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Meaning of EXW Incoterms in Shipping

The international shipping process is the backbone of trade exchanges at the international level, but this process, which represents the transfer of ownership of goods from the supplier to the importer, is a delicate process, at what stage exactly will responsibility for the goods be transferred from the supplier to the importer, does the supplier receive his goods from the factory? Or at the port of export? Or does the supplier deliver it to the importer to the door of his warehouse?;
To regulate this process, the International Chamber of Commerce in Paris issued the terms of international trade “Incoterms”, in order to clarify the responsibilities of both the seller and the buyer in international trade.

In this article, I will explain in detail one of the international shipping terms (incoterms), which is one of the most famous terms in international trade, which is the meaning of EXW Incoterms in shipping.

Meaning of EXW Incoterms in Shipping

Meaning of EXW Incoterms in International Shipping

EXW Incoterms means delivery at the seller’s location, where the supplier is only obliged to prepare the goods in the warehouse or factory and prepare them for you to pick them up, and then assume full responsibility for transporting the goods to your warehouse in the country of import.

Under the Shipping Agreement (EXW), you will have almost complete control over the shipment of your goods whether by sea, air or land.

But in return, you will take care of all the costs and bear the risks, whatever they may be. You are responsible for all shipping documents and all shipping charges and must meet the import and delivery process.

Therefore, when relying on the shipping agreement (EXW), it is preferable to be aware of the import procedures in the country of origin.

💡 Note: Often, those who use the EXW shipping agreement have an agreement with a shipping company in the country of export, so that it receives the goods from the supplier after inspection and receipt, and in turn they ship them to the importer’s country.

What is EXW Price?

The EXW price represents the cost of the goods as they are made available at the seller’s premises. It does not include any transportation, insurance, or customs clearance costs. This price structure is beneficial for buyers who have their own logistics arrangements or prefer to have greater control over the shipment process.

Obligations of Importers and Suppliers under EXW Incoterms Shipping Agreements

Obligations of Importers and Suppliers under EXW Incoterms Shipping Agreements

Obligations and fees borne by the Supplier

  • Commitment to the packaging procedures for the goods before shipment.
  • Delivery of goods at the agreed place (factory or warehouse).

Obligations and fees borne by the importer

  • Comply with all risks once the goods are received from the supplier.
  • Commitment to internal transport within the country of origin.
  • Fulfillment of customs procedures within the country of export.
  • Commitment to the process of shipping the goods from the supplier’s warehouses to your country.
  • Customs clearance in the country of import.

This is while bearing all the costs required by the shipping process, starting from receiving the goods from the supplier to the arrival of the goods at the door of your warehouse.

Advantages and disadvantages of the EXW shipping agreement

Features:

  • 1. The EXW is the most common solution for importers who import continuously throughout the year, as they can combine different goods for more than one supplier in one shipment.
  • 2. Importers who do not wish to disclose their suppliers can benefit from the shipping agreement “EXW” by anonymizing the suppliers because they will be shipping the goods in their own name or the name of the shipping company.
  • 3. “EXW” is defined as a shipping agreement that can be used regardless of the shipping method, i.e. fits all types of shipping.

Advantages of EXW for Sellers

Minimal Obligations: Sellers under EXW have minimal obligations, as they are only required to have the goods ready for collection.
Reduced Risk: Since the risk transfers to the buyer at the seller’s premises, sellers under EXW bear less risk compared to other Incoterms.
Cost Savings: Sellers do not have to bear the costs of transportation, insurance, or customs clearance, which can result in cost savings.

Defects:

  • 1. Greater liability and risk.
  • 2. If you are unskilled in the shipping process, you may incur a higher cost than if you used another shipping condition that obliges the supplier to ship.

Read also

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Freight forwarders from China

What is the difference between FOB VS EXW?

FOB is an abbreviation for the English word (Free on board) “sale on condition of delivery on board”.

It stipulates the obligation of the supplier to deliver the goods on board the ship specified by the importer at the agreed time and at a specific port and in the manner stipulated in the agreement, and the importer shall bear all costs and risks of damage or loss of the goods from the moment the goods are placed on board the ship.

In the “EXW” shipping agreement, you bear responsibility directly from the supplier’s warehouse or warehouse, and once the goods are finished manufacturing, processing and packaging, all shipping responsibilities will be transferred to you as an importer.

Get to know: What Is The Difference Between FCA And FOB

when is it better to rely on the EXW Incoterms shipping agreement?

The importer relies on the shipping agreement “EXW” when the supplier is unable to ship the goods for some reason, or when you as an importer want to ship your goods with a reliable shipping company and save you from doing customs clearance procedures, or when you ship multiple goods from more than one source and then ship them in one shipment.

For example, an importer may want to opt for an EXW if they want to rely on express shipping, as express shipping companies often collect goods from the supplier’s warehouses, and their service includes all shipping and supply procedures. Therefore, an importer who ships goods via express shipping companies may find some savings by changing their terms to “EXW”.

when is it better to rely on the EXW Incoterms shipping agreement?

Conclusion

EXW is a unique Incoterm that offers minimal obligations and reduced risk for sellers in international trade. It is suitable for situations where buyers have their own logistics arrangements or prefer to have greater control over the shipment process. Understanding the nuances of EXW and how it differs from other Incoterms such as FOB is crucial for both buyers and sellers in ensuring smooth and efficient international trade transactions.

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