Ex Works – What is Ex Works?
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.
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)
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
- 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
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.