What is the EXW Incoterm?
The Incoterm EXW stands for "Ex Works," which means that the seller fulfills its obligation to the buyer by making the goods available at its (the seller's) own location, such as the factory, warehouse, etc. In this case, the seller is not required to load the goods onto a shipping vehicle or clear them for export.
The buyer bears all costs and risks involved in picking up the goods at the seller's location and transporting them to their final destination. This includes all costs for pre-transportation, export/customs duties, loading and transportation of the goods, as well as import/customs duties in the buyer's country.
It is important to note that EXW imposes the maximum risk on the buyer and the least on the seller, of all the Incoterms. Therefore, experts in international trade recommend that this Incoterm be used only in specific cases, preferably for domestic sales or when the buyer and seller have a long-term trading relationship.
What are the advantages and disadvantages of the EXW Incoterm?
With the EXW Incoterm, there are some distinctive aspects that make it attractive to both sellers and buyers. For the seller, it is a fairly safe option. They have the security of minimizing their risk by having their responsibility end as soon as the goods are available at their location. They do not have to worry about arranging transportation or loading the goods, which can save time and effort.
On the buyer's side, there is a greater degree of control in the transportation process. They can choose the means of transportation and route, and if they have a good relationship with carriers, they may be able to negotiate lower rates.
But the EXW Incoterm also has its challenges. For sellers, the loss of control over delivery can be a disadvantage. They have no control over when and how the goods are transported, which can make it difficult to manage customer relationships, especially if the buyer is new to international trade.
For buyers, the EXW Incoterm brings with it the responsibility to manage all logistics processes, including export and import control. They assume full risk once the goods leave the seller's location. This can lead to potential complications, especially if they are not familiar with local laws and regulations.
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Frequently asked questions about the EXW Incoterm:
Who handles export and customs documents in EXW?
With EXW, the buyer is generally responsible for all export and customs documents.
Is EXW suitable for all types of transportation?
EXW can theoretically be used for any form of transport, but it is especially suitable for road transport. For international transport, involving more customs formalities and regulations, other Incoterms may be more useful.