Incoterm EXW (Ex Works) is one of the standardized international trade terms defined by the International Chamber of Commerce (ICC) under the Incoterms 2020 system. It specifies how costs and risks are allocated between buyers and sellers in international transactions
1.What Is Incoterm EXW?
Incoterm EXW (Ex Works)is often considered the term with the least obligation for the seller and the greatest responsibility for the buyer.Under EXW, the seller simply makes the goods available at their premises—such as a factory, warehouse, or another named place—on the agreed date. From that point forward, the buyer assumes all risks, costs, and logistical arrangements, including loading the goods, handling export procedures, and arranging transportation to the final destination.
2.Key Features of Incoterm EXW
1.Named Place: The agreed location where the goods will be made available (e.g., Seller’s Factory, Shanghai, China).
2.Risk Transfer Point: The risk shifts from seller to buyer as soon as the goods are placed at the buyer’s disposal at the named place.
3.Cost Allocation: The buyer bears all transportation, insurance, and customs-related expenses from the named place onward.
3.The Responsibilities under EXW
Seller Responsibilities under EXW
The seller’s duties are minimal and generally include:
1.Making the goods available at the agreed location.
2.Packaging the goods appropriately for transport.
3.Notifying the buyer that the goods are ready for pickup.
4.Assisting in obtaining documents at the buyer’s expense (if requested).
What the seller is not responsible for under EXW:
1.Loading the goods onto the buyer’s collecting vehicle.
2.Export clearance, licenses, or customs documentation.
3.Any transportation costs or insurance beyond making the goods available.
Buyer Responsibilities under EXW
The buyer bears most of the burden, which includes:
1.Loading the goods at the seller’s location.
2.Arranging and paying for export clearance, licenses, and permits.
3.Organizing transportation for the entire journey—from the seller’s premises to the final destination.
4.Paying all transportation costs, including pre-carriage, main carriage, and on-carriage.
5.Purchasing insurance (if desired).
6.Managing import clearance at the destination country and paying applicable duties, taxes, and fees.
4.EXW Cost and Risk Division
| Responsibility | Seller | Buyer |
|---|---|---|
| Provide goods & documents | ✔ | |
| Package goods | ✔ | |
| Load at seller’s premises | ✔ | |
| Export customs clearance | ✔ | |
| Main carriage (international freight) | ✔ | |
| Import customs clearance | ✔ | |
| Final delivery | ✔ | |
| Insurance | ✔ | |
| Risk transfer point | At seller’s premises | After pickup |
5.Advantages and Disadvantages of Using EXW
| Perspective | Advantages | Disadvantages |
|---|---|---|
| For Sellers | – Minimal risk: Responsibility ends once goods are made available. – No export obligations: Avoids dealing with customs and shipping arrangements. – Time savings: No involvement in transport logistics. | – Limited service offering: May deter buyers seeking more seller involvement. – Reduced competitiveness: Inexperienced buyers may avoid EXW. |
| For Buyers | – Full control: Manage the entire logistics chain, optimizing routes and costs. – Potential cost savings: Strong freight networks can secure better rates. – Flexibility: Ability to consolidate shipments from multiple suppliers. | – High responsibility: Must manage every step including loading, export, and transport. – Complex customs processes: Some countries require a local representative for export clearance. – Potential for unexpected costs: Inexperience can cause delays, fines, or storage charges. |
6.Common Situations Where EXW Is Used
1.When the buyer has a local branch or agent in the seller’s country to handle logistics.
2.For buyers consolidating goods from multiple suppliers into one shipment.
3.In transactions where the buyer prefers to control every stage of transport.
4.When sellers want to avoid liability and limit their role to product manufacturing and packaging only.
7.EXW vs. Other Incoterms
| Term | Seller’s Responsibility | Buyer’s Responsibility | Key Difference |
|---|---|---|---|
| EXW (Ex Works) | Makes goods available at seller’s premises; minimal obligation. No loading or export clearance. | Handles loading, export clearance, all transport, insurance, and import formalities. | Maximum responsibility for buyer; seller only provides goods. |
| FOB (Free on Board) | Delivers goods on board the vessel at the port of shipment, clears them for export. | Takes over once goods are on board; handles main carriage, insurance, import clearance, and delivery. | Seller covers export clearance and loading onto ship; buyer takes over after loading. |
| FCA (Free Carrier) | Delivers goods to a carrier or party nominated by the buyer, completes export clearance. | Takes over from the point of delivery to the carrier, handling main carriage and beyond. | Seller responsible for export clearance and delivery to carrier; more seller involvement than EXW. |
8.Common Mistakes When Using EXW
Some countries require the seller to be the exporter of record. If the buyer cannot legally do this, EXW may not work.
Failing to specify the exact pickup point can lead to confusion, extra costs, or disputes.
Unless agreed in writing, the seller is not obligated to load the goods onto the buyer’s transport.
Since the buyer bears all risk after pickup, cargo insurance is essential to protect against loss or damage.
Inland haulage from the seller’s premises to the port can be expensive, especially for remote factories.
Conclusion
Incoterm EXW shifts maximum responsibility to the buyer and minimum obligation to the seller. It is a cost-effective option for buyers with strong logistics capability and local support in the seller’s country, but it can create challenges for inexperienced importers. Clearly defining the named place, understanding local regulations, and planning insurance are critical for success under EXW.
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FAQs
Q1:Is EXW the cheapest option?
Not always. While the seller’s price might be lower, buyers must add inland transport, export clearance, and other costs, which can sometimes exceed the cost of terms like FOB or FCA.
Q2:Can the seller load the goods under EXW?
Yes, but only if this is specifically agreed upon in the contract. Otherwise, loading is the buyer’s responsibility.
Q3:What’s the main risk for the buyer?
The buyer is responsible for everything after the goods are made available, including risks during loading, inland transport, and customs.
Q4:Is EXW suitable for air freight?
It can be, but buyers must still arrange pickup, export clearance, and delivery to the airport.
Q5:What’s the difference between EXW and FCA?
Under FCA, the seller delivers the goods to a named place or carrier and clears them for export, making it more convenient for buyers. EXW leaves export clearance entirely to the buyer.