The first incoterm we are going to discuss in detail is also one of the simplest. Most trading companies do business on EXW terms without even knowing it. They have a product for sale, they sell it, receive payment, and instruct the buyer to make their own arrangements to pick up the goods from the seller’s facility. This method of selling, where the buyer has to arrange their own transportation and clearance of the goods from the seller’s door, is the simplest and least risky term of sale for the seller. The seller assumes no risk or responsibility beyond his/her own “named place” or factory door.
First off, EXW stands for Ex Works. It is also sometimes referred to as Ex-Factory. Simply put, under EXW terms the seller/manufacturer simply makes the goods available to the buyer at the seller’s named place of business. For example, ABC Exporters could simply make the goods available at their factory, i.e. “EXW-ABC Exporters Factory, Shenzhen, China”.
Under EXW terms, the seller’s risk and responsibility end the moment the goods are picked up by the buyer’s carrier :
1) Produces the goods and commercial documents as required by the sales contract.
2) Makes the goods available to the buyer – unloaded – at the named place in the sales contract. For example, EXW-3plwire.com Factory, Los Angeles, CA.
3) Assumes all risk to the goods (loss or damage) only up to the point they have been made available to the buyer, which is usually the seller’s door.
4) Seller must advise the buyer of the location and time of availability of the goods to the buyer.
5) Seller has no obligation to provide the buyer with proof of delivery or transport documents.
1) Buyer must pay for the goods as per the sale contract
2) Buyer must obtain all commercial documentation, licenses, authorizations, and export/import formalities at own risk and cost.
3) Buyer must take delivery of the goods when they have been made available by the seller and at the place nominated by the seller in the sale contract, if it is not the seller’s door.
4) Buyer must assume all risk and responsibility for the goods from the moment they are picked up from the seller’s door or name place to arrival into the buyer’s warehouse or other specified location.
5) Buyer pays for all costs of transportation, insurance, export and import customs and duty fees, and all other formalities and charges related to the transportation of the shipment. This includes all costs relating to loss or damage of goods or non-delivery.
6) Buyer provides the seller with proof of delivery.
EXW is commonly used by sellers/exporters in the U.S. when dealing with overseas buyers. They produce the goods and once payment is received will release the goods from their named location to the overseas buyer’s transportation company. Many European companies also use EXW, but FOB and CIF are common as well (we’ll go into more detail with those incoterms later).
Basically, EXW carries the lowest risk for the seller and is the easiest way for the seller to trade his goods. EXW carries the most risk and responsibility for the buyer, but many buyers prefer the control factor of handling their own cargo from point of origin to their own warehouse.
This interpretation is provided as a guide only.
Incoterms are published by the International Chamber of Commerce and are available on their website and official publication “Incoterms 2000”. For a complete and official overview please refer to the ICC’s publication.