EXW–Ex Works (Named Place) Incoterms
Article 2 in our series of Incoterms® 2020 – In each article we will identify the responsibilities of the seller in the transaction at different points in the shipping journey.The previous article explained what Incoterms® rules are.
What are Incoterms® used for?
Incoterms® are primarily used for determining how the sale of equipment for delivery across international boundaries will be handled and who will pay for what in the transaction. They will not address the consequences of a breach of contract or exemptions of liability. Incoterms®relate to the terms between the exporter and importer.
Incoterms® cover the following broad points:
- Delivery - Incoterms® 2020 specify when seller delivers to buyer:
- Risk - Incoterms® 2020 specify when risk transfers from seller to buyer. Risk passes from seller to buyer when seller has fulfilled
his obligation to deliver the goods
- Costs - Responsibility of costs passes from seller to buyer at a point up to which the seller is obliged to pay transport (and insurance) costs.
This term is a rule that can be used for ANY MODE OR MODES OF TRANSPORT
“Ex Works” means that the seller delivers when it places the goods at the disposal of the buyer at the seller’s premises or at another named place (i.e., works, factory, warehouse, etc.). The seller does not need to load the goods on any collecting vehicle, nor does it need to clear the goods for export, where such clearance is applicable.
Seller delivers when he places goods at buyer’s disposal at agreed point
- Not loaded on collecting vehicle
- Not cleared for export
- Minimum obligation for seller
- Buyer bears all costs and risks in taking goods from agreed point
- Suitable for domestic trade only but can be used for international sales
- Suitable for use with any mode of transport
Notwithstanding experience in exporting or importing goods a choice of a suitable Incoterms® 2020 rule can be a challenge. It turns out that this decision has a considerable impact not only on the rights and duties of a buyer and a seller but also on incurred expenses. A lot of exporters naturally gravitate to the Incoterms®, Ex Works, because they think it is the easiest path with the least risk. After all, what can be easier than saying to the buyer, "The goods are at my back (or front) door, come and get them?"
EXW is the Incoterms® that represents the minimum obligations, costs and risks for the seller as he delivers the goods at his own premises (factory or warehouse) in his country.
But in saying that the term is also used by a lot of importers (buyers) who often agree one of the most beneficial rules is EXW. The rule allows for a choice of a freight forwarder, who is responsible for the organization of a large part of the transport. This allows for greater control over transport, planning, and expenditure than other terms. Incoterms® 2020 also determine who incurs the costs related to, among others, loading and unloading, customs procedures, and insurance.
Whilst EXW is a reasonable term suitable for certain situations, where there is a payment arrangement that can only be managed by providing transport documentation then the seller should be wary and consider the implications of not handling the transportation process themselves – or at least sell with an alternative Incoterms® rule in place.
There are many other points that need to be considered when deciding if EXW is the best term for your sale. As always, the ECA is always happy to assist and guide further on the benefits and non-benefits of which Incoterms® to use for certain transactions.