EXW

Definition

EXW, or Ex Works, is an Incoterm that defines the responsibilities of buyers and sellers in international trade, where the seller makes the goods available at their premises for the buyer to collect. This term places the maximum obligation on the buyer and minimum responsibility on the seller, as the seller is only required to prepare the goods for pickup and ensure they are available. It is crucial in understanding how risk and costs are allocated in global supply chains.

5 Must Know Facts For Your Next Test

1. Under EXW, the seller's responsibility ends when the goods are made available at their location, leaving all transportation and risk management to the buyer.
2. EXW can be used for any mode of transport but is most commonly applied in situations where the buyer has better access to transportation options.
3. The buyer is responsible for all costs associated with loading the goods onto their chosen transportation method once they arrive at the seller's location.
4. EXW does not require the seller to clear goods for export or provide any export documentation, which can complicate international transactions.
5. Buyers using EXW must be prepared to handle all logistics, including loading, transportation, customs clearance, and delivery at destination.

Review Questions

• How does EXW impact the responsibilities of buyers and sellers in international trade?
  • EXW significantly impacts the responsibilities by placing nearly all obligations on the buyer while minimizing those of the seller. The seller's role is limited to making goods available at their premises, leaving it up to the buyer to handle everything from loading to transportation and customs. This arrangement requires buyers to have reliable logistics capabilities and an understanding of local laws to ensure smooth handling of their shipments.
• Compare EXW with other Incoterms like FOB and CIF in terms of risk allocation and cost responsibilities.
  • EXW differs from FOB and CIF primarily in how risk is allocated. With EXW, risk transfers from seller to buyer at the seller's premises, meaning the buyer takes on all subsequent risks and costs. In contrast, FOB shifts risk when goods are loaded onto a ship, making the seller responsible until that point. CIF places even more responsibility on the seller by requiring them to cover costs, insurance, and freight until delivery at a port. This makes EXW a less favorable choice for buyers who may prefer more support in managing shipping risks.
• Evaluate how using EXW as an Incoterm might influence a company's decision-making process regarding its supply chain strategy.
  • Using EXW as an Incoterm can greatly influence a company's supply chain strategy by necessitating careful consideration of logistics capabilities. Companies must evaluate whether they have sufficient resources and expertise to manage loading, transportation, and customs clearance effectively. If not, this could lead them to favor other Incoterms that shift more responsibilities back to sellers. Additionally, companies may also assess potential partnerships or third-party logistics providers to mitigate risks associated with an EXW arrangement while ensuring efficient handling of shipments throughout the supply chain.

Related terms

Incoterms: International commercial terms that outline the responsibilities of buyers and sellers in international transactions, helping to clarify shipping and delivery obligations.

FOB: Free On Board is an Incoterm where the seller is responsible for delivering goods to a specified port, transferring risk to the buyer once the goods are loaded onto the vessel.

CIF: Cost, Insurance, and Freight is an Incoterm where the seller covers costs, insurance, and freight charges necessary to bring goods to a specified port of destination.