the seller delivers the goods cleared for export to the carrier). FCA is generally considered a more balanced and safer term for international sales.

Tennie

Tennie Chen is responsible for sourcing and supplier evaluation, with a focus on balancing product quality, cost efficiency, and supply chain reliability. My role involves identifying trustworthy manufacturers, comparing quotations, analyzing total landed costs, and ensuring compliance with international standards. I always prioritize long-term partnerships over one-time deals, aiming to work with suppliers who can provide consistent quality, competitive pricing, and flexible solutions. When making purchasing decisions, I evaluate not only the product itself but also the supplier’s production capacity, lead time, and after-sales support, ensuring that every cooperation contributes to sustainable business growth.