Ex Works – A 2019 TFG Guide

EXW Meaning - Ex Works

Ex Works – What is Ex Works?

Ex Works (EXW) is the term used to describe the delivery of goods to an available designation at their place of business, normally in their factory, offices or warehouse. The seller does not need to then load items onto a truck or ship, and the remainder of the shipment is the responsibility of the buyer (e.g. overseas shipment and customs duty). EXW is therefore more favourable to the seller as they do not need to worry about the freight once it has left their premises.

ICC Definition of Ex Works

Ex Works are a type of Incoterm, defined by the ICC. Ex Works is a rule making the seller (or shipper / supplier) of goods responsible for packaging and leaving the goods at their factory or place of manufacture. The buyer (or consignee) is then responsible for everything else: Loading goods onto transport Transporting goods to a port or terminal Shipping the goods Unloading the goods at the buyer’s port or terminal Transporting the goods to the end destination or warehouse Ex Works can be complex and problematic for a buyer importing goods from overseas, given that they will still need the seller’s communication or authority to pass goods through customs or provide documentation to freight parties along the way.

In Ex Works, the buyer is responsible for everything from the point of the goods being made available, so diligent and detailed planning is advised. Ex Works is preferable for domestic (in market) transportation of goods, and the buyer can use their preferred freight forwarders or logistics partners to arrange the transport, potentially being cheaper than the seller arranging the entire delivery process.

With domestic trade, Ex-works is preferable to other liability arrangements. This is because, within the domestic market, the buyer is likely to have transport links/ existing supply chains that they may be able to use – potentially being cheaper than the seller’s preferred arrangement.

Diagram: EXW – obligations from the seller and buyer, and where the transfer of risk between each party is transferred.
Responsibility of the Buyer (versus Seller)
Relative Price

Transport Modes:

Rail, Sea, Air, Road

And this is the issue Ex works have in the international marketplace. The Buyer remember, is responsible for:

  • Loading the goods at the factory
  • Transporting to the port
  • Clearing customs
  • Shipment/ main transport
  • Unloading of the goods at the destination port
  • The final leg of the transport from the port to the buyer’s warehouse/ shop.

All of the above include many moving variables, that are costly for a business to arrange. For instance, the buyer will need to arrange the relevant licenses/ documents that are required for the goods to be cleared through customs and accepted for export.

Advantages and Disadvantages of Ex Works (EXW)

AdvantagesDisadvantages
  • The buyer is responsible for all of the fees/ errands associated with the transport of the goods so in this instance, there is much less work.
  • The difficulties surrounding the clearing of customs alone may be enough to put businesses off using Ex Works. In many cases, the buyer is still required to provide communication and proof of purchase documents from the seller in order to have the goods approved for export, meaning a lot of legwork and time potentially wasted.
  • For the Buyer, they receive full transparency with the costs associated with the transaction. This also means that there is no risk of the Seller inflating the costs of transport when building their price.
  • There may be large costs involved as a by-product of the aforementioned issues. Costs such as the price of the necessary licences required for Customs can be a real strain on SME businesses, who may not need the full term of coverage offered by the licence but have no alternative.
  • The very fact that the Buyer is to arrange the transport of the goods may actually be positive. The idea is that they are free to arrange the transport completely on their own terms meaning that the conditions of transport, delivery times and insurance are all open to be chosen by the Buyer.
  • The Buyer is fully responsible for the majority of the transport. This could be complex and incur hidden fees, as well as the liability of faulty or damaged goods.

Ex Works Price

The price of Ex Works – much like FCA – is obviously dependent on the journey that is required for the goods. However, the following costs are to be considered when applying an Ex-Works arrangement:

  • Loading/ docking fees
  • Shipping Costs
  • Customs Duty
  • Any relevant Taxes
  • Insurance
  • Warehouse Storage

ExWorks – What are the Critical Issues?

The moment when the Seller gives the Buyer notice of goods ready to be picked up, as this way risks are shifted on the Buyer, along with the related costs. This rule stands for the lowest level of obligation for the Seller, whose only obligation is is giving the Buyer notice of goods readyness, mentioning the exact place for delivery.

In case the Buyer does not provide for the  loading of the goods and the export customs clearance, EXW rule  should not be adopted, unless  you don’t introduce specific exceptions such as “Loaded” or “Customs clerance/Cleared for export”. In such cases, FCA is the most appropriate rule.

– Andrea Frosinini

Ex Works vs FOB and Free Carrier Arrangement

Ex Works mainly differs from Free on Board pricing (FOB) in that with FOB pricing, the seller will transport the goods to their nearest port or terminal. FOB requires the supplier to ship the goods to their port, handle goods at the port and clear customs.

Find out more about FOB Pricing here

Testimonials

A seller of clothing items is located in Glasgow, Scotland. The buyer is based in London, England. Both parties agree on the price of the clothing goods and decide to sign an Ex Works contract. The buyer agrees to then pick up the clothes in three weeks, and the supplier of the clothes needs to have these ready for collection from their factory in Glasgow. In this case, the buyer is responsible for all costs associated with loading the clothing pallets onto the truck, transporting the clothes from Glasgow to London (normally by rail or road), and then getting these to their warehouse in London. The buyer will incur all of these costs, including any liabilities such as the items of clothing getting damaged in transit.
Jenny M, Clothes Trader.

Case study

Case Study

Clothing Brand

We wanted flexibility to have our clothes delivered from our supplier in Scotland, as our stock was seasonal and we have limited space in our warehouse in London. Trade Finance Global introduced us to their expert shipping and freight partners so that we could control the delivery times and logistics, knowing that the costs were minimal and not inflated by the supplier, and allowing us the flexibility to organise the logistics and level of risk we wanted to take.

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First Name*

Last Name*

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Your Email*

Telephone Number*

Briefly, what type of stock or trade are you looking to finance?

(Marketing Terms can be found here)

Meet our writer

Written by our resident freight forwarding and shipping expert.

Andrea Frosinini

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