How does the Incoterm Rule EXW Work?

You have to bear in mind that the transaction between seller and buyer doesn’t cease from the moment when both parties have agreed to do business. After an agreement has been reached as to the specifications of the order, they now have to tackle the shipping details that will transfer the ownership of the goods from the seller to the buyer. However, you have to take note the shipping conditions vary depending on the transaction agreed by both parties. One of the popular shipping methods that you have to take note of is called EXW (Ex Works). And if you are indeed prospecting of incorporating EXW into your business deal with the buyer or seller or vice versa, then you would be glad to know that the short but informative blog I prepared will provide you with the information you need about the subject matter. I will present you with the specifics of Ex Works and how it could potentially benefit both parties. So without any further ado, let’s get right into today’s discussion.

What Is Ex Work? How Does it Benefit Businesses?

Ex Work or simply EXW is a shipping condition that is agreed upon by the buyer and seller and other parties directly involved in the transaction. EXW is a standard that is under the guideline of Incoterm, an international regulation on shipping rules that includes Freight Carrier and Free On Board (FOB) aside from the concept of ex works. The idea of Incoterms Ex Works is that the point of responsibility and ensuing risks on the goods shall pass from the seller to the buyer once the delivery has reached the destination where the parties have agreed upon. With this being said–the seller shall bear necessary costs such as freight charges, shipping costs, export fees, etc. Furthermore, the seller will bear the burden of risks and must exercise diligence in ensuring that the goods are in perfect condition while they are in transit and until they reach their designated destination. Once the goods have reached the agreed location, the ownership passes to the buyer who will assume full responsibility for the goods including the costs and risks that come along with it.

How Does the EXW Shipping Option Work?

The premise of Ex Works is that ownership of the goods will be passed from the seller to the buyer when it reaches the nearest port or unloading area or any location that both parties have agreed upon. Until then, the buyer is expected to exercise due diligence over the products that are currently in transit and settle for any charges related to the delivery of the goods. Since it is an international transaction, the buyer must gather essential documentation such as licenses and export fees. Although the sellers are the ones who are expected to settle for them, the buyer must also provide assistance and share necessary information to properly ship the goods to them.

As mentioned, the transfer of ownership also includes the passing of the risks. Most of the risks involved in this setting are in the delivery of the goods from the port near the seller up to their warehouse or storage facility. Some examples of the said risks are unloading the goods from the buyers’ carrier, transactions with customs officials, and loading the goods from a shipping line to a plane or trucking services, and then you have to think about unloading them to your warehouse and storing them properly.

Final Thoughts

Ex Works can provide a lot of advantages, especially to the buyer because it somehow gives them the assurance of the quality of the goods they are going to receive. And if in any case the products are damaged during the duration of the trip, they have the guarantee to conveniently return or modify the transaction since no money necessarily has to come out from the buyer. Ex Works transfers the ownership when the goods are received from the agreed location, until then, the seller bears all the costs and risks involved. It is also somehow beneficial to the seller because it maintains a good relationship between them and the buyer which should allow them to come back for more products.