EXW Incoterms: Meaning, responsibilities and advantages

The EXW Incoterms rule assigns minimal obligations to the supplier (exporter), placing the bulk of responsibility on the buyer (importer). This arrangement grants buyers full control over transportation but also demands meticulous planning and coordination.

Such level of control can be favorable for importers who prefer to manage their logistics or have established relationships with reliable freight forwarders.

In this guide, you’ll learn:

• The meaning of EXW Incoterms
• Buyer’s and supplier’s responsibilities
• An example of EXW Incoterms
• Advantages and disadvantages
• Frequently asked questions about EXW

What are Incoterms EXW?

EXW Incoterms (Ex Works) rule is one of the 11 Incoterms defined by the International Chamber of Commerce (ICC). Under EXW, the supplier's responsibility ends when they make the goods available for collection at their premises (factory, warehouse, etc.). From this point, the buyer assumes all risks and costs linked to transporting the products to their final location.

Under Ex Works Incoterms, the importer assumes all costs and risks for the cargo once the exporter makes them available. It’s a great choice for scenarios where the buyer prefers to have full management over the logistics and transportation process.

Key features of EXW Incoterms explained:

• Point of delivery: The supplier makes the goods available at their premises or another mutually agreed-upon site.
• Types of transport: Ex Works Incoterms rule applies to all modes of transport (sea, air, rail, or road), including multimodal.
• Insurance coverage: Negotiable. The supplier doesn't need to provide insurance.

💡 The International Chamber of Commerce updates the Incoterms guidelines every decade. The most recent editions are Incoterms 2010 and Incoterms 2020. When you specify EXW or any other Incoterms in a contract, you must mention the edition to prevent misunderstandings or ambiguities.

Read more: What are the types and rules of Incoterms?

Supplier’s and buyer’s responsibilities under CIP Incoterms

Defining responsibilities between the supplier and buyer is crucial in international trade. EXW Incoterms rule achieves this by outlining each party's obligations for carriage, risk, and costs.

Supplier’s responsibilities

• Export packaging: Ensuring proper packaging for the international shipment of goods.

Buyer’s responsibilities

• Loading charges: Covering expenses for loading products onto the initial carrier at the pickup location.
• Delivery to port/place: Transporting the products to the designated carrier or party at the specified port or location per the contract.
• Export formalities: Fulfilling export duties, taxes, and customs clearance procedures.
• Origin terminal charges: Settling costs at the origin terminal, including handling charges.
• Loading onto carriage: Overseeing the loading of cargo onto the primary transportation mode.
• Main freight charges: Bearing expenses for the primary transportation to the agreed location.
• Destination terminal charges: Paying for expenses at the destination terminal, such as unloading and handling, up to the agreed delivery point.
• Delivery to the final destination: Assuming responsibility for the goods upon their arrival at the specified place, port, or terminal, and arranging further transportation to the final destination (buyer’s premises or designated place). 
• Unloading at destination: Covering the costs and taking charge of unloading the items, unless otherwise agreed.
• Import formalities: Fulfilling all import requirements and associated expenses, including customs duties, taxes, and clearance in the buyer’s country.

An example of EXW Incoterm

Consider Gourmet Delights, a prominent New York-based specialty food store, partnering with Alpine Farms, a well-known Swiss cheese producer, to import their premium cheese using EXW Incoterms.

Supplier's responsibilities (Alpine Farms)

Under Ex Works Incoterms, Alpine Farms packages the premium cheese and makes it available for pickup at their premises in Switzerland. They must notify Gourmet Delights when the cheese is ready for collection and provide the necessary documentation, such as commercial invoices and packing lists. 

Alpine Farms doesn't handle any part of the transportation, export documentation, or customs clearance processes.

Buyer's responsibilities (Gourmet Delights)

Gourmet Delights assumes a broader range of responsibilities. They arrange and pay for the entire shipping process from Alpine Farms' premises in Switzerland to their store in New York. 

The importer’s responsibilities include handling export customs clearance, securing insurance, managing import customs clearance, and covering duties and taxes. They also take care of inland transportation within the U.S. and perform quality inspections once the cheese arrives at their facility.

This EXW Incoterms example highlights the extensive responsibilities placed on the buyer, emphasizing the need for efficient logistics planning and coordination.

Advantages and disadvantages of EXW Incoterms

Like all Incoterms, the EXW agreement has its advantages and disadvantages. By understanding these, businesses can determine if the EXW Incoterms rule suits their transactions.

Advantages

• Supplier’s convenience: Ex Works Incoterms agreement is straightforward for suppliers, as their primary responsibility is to make the cargo available for pick-up.
• Buyer’s control: Buyers have complete control over the logistics and shipping process, allowing them to choose the most cost-effective and reliable shipping options.
• Cost transparency: It allows buyers to oversee and manage all expenses related to the transportation process, enabling better budgeting and potential cost savings.

Disadvantages

• High responsibility for buyers: Buyers must handle all aspects of transportation, export, and import, which can be complex and time-consuming.
• Risk management: Buyers assume all risks once the goods are made available under EXW Incoterms, meaning they need robust insurance and risk management strategies.
• Difficulties for inexperienced importers: For businesses new to international trade, the complexities of EXW can be overwhelming and potentially lead to costly mistakes.

💡 It's essential for both buyers and suppliers to carefully evaluate these advantages and disadvantages within the context of their specific business needs, risk tolerance, and international logistics capabilities.

Learn more: What is export finance and how can it help SMEs?

Incoterms EXW: Frequently Asked Questions (FAQs)

Who is responsible for loading in EXW?

In Ex Works Incoterms, the buyer is responsible for loading the goods. The seller's responsibility ends once the products are made available for pickup at their premises. The buyer must handle all aspects of loading, transportation, and any associated costs and risks from that point onward.

Is FCA the same as EX Works?

EXW Incoterms rule places minimal risk on the seller, with the buyer assuming most responsibilities. Meanwhile, FCA (Free Carrier) transfers risk when the exporter loads the goods onto the importer’s transport or delivers them to a named location.

Which is better, EXW or FOB?

It depends on cost and control preferences. EXW is usually cheaper for the supplier because the buyer handles all transport and customs costs. FOB involves the exporter covering these costs until the cargo is loaded onto the shipping vessel, which can make it more expensive for the seller.

What is the difference between EXW and DAP?

Under EXW, the buyer is responsible for all shipping logistics, including export customs formalities in the seller’s country. In contrast, under DAP, the importer only handles import formalities in their own country and unloads the goods at the named destination.

When to use EXW Incoterms

EXW Incoterms agreement is a suitable option for importers with established logistics networks and expertise in handling international shipping and customs procedures. It’s mainly for companies who prefer to manage all aspects of the shipment and leverage their existing relationships for cost savings.

However, the decision of whether or not to use the Ex Works Incoterms rule depends on your specific business needs, risk tolerance, and experience in international trade. Carefully weigh the advantages and disadvantages, consider the specific circumstances of your transaction, and seek expert advice if needed.

By understanding Incoterms and choosing the right one for your business, you can navigate the complexities of international trade with confidence and achieve success in the global marketplace.

Learn more about other Incoterms:

• FCA (Free Carrier)
• FAS (Free Alongside Ship)
• FOB (Free On Board)
• CFR (Cost and Freight)
• CIF (Cost, Insurance, and Freight)
• CPT (Carriage Paid To)
• CIP (Carriage and Insurance Paid To)
• DAP (Delivered at Place)
• DPU (Delivered at Place Unloaded)
• DDP (Delivered Duty Paid)

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