Shipping across the globe can be a complicated experience.
In addition to planning the route and working through hoards of paperwork, you will also have to grapple with a wide variety of different incoterms.
Incoterms’ primary function is to designate responsibility for the goods at varying stages of the shipping process. The focus today will be on the EX-Works incoterm.
What is the EX-Works Incoterm
The EX-Works (EXW) incoterm stipulates that the buyer is responsible for the entire shipment, from dispatch to delivery.
EXW means that the goods are delivered to the buyer once they've been placed at an agreed location.
The seller is under no obligation to load the delivery onto any collecting vehicle or clear them for export. This rule places very few obligations on the seller.
Advantages
The EXW incoterm means that the buyer, and the buyer alone is responsible for the goods. As a result, EXW terms allow the buyer to receive a clear picture of the costs required to ship their goods.
The buyer is in complete control of the shipment, allowing lucid visibility and removing any worries with suppliers about cost inflations.
Disadvantages
The major drawback to the Ex-Works term is focussed around customs in the country of origin.
The supplier gives the information when arranging customs clearance in the country of origin; if this information is incorrect, the buyer must pay extra costs. Additionally, the buyer must also pay any fees if goods are chosen for a customs inspection.
Export licences offer another drawback for the EXW incoterm. If the supplier doesn’t have the necessary export licence, they will often use the EXW term to get the buyer to pay for one.
While the EXW incoterm may result in a higher freight invoice cost, the overall cost shouldn’t be higher. The EXW incoterm still allows for the buyer to have complete visibility and control over the cost of shipping.
Every quarter we release the next episode of our popular Freight Club customs podcast. It covers all the latest legislation across the globe, and our international team get together to discuss the current customs and regulatory news. We promise it is more fun than it sounds.
