Understanding Ex Works Incoterms

What is Ex Works (EXW) Incoterms and How is it Used?

Incoterms® rules, set by the International Chamber of Commerce, outline the responsibilities of buyers and sellers in international trade. The EXW (Ex Works) incoterm means the seller makes the goods available at their location (like a factory or warehouse), and from that point on, the buyer is responsible for everything else—pickup, loading, transportation, and handling all international trade procedures.

EXW is best suited for buyers who have the experience and resources to manage the logistics and export/import processes themselves. It’s also a good choice if the seller is not able or willing to handle export tasks. Here are common reasons for using EXW:

• The buyer wants full control over the shipping process.
• The seller cannot manage export procedures.
• The buyer plans to combine shipments from multiple suppliers.
• The buyer is using air express couriers that include export services in their offering.

EXW might not be the best choice for buyers new to international trade. It requires handling many responsibilities and risks, which can be difficult if you’re not familiar with the export procedures in the seller’s country. In these cases, using Incoterms like FCA (Free Carrier) could be a better option.

Buyer and Seller Responsibilities under Ex Works (EXW) agreement

Under the EXW (Ex Works) Incoterm, the responsibilities between the seller and the buyer are clearly defined. The seller’s obligations are minimal, while the buyer takes on most of the responsibilities and risks.

What Responsibilities Does the Seller Have?

1. Provide Goods and Documentation: The seller must ensure the goods are properly packed for export and make them available at the agreed location.
2. Notice of Availability: The seller must notify the buyer that the goods are ready for collection at the specified place.
3. Export Packaging: The seller must ensure the goods are packaged in a way that they are ready for export.

The seller does not handle the loading of the goods onto the transport vehicle unless otherwise agreed. If the seller does assist with loading, it is at the buyer’s risk and expense.

What Responsibilities Does the Buyer Assume?

1. Loading: The buyer is responsible for loading the goods onto the transport vehicle at the seller’s premises.
2. Transport: The buyer must arrange and pay for transportation from the seller’s premises to the final destination.
3. Export Procedures: The buyer handles all export documentation, licenses, and customs clearance.
4. Insurance: While not mandatory, it is advisable for the buyer to insure the goods against damage, theft, or loss during transit.
5. Import Procedures: The buyer must take care of import duties, taxes, and customs clearance at the destination.
6. All Associated Costs: The buyer is responsible for all costs related to loading, transport, export, and import processes.

How Are Risks and Costs Allocated in EXW?

• Risk Transfer: The risk transfers from the seller to the buyer as soon as the goods are made available at the seller’s premises. This means that any damage, theft, or loss of goods after this point is the buyer’s responsibility.
• Cost Allocation: The seller incurs minimal costs, limited to preparing and packaging the goods. The buyer bears all costs from the moment the goods are ready for pickup, including loading, transportation, export, and import fees.

Pros and Cons of Using EXW Incoterms®

Advantages of Using EXW Incoterm

1. Cost Control: Buyers have greater control over logistics costs, as they handle the transportation and related expenses.
2. Flexibility in Shipping: Buyers can choose their preferred carriers and shipping methods, allowing for tailored logistics solutions.
3. Supplier Anonymity: EXW allows buyers to keep their suppliers anonymous by using a different name on shipping documents.
4. Simplicity for Sellers: Sellers benefit from minimal responsibility, only needing to prepare and make the goods available for pickup.

Disadvantages of Using EXW Incoterm

1. High Responsibility for Buyers: Buyers assume all risks and responsibilities once the goods are made available at the seller’s premises. This includes loading, transportation, and export/import processes.
2. Complex Logistics: Managing all aspects of international shipping can be challenging, especially for buyers unfamiliar with export procedures.
3. Potential for Higher Costs: Inexperience can lead to unexpected costs, making EXW potentially more expensive than other Incoterms that share responsibilities more evenly.
4. Risk of Miscommunication: The high level of buyer responsibility increases the chance of errors and miscommunication, which can result in delays or additional costs.

When Should You Consider Alternatives to EXW?

EXW vs. FCA

For buyers new to international trade, FCA (Free Carrier) is often a better choice than EXW. Under FCA, the seller handles more tasks. They deliver the goods to a carrier or another party at a specified location and take care of export clearance. This reduces the buyer’s workload. The buyer takes over responsibility only after the goods are handed to the carrier. FCA simplifies the process by ensuring that the seller manages the initial export steps, which can be tricky for those not familiar with export rules​.

EXW vs. FOB

If the seller has strong export capabilities, FOB (Free On Board) can be a better choice than EXW. FOB requires the seller to handle all export procedures and load the goods onto the shipping vessel. The buyer assumes responsibility only once the goods are on board. This arrangement balances the tasks better. The seller manages export logistics, reducing the buyer’s burden of handling export documentation and procedures. FOB is suitable when the seller is equipped to handle export tasks.

EXW vs. DAP and DDP

For complex shipments, DAP (Delivered at Place) or DDP (Delivered Duty Paid) can simplify logistics for the buyer. Under DAP, the seller is responsible for delivering the goods to a specified place in the buyer’s country, but the buyer handles import duties. DDP covers all costs and risks, including import duties and taxes, until the goods reach the buyer. These terms ensure the seller handles most logistics, making the process easier for the buyer and reducing the complexity of managing multiple transport stages.

TIP: Also read DAP vs DPU vs DDP.

EXW vs. CPT and CIP

When risk management is important, terms like CPT (Carriage Paid To) and CIP (Carriage and Insurance Paid To) are better choices. In CPT, the seller pays for transport to a specified destination, but the buyer takes on risk once the goods are with the carrier. CIP is similar but includes insurance during transit. These terms help balance risks between buyer and seller, promoting cooperation and reducing potential conflicts.

How to Calculate Landed Cost with EXW

Try our free landed cost calculator here 

In an EXW agreement, the Product Cost is particularly crucial because it represents the goods’ price at the seller’s location, with no additional services provided by the seller. The buyer must then account for all subsequent costs, such as loading, transport, export, and import fees, to determine the total landed cost. This differs from other Incoterms, where the seller may cover some of these costs, reducing the buyer’s burden.

By focusing on the Product Cost (EXW) as the starting point, you can see how EXW places most of the cost and logistical responsibility on the buyer, making it essential to carefully calculate all additional costs to determine the true landed cost.

Here’s a breakdown that highlights the EXW component:

Component	Description	Cost (Example)
Product Cost (EXW)	The price of the goods as quoted by the seller, ready for pickup at the seller’s premises.	$5,000
Loading Costs	Expenses for loading the goods onto the transport vehicle.	$200
Transport Costs	Charges for moving the goods from the seller’s premises to the final destination.	$1,500
Export Fees	Costs related to export documentation, licenses, and customs clearance.	$300
Insurance Costs	Optional, but important for covering risks during transport.	$150
Import Duties and Taxes	Fees for importing the goods into the destination country, including customs duties and local taxes.	$1,000
Unloading Costs	Expenses for unloading the goods at the final destination.	$100
Handling Fees	Any other fees for handling the goods along the way, such as storage or warehousing fees.	$250
Total Landed Cost	Sum of all the above components.	$8,500

To accurately calculate the landed cost under an EXW agreement, follow these steps:

1. Start with the Product Cost: Begin with the price you paid for the goods ($5,000 in this example).
2. Add Loading Costs: Include any expenses for loading the goods onto the transport vehicle ($200).
3. Include Transport Costs: Add the charges for transporting the goods to their final destination ($1,500).
4. Account for Export Fees: Include the costs of export documentation, licenses, and customs clearance ($300).
5. Consider Insurance Costs: Add insurance expenses if you choose to insure the goods ($150).
6. Add Import Duties and Taxes: Include all import fees, duties, and local taxes ($1,000).
7. Include Unloading Costs: Add the expenses for unloading the goods at the final destination ($100).
8. Add Handling Fees: Include any other handling fees incurred along the way ($250).

By summing these costs, you get the total landed cost of the goods, which is $8,500 in this example.