The EXW delivery method is a method that is particularly preferred by sellers. In terms of international transport, its boundaries are defined by Incoterms.
So, what is the ExWorks delivery method, and how is it applied? You can access all the details on this subject in the rest of the article!
What Is the EXW Delivery Method?
EXW delivery is a term used in shipping arrangements where the seller is required to deliver the goods only to a pre-determined location and the buyer is responsible for the transport costs. EXW or ExWorks stands for "Ex Works."
The buyer assumes responsibility for the associated risks of the goods, which can include everything from customs clearance to loading and transferring to other vessels.
The ExWorks delivery method belongs to the Incoterms (International Commercial Terms) group, which is a standard framework of 11 terms designed to bring clarity to various commercial agreements.
What Are the Highlights of the EXW Delivery Method?
• Once buyers have received their goods, they are responsible for other risks such as loading the goods onto trucks, transferring them to a ship or aircraft, and meeting customs regulations.
How Does the ExWorks Delivery Method Work?
As an agreement option, the ExWorks delivery method is particularly good for the seller and not so good for the buyer. The seller is only required to pack the goods securely, label them appropriately, and deliver them to a pre-agreed location, such as the seller's nearest port. The seller must also assist the buyer in obtaining export licenses or other required paperwork, although the buyer must pay the actual fees for the documents.
Once the buyer has received the goods, it is up to the buyer to cover all costs and account for the risks associated with the goods. Risks can include loading the goods onto a truck, transferring them to a ship or aircraft, dealing with customs officials, unloading at destination, and storage or resale. Even if the seller helps the buyer, for example by loading the product onto a ship, if anything goes wrong during loading, it is still the buyer's responsibility to pay for it.
How Is the EXW Delivery Method Pricing Done?
ExWorks costs are calculated by businesses looking to reduce costs by removing the seller's so-called added value for transport. For example, suppose Company A prices a pair of printers from Company B at $4,000, with an ex-works shipping cost of $200.
To save money, Company A finds a third-party shipper that will deliver the printers for $170. So to save $30 on shipping costs, they make an agreement with Company B, which is ex-works.
An ex-works contract differs from FOB delivery, where the seller covers the costs of taking the goods to a shipping terminal and pays all customs costs to get the goods on board. Meanwhile, the buyer still has to find the shipping company, sign a contract, and pay the shipping company as well as the customs costs incurred when the goods arrive in the destination country. The buyer also pays for insurance costs.
In practice, ex-works is sometimes a poor choice due to the customs rules of some jurisdictions. For example, in the European Union, a non-resident individual or entity may not be able to complete the export declaration documents, leaving the buyer in a difficult position. In such cases, FCA is preferred.
What Are the Pros and Cons of the EXW Transport Method?
With EXW, the seller saves on transport and customs costs, along with liability for damaged goods once delivered to the shipping terminal, packaged, and labeled. While this is sometimes ideal for sellers, it is not always possible due to customs requirements in specific jurisdictions.
Consider, for example, the European Union, which restricts non-resident companies from completing export declaration forms. In this case, an ex-works contract would be detrimental to both the seller and the buyer, while a free-carrier contract where transport responsibility lies with the seller might offer a more appropriate alternative.
What Are the Differences Between the EXW Transport Method and FOB?
The difference between FOB and EXW in shipping arrangements depends on the transfer of responsibility for the goods between the buyer and the seller. Under Free on Board contracts, the seller assumes responsibility for bringing the goods to a terminal and loading the goods onto the vessel, in addition to customs costs. Meanwhile, the buyer is responsible for transport costs, insurance, and customs costs at the final destination.
In other words, once the goods have been shipped, the buyer assumes responsibility and ownership of the goods, known as "FOB Origin" or "FOB Destination." In contrast, under an EXW contract, the seller is only responsible for the delivery of the goods to an
