Delivery terms are a crucial aspect of any transaction in international trade. One of the key Incoterms frequently encountered in contracts is EXW (Ex Works). This term places minimal obligations on the seller while imposing greater responsibility on the buyer. In this article, we will explore in detail what EXW means, the responsibilities it entails for each party, and how to properly account for it when drafting contracts.
- 1. What Is EXW in the Context of Incoterms Rules?
- 2. Transfer of Risks and Ownership Rights
- 3. Obligations of the Parties in an EXW Transaction
- 4. Advantages and Disadvantages of Closing a Deal Under Ex Works Terms for the Buyer
- 5. When to Use the EXW Term?
- 6. Recommendations for Drafting a Contract on Ex Works Terms
- 7. Frequently Asked Questions
EXW, or Ex Works, is one of the fundamental terms in the system of international Incoterms rules. This term applies to all modes of transport: air, land, sea, or multimodal. Literally translated, Ex Works means “self-pickup”. Under the terms of EXW, the seller makes the goods available to the buyer at their premises or another agreed location (such as a warehouse).
After this, responsibility for further transportation, insurance, and customs clearance fully transfers to the buyer. It is important to understand that the seller is not obligated to load the goods onto the buyer’s transport vehicle or handle export documentation.
EXW is considered one of the simplest delivery terms for the seller but imposes significant responsibilities on the buyer. This term is often used in transactions where the buyer has a well-established logistics infrastructure or prefers to oversee all stages of transportation.
To avoid disputes with the other party and minimize potential losses, it is essential to clearly understand the moment when risks are transferred and to know all the nuances of transferring ownership rights to the goods. Under Ex Works terms, the seller is responsible only for making the goods available at the agreed location—most often a warehouse or production site. From the moment the goods are handed over, all risks of loss, damage, or delays during transportation transfer to the buyer.
EXW requires a high level of preparedness from the buyer, as they are responsible for:
- Loading the goods onto the transport vehicle;
- Organizing transportation;
- Handling all customs procedures for export and import.
It is important to note that ownership of the goods under Ex Works terms is not automatically transferred at the moment the risks are transferred. This aspect is governed by specific provisions in the sales contract and may depend on additional factors, such as full payment for the goods or the signing of the relevant documents.
Under Ex Works terms, the primary responsibility for organizing transportation, from picking up the goods to delivering them to the final destination, rests with the buyer. The seller’s obligations are minimal. The seller is responsible for preparing the goods for shipment and handing them over to the buyer.
To be more precise, under EXW terms, the seller is obligated to:
- Prepare the goods for handover at the agreed location (e.g., at their warehouse) within the specified timeframe.
- Pack the goods in appropriate packaging, if specified in the contract.
- Provide the buyer with invoices, waybills, and other documents necessary for receiving and further transportation of the goods.
The buyer, for their part, is obligated to:
- Collect the goods from the seller: The buyer must independently arrange transportation to remove the goods from the agreed location, such as the seller’s warehouse, production site, or another facility.
- Load the goods onto the transport vehicle: EXW does not require the seller to participate in the loading, so the buyer must ensure this step is completed either personally or with the help of hired specialists.
- Organize transportation: The buyer assumes responsibility for delivering the goods to the final destination, including selecting the transportation company, coordinating the route, and covering all associated costs.
- Complete customs clearance: All stages of customs clearance, including export and import procedures, as well as the payment of relevant duties and taxes, are the responsibility of the buyer.
- Insure the goods: Under Ex Works terms, the seller is not obligated to provide any insurance coverage. Therefore, the buyer must decide whether to insure the goods at all stages of transportation.
- Bear all risks associated with damage, loss, or delays of the goods after they are handed over.
EXW is advantageous for the seller, as it removes most of their responsibility. But what about the buyer? On one hand, it offers the opportunity to take control of the entire delivery chain. However, there is also a downside. Ex Works terms mean the buyer must manage this chain, which requires experience and reliable partners in transportation and customs clearance. Let’s weigh the pros and cons.
Advantages of EXW shipping for the buyer:
- Full control over logistics: The buyer independently selects transport companies, routes, and delivery methods, which allows for optimization of costs and delivery times.
- Flexibility in customs clearance: The buyer can use their own customs procedures and brokers, minimizing costs and the risk of errors.
- Cost transparency: The price of the goods under EXW does not include shipping and other associated services, allowing the buyer to better control the budget and avoid hidden markups from the seller.
- The ability to consolidate goods from different manufacturers: EXW allows for consolidating goods from multiple suppliers into a single shipment using an experienced freight forwarder. For example, Fulfillment-Box has warehouses around the world. We can collect goods from suppliers, combine them into one shipment, and transport them to the destination country.
- The ability to use own resources: If the buyer has an in-house logistics department or long-term contracts with carriers and brokers, Ex Works allows them to utilize these resources as efficiently as possible.
- Maintaining confidentiality: If the buyer needs to keep information about their supplier confidential from third parties, they can specify a different exporter in the accompanying documents.
Disadvantages of EXW shipping for the buyer:
- High responsibility: The buyer takes on the organization of all logistics tasks, including loading, transportation, insurance, and customs clearance. Consequently, all risks associated with the transportation process fall on the buyer.
- Additional costs: The buyer must cover all expenses related to organizing the loading if the seller does not provide this service.
EXW is not suitable for all transactions, but in certain cases, it can be the most convenient and cost-effective choice. This applies to situations where the buyer is ready to take on the responsibility for all logistics, starting from the moment the goods are handed over at the seller’s warehouse.
Situations where using EXW is most reasonable:
- If the seller and buyer are located close to each other, it is easier and cheaper for the buyer to organize transportation independently.
- If the buyer already has established connections with carriers, they can use their services to their advantage. This is a great opportunity to avoid markup charges from the seller.
- If the buyer plans to consolidate goods from different suppliers located in the same country, EXW significantly simplifies this process.
- If the supplier lacks sufficient resources or expertise to organize delivery, it is better for the buyer to take on this process themselves.
- If you need to transport goods that require special handling, temperature control, or specific packaging, it is better to entrust this task to trusted logistics partners.
- Ex Works terms are especially convenient for working with manufacturing markets, such as China, where many local suppliers do not have export licenses. The buyer can handle export formalities, simplifying the cooperation.
All responsibility for transportation and related procedures falls on the buyer. Therefore, it is crucial to have a written agreement in place in advance, detailing the terms of the EXW delivery. A well-drafted contract will help minimize risks and avoid potential misunderstandings during the transaction.
The contract should clearly specify the address from which the goods need to be picked up and the terms of delivery (e.g., the seller’s warehouse or production facility address). This will help avoid confusion and additional costs related to uncertainty.
It is equally important to include clear requirements for packaging and labeling of the goods. This will reduce the likelihood of damage to the cargo and facilitate its identification at all stages of the logistics chain.
Under EXW rules, the seller is not obligated to participate in loading the goods. If the buyer wants the seller to assist with loading, this should be clearly stated in the contract, along with the allocation of responsibilities and any potential additional costs.
The responsibility for customs procedures also lies with the buyer. To simplify the process and prevent delays, the contract should detail:
- A list of required documentation (invoice, transport bills of lading, etc.).
- A list of certificates of conformity and licenses that the seller is required to provide.
By considering all these aspects and properly allocating responsibilities, you can make the EXW terms as convenient and secure as possible for both you and the other party involved in the transaction.
Considering all the above, it can be concluded that EXW is beneficial for buyers who have sufficient resources and experience to efficiently manage the entire logistics chain. However, for inexperienced participants in the transaction, this option may involve excessive complexities and risks. In such cases, it’s better not to take risks and seek assistance from logistics professionals, such as Fulfillment-Box. Our company offers full-cycle logistics services. We will pick up your goods from the supplier and deliver them to the final destination with maximum benefit for you.
1. Who is responsible for loading the goods under EXW terms?
Under EXW terms, the responsibility for loading the goods usually lies with the buyer, unless otherwise specified in the contract.
2. When does the transfer of risk occur under EXW terms?
The risk transfers to the buyer when the seller makes the goods available to the buyer at the agreed location. It is important to note that the seller is not responsible for loading the goods onto the transport vehicle. The buyer is responsible for organizing the loading and bears all risks and costs associated with this process.
3. What costs are included in the EXW price?
The EXW price includes only the cost of the goods and their basic preparation for transfer (such as packaging, if agreed upon). All other costs, including transportation, insurance, and customs fees, are to be paid by the buyer.
4. What types of transport can be used under EXW terms?
EXW applies to all types of transportation, including road, rail, sea, air, and multimodal transport.
5. Can the seller assist with the export documentation under EXW terms?
Yes, the seller can provide assistance, but this must be agreed upon in advance and clearly specified in the contract. Typically, such assistance is provided for an additional fee.
6. How do EXW terms differ from FCA?
The main difference lies in the point of transfer of risk and responsibility: under EXW, the goods are transferred at the seller’s premises, while under FCA, the seller ensures delivery to a specified point (for example, a transport terminal).
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