Ex Works (EXW): Definition, Pros and Cons, Plus More Incoterms

EXW, meaning in shipping, is related to an arrangement between the buyer and seller tasks. Under this EXW Incoterms, the buyer takes responsibility for the complete logistic process, starting from the supplier's warehouse to the cargo's specified destination.

The seller's obligation in EXW Incoterm is minimal, just limited to making goods or products available at the specified premises.

Once the goods are packed in export packaging and collected, the buyer will assume all the responsibilities of the shipment. This Incoterm is designated for all shipping scenarios, irrespective of the mode of transportation.

To define Ex Works agreements correctly, knowing all about the buyers and seller responsibilities is crucial.

-Seller Responsibilities in Ex Works Incoterm

Under the Ex Work Incoterms, the seller's responsibility and role are minimal. The essential requirement is to ensure that the goods are packaged and ready for export.

Once packaged, the goods can be collected from the location and delivered to the agreed-upon location, where the buyer can collect them from the seller.

-Buyers Responsibilities in Ex Works Incoterm

Under the EXW Incoterm, the buyer shoulders the bulk of the responsibilities. They are responsible for collecting the goods from the seller, after which all risks and liabilities are transferred to them. Some of the responsibilities of a buyer under Ex Works Incoterms are:

• One of the buyer's responsibilities is covering the loading charges. These charges are basically the cost of loading the goods at the pick-up point so that the goods can move to the place of export.

• The buyer is also responsible for delivering the goods to the port of origin so that the export process begins.

• The buyer is also responsible for export documentation and must pay the customs duties and taxes to export the cargo.

• Besides this, the buyer is also responsible for paying terminal charges.

• In addition, the buyer is also responsible for loading the cargo onto the carriage.

• The buyer covers the cost associated with moving the cargo from port to port.

• This is not necessary, but the buyer is also responsible for insuring the freight to protect against loss, damage and theft.

When the cargo arrives at the destination port, the buyer will also bear the destination terminal charges, which include unloading the shipment and transferring it throughout the harbour.

The buyer also incurs the cost of delivering the goods from the destination port to the final destination.

The buyer is responsible for all the import duties, taxes and customs clearance charges for importing the goods into the destination country.

After learning all about the Ex Works meaning, it is time to learn how to calculate the price of EX Works Incoterms. The EX Work Incoterm included the full range of freight costs, which includes:

Transportation charges from supplier warehouse to port of origin

• Terminal charges

• Loading and unloading charges

• Moving goods charges on selected mode

• Custom export and import charges

• Transportation charges from the destination port to the warehouse

Ex Works Incoterm is basically the sum of all these charges. Various online freight rate calculators are available that can help estimate the freight cost under EX Works Incoterm.

Let us dive deep into the advantages and disadvantages of Ex Works Incoterms for the buyers.

-Advantages of Ex Works

• EXW is a practical solution for buyers who purchase from multiple suppliers in a single country. They can buy goods from various suppliers and consolidate the products together as a single export.

• Another advantage of Ex Works Incoterm is for buyers who wish to hide the names of their suppliers. Under EXW, they can use differently named exporters on the shipping document.

• Another advantage of EXW in shipping is it offers transparent pricing.

• EXW is a great option for buyers who want to buy goods from manufacturing-focused markets like China. Many local sellers in China do not have an export licence.

• One significant advantage of EXW Incoterm is that it empowers buyers with more visibility and control over the entire shipping process. This control can be a valuable asset in managing the logistics of international trade.

-Disadvantages of Ex Works

• One significant disadvantage of EXW Incoterms for buyers is that they are responsible for all the costs and risks associated with transporting the goods from the seller's premises to the destination point. If something goes wrong in between, then the buyer has to bear all the loss.

• If a buyer is inexperienced and knows nothing about the shipping process, then he might have to pay more than he originally intended to pay for shipping goods.

• Another aspect of the EXW Incoterm is that the buyer is responsible for documenting customs clearance. While this can be time-consuming, it also ensures that the buyer is fully aware of the import process.

• Any unexpected situation, be it a logistic problem or custom issue, can add additional financial burden on the buyer.

• One reason buyers choose EXW Incoterm is when their sellers are unable to export the goods. Under this arrangement, the buyer will combine various shipments and export them under a single name.

• Another reason buyers opt for EXW if they are shipping via Air Express is that most Express courier services generally collect the cargo from the seller's location and carry out all the transport and export formalities, saving buyers some time and money.

• Another instance when a buyer uses an Ex Works agreement is when they purchase goods that require specialised transport or handling. Buyers have experience handling the logistics of such goods.

• Many times, buyers prefer the EXW agreement because it allows them to leverage their relationships with carriers and freight forwarders. This independence in choosing their partners can significantly ease the logistic process.

Apart from the Ex Works Incoterms, some popular Incoterms are used in any form of transport, such as:**

-FCA: FCA is another Incoterm that stands for the Free Carrier.

-CPT: CPT refers to Carriage Paid To.

-CIP: CIP, also known as, Carriage And Insurance Paid To.

-DAP: DAP stands for Delivered At Place.

-DPU: DPU refers to the Delivered At Place Unloaded.

-DDP: DDP stands for the Delivered Duty Paid.

Some of the additional Incoterms that help in deciding the transaction involved in an inland waterway and sea transport are:**

-FAS: FAS stands for Free Alongside Ship.

-CIF: CIF stands for the Cost and Insurance Freight.

-CFR: CFR stand for Cost and Freight,

-FOB: FOB stands for the Free on Board.

The EXW Incoterm is a popular term in trade contracts that helps in understanding the responsibility and risk of buyer and seller in the shipping process. Under these Incoterms, the seller's responsibility is minimal, and buyers have to cover the risk and cost associated with shipping goods to their destination.

This is a good option for businesses with experience handling the logistics and shipping process. However, before trying, it is necessary to know all about EXW Incoterm.

Apart from this, running an import and export business comes with risk. Hence, businesses should consider buying marine cargo insurance to protect their goods from various damages during transit. To help businesses out, there are various marine insurance policies available in India.

TATA AIG offers a variety of SME Insurance plans, including marine insurance in India, designed to protect businesses from unforeseen events.

One of our key offerings is the annual marine open policy, which provides continuous coverage for multiple shipments throughout the year, making it ideal for businesses with regular shipping needs.

-What is the difference between EXW and DAP?

The key difference between EXW (Ex Works) and DAP (Delivered at Place) is responsibility. In EXW, the buyer handles all transportation costs and risks from the seller's location onward.

In DAP, the seller covers transport costs and assumes the risk until the goods are delivered to the buyer's specified location, but the buyer is responsible for import duties and taxes.

-How to use Ex Works?

To use Ex Works, the buyer must arrange for all aspects of transportation from the seller's premises, including loading, shipping and customs clearance.

The seller's responsibility ends once the goods are made available for pick-up at their location, meaning the buyer assumes all risks and costs from that point onward.

-Does the Ex Works method include shipping costs?

No, the Ex Works method does not include shipping costs. Under EXW, the seller is only responsible for making the goods available for pick-up at their premises or another specified location.

The buyer is responsible for all costs and risks associated with transporting the goods from that point onward, including shipping, loading and customs clearance.