What Is Ex Works (EXW) and How Does It Work?

Ex works (EXW) is a phrase used in international trade to denote when a seller makes a product available at a specified place and the buyer is responsible for the transportation charges.
The Incoterms (International Commercial Terms) are a set of standardised international trade terms published by the International Chamber of Commerce. Ex works (EXW) is one of the 11 current Incoterms (International Commercial Terms).

  • The term “ex works” refers to a shipping agreement in which a vendor makes a product available at a certain place, but the buyer is responsible for the transportation charges.
  • Buyers are liable for further risks after receiving their goods, such as loading them onto trucks, transporting them to a ship or plane, and complying with customs requirements.
  • The International Chamber of Commerce publishes 11 standardised international commerce phrases called Incoterms (International Commercial Terms).

Ex works is one of them. Ex Works: An Overview (EXW)

Ex works is a contract option that is advantageous to the seller but disadvantageous to the buyer. The seller’s only responsibilities are to properly package the items, label them, and deliver them to a previously agreed-upon place, such as the seller’s nearest port. Although the buyer must pay the real fees for the documentation, the seller must assist the buyer in obtaining export licences or other relevant paperwork.

Once the buyer gets the products, it is the buyer’s responsibility to cover any costs and account for any risks associated with the items. Loading the products into a truck, transporting them by ship or plane, dealing with customs officials, unloading them at their destination, and storing or reselling them are all possible risks. Even if the seller assists the customer by, for example, putting the merchandise onto a ship, the buyer is still responsible for any damages that occur during the loading. Ex Works Exercising.

Example of Ex Works

  • Businesses that wish to decrease expenses by removing the so-called seller’s value-added for shipping compute ex works costs. Assume that company A has set a price of $4,000 for a pair of printers from company B, plus a $200 ex works delivery fee. Company A finds a third-party shipper who would deliver the printers for $170 to save money. So, in order to save $30 on delivery, they strike an ex works agreement with firm B.
  • An ex works arrangement differs from a free-on-board (FOB) agreement, in which the seller covers the cost of transporting the items to a shipping terminal as well as all customs fees. Meanwhile, the buyer must pay for the costs of locating, contracting, and paying a shipping business, as well as the fees of customs clearance when the goods arrive in their destination country. The customer is also responsible for the cost of insurance.
  • In actuality, due to the customs laws of various jurisdictions, ex works is sometimes a bad decision. A non-resident individual or organisation in the European Union, for example, may be unable to complete the export declaration documents, leaving the buyer stranded. In such circumstances,In these situations, the term “free carrier” (FCA) is preferable. The term “free carrier” refers to a situation in which the seller is responsible for transporting items to a certain location.

Special Considerations

The International Chamber of Commerce’s Incoterms include phrases like ex works, free on board, and free carrier. They are used in international trade contracts to specify things like delivery and payment dates and locations, when the risk of loss switches from the seller to the buyer, and who is responsible for freight and insurance costs. The Incoterms aren’t actual contracts, and they don’t take precedence over local law. Explicit stipulations in a commercial contract can change Incoterms. 1

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