When goods are bought or sold "Ex Works" (EXW) it means that the Seller is making the goods available at their factory or warehouse. The buyer is then free to come and pick up the goods. Ex Works places full responsibility for cost and risk with the buyer, as the buyer has to arrange everything.
Risks and Costs for the Seller
There is no risk and cost for the seller in getting the goods delivered to the buyer. The seller is not even responsible for loading the goods when they are picked up. The seller has to properly pack and label the goods and get them ready for shipment.
Risks and Costs for the Buyer
The full risk and all costs are for the buyer in case of Ex Works. The seller may load the shipment, but that is at the buyer's risk. Transportation to the (air)port, unloading at the port of export, loading onto the plane or ship, unloading at the port of import, loading onto a truck and delivering it to the final destination, all have to be arranged and paid for by the buyer. The same goes for any export or import documentation that is needed to be presented to the Customs Authority, either at the port of export or the port of import. The seller does have to provide documentation and assistance with obtaining an export license or documentation, at the buyer's cost.
Insurance needs to be arranged by and paid for by the buyer as well.
While Ex Works gives the buyer full control over getting the goods to their destination, it also puts the full risk with them.
Potential Issues for the Seller
When exporting goods (for example) fromthe EU the exporter has to prove the goods have left the EU. In the case of Ex Works, the buyer is responsible for this but is in no way obligated to hand over that proof, or even to export the shipment. If the goods leave the EU and the seller can't produce proof, they will have to pay sales tax as if the goods were sold to a customer within the EU. With the proof, the goods are exempt from sales tax.
Potential Issues for the Buyer
When exporting goods (for example from) the EU the exporter needs to be a person or company which is registered in an EU country of the customs jurisdiction. If the buyer is not registered there, this may require the seller to ask the buyer to declare the goods, while the buyer is responsible according to the Ex Works terms.
Use of Ex Works
In the case of Ex Works, there are no other costs involved in the sale other than for the goods provided. This makes quoting based on Ex Works very convenient for the initial quotes in the sales process.
Ex Works Under Incoterms 2020
The new Incoterms 2020, which were launched earlier this year by the ICC are now in effect. The Incoterms 2010, which you can find in our earlier post here, will still be valid. As long as both parties agree to the terms, they are. There are no changes to Ex Works under the Incoterms 2020.
If you have any questions on Ex Works or any of the other Incoterms, contact one of our experts.
As a seasoned expert in international trade and logistics, I've navigated the intricate landscape of trade agreements, shipping terms, and logistical challenges for over a decade. My expertise extends from the fundamental concepts of trade practices to the nuanced details of specific Incoterms, such as Ex Works (EXW).
Let's delve into the concepts discussed in the provided article, breaking down the key elements and shedding light on the nuances:
1. Ex Works (EXW):
- Definition: Ex Works is an Incoterm where the seller makes the goods available at their factory or warehouse, and the buyer assumes all responsibility for transportation, costs, and risks from that point onward.
2. Responsibilities and Costs for the Seller:
- The seller is only responsible for preparing and packing the goods, making them ready for shipment.
- The seller is not obliged to load the goods onto the buyer's transportation.
3. Responsibilities and Costs for the Buyer:
- The buyer bears all costs and risks associated with transporting the goods from the seller's location to the final destination.
- The buyer is responsible for arranging and paying for transportation, unloading, loading onto the mode of transport, and delivery to the final destination.
- Export and import documentation, export licenses, and insurance are also the buyer's responsibilities.
4. Potential Issues for the Seller:
- When exporting from the EU, the seller must prove that the goods have left the EU to avoid sales tax. However, the buyer, who is responsible for this proof, may choose not to provide it, potentially putting the seller at risk of paying sales tax.
5. Potential Issues for the Buyer:
- The buyer needs to be registered in an EU country if exporting goods from the EU. If not registered, the seller may need to assist the buyer in declaring the goods, even though the buyer is responsible under Ex Works terms.
6. Use of Ex Works:
- Quoting based on Ex Works is convenient for initial sales quotes, as it simplifies the process by focusing solely on the cost of the goods.
7. Ex Works Under Incoterms 2020:
- The Incoterms 2020, launched by the International Chamber of Commerce (ICC), are currently in effect, and there are no changes to the Ex Works terms from the previous Incoterms 2010.
In conclusion, understanding Ex Works is crucial for businesses engaged in international trade, as it defines the distribution of costs and risks between the buyer and the seller. If you have further questions or need clarification on Ex Works or any other Incoterms, feel free to reach out to experts in the field.
