Ex Works: meaning and risks of the term EXW
Ex Works is one of the terms codified in the Incoterms, i.e. international trade terms. These terms identify the rights and duties of the parties involved in the import/export, the division of transport costs between buyer and seller, as well as any risks of damage to or loss of goods. According to the International Chamber of Commerce, what is meant by Ex Works and what are the characteristics of this contractual clause? Let’s take a detailed look at all the relevant information.
Ex Works surrender term: what does it mean?
Ex Works (EXW) is the return term that minimizes the seller’s obligations, risks, and costs. Therefore, all obligations are borne by the buyer, who assumes all possible risks and bears all transport costs. That is why it is one of the most appreciated and used Incoterms in international buying and selling.
Ex Works: the Seller’s Obligations
Ex Works is therefore the most advantageous term of delivery for the seller, as they only have to comply with the following obligations:
- Provide the goods and the commercial invoice to the buyer
- Deliver the goods to the named place, without loading them onto the means of transport
- Provide the necessary documents and all information relevant to the movement of the goods
Moreover, only if explicitly requested is the seller responsible for assisting the buyer in obtaining the export license or other authorizations. Furthermore, sellers are not responsible for drawing up the transport contract, taking out the insurance or providing the delivery documents to the buyer.
Ex Works: The Buyer’s Obligations
If EXW is advantageous for the seller, it is less so for the buyer on whom most of the obligations fall. The buyer, in fact, must:
- Pay transport costs
- Obtain import/export licenses or other possible authorizations
- Take delivery of the goods
- Communicate the date and exact point of delivery of the goods
- Provide the seller with proof of taking delivery.
What are the risks and costs of the EXW term?
So far, we have seen how the obligations of the EXW term are divided, but what does this clause state in regards to costs and risks? Ex Works return term foresees that the seller bears any risk of damage to or loss of the goods up to the moment of delivery. Thereafter, it is the buyer who bears all risks.
On the other hand, as far as costs go, the seller is obliged to bear the costs of the goods up to the time of delivery, including those related to quality control, measuring, and counting. Meanwhile, the buyer bears all costs from the time of delivery onwards, including any inspection costs for import/export.
Critical issues related to Ex-works
The term “Ex-works” exerts a good impression on operators, however, especially sellers, should not underestimate some problematic aspects that may arise. In fact, it entails a loss of control over the formalities related to customs operations, increasing the risk of non-declaration of goods or difficulties in finding export customs documents. Moreover, the absence of a direct relationship between seller and carrier means that it is impossible to monitor the shipment.
For this reason, before choosing between the different Incoterms yields, it is a good idea to get properly informed. We at C.T.I. International Forwarder are always available to advise you on the best transport solution and assist you at every stage of import/export.