Incoterms are standardized terms used within international trade to outline the exact delivery terms between a buyer and seller. Incoterms summarize who is responsible for loading and unloading, delivery, payment and insurance. So who is responsible for these activities when the Ex-Works (EXW) term is selected?
Ex-Works (EXW) places the maximum obligation on the buyer and minimum obligations on the seller.
The EXW term results in the buyer incurring all of the risks for transporting the goods to the final destination. The EXW term can also apply to any mode of transportation.
The seller is only responsible for the export packing, marking and labeling.
The seller does not load the goods on collecting vehicles and does not pay for the export clearance. However, the seller may elect which freight forwarder handles the export clearance to ensure compliance with local laws. If the seller does load the goods, he does so at the buyer's risk and cost.
The EXW term is used when the buyer wants to route the transportation and handle all of the export and import customs clearance.
This is a large responsibility for the buyer.
Differences in customs procedures, documentation and regulations should be well researched prior to the shipment departure. For buyers that are unfamiliar with origin customs and documentation differences, a term which assigns the export formalities to the seller might be a more viable solution.
Some examples of export formalities include:
- Export Customs (AES in the U.S.)
- Arrangement of Transportation with Carriers
- Creation of Transportation Documentation
Additionally, buyers who select the EXW terms will need to take into account the costs and formalities associated with product or country specific doumentation. Examples include: phytosanitary certificates, legalization of commercial documents and any health documents which might be required.