Created by the International Chamber of Commerce, Incoterms are a series of three-letter designations that define responsibilities between buyers and sellers around the sale of goods, specifically related to transportation costs and liability. If you’re looking for more information on Incoterms, check out our other articles on this topic:
The Complete Guide to All 11 of the 2010 Incoterms Rules
Incoterms 2020 Rules: Everything You Need to Know
Protect Your Bottom Line by Understanding These 5 Common Incoterms
When you’re negotiating a contract to buy or sell goods, knowing your Incoterms® can save you time and money—and prevent unexpected costs that could hurt your bottom line. If you’re considering the EXW Incoterm, let’s dive into the details.
What Does EXW Mean?
EXW stands for Ex Works, and this Incoterm puts the majority of costs on the buyer. If you purchase goods under the EXW Incoterm, your responsibility starts at the door of the location where the seller stores the goods. In other words, you’re on the hook for just about everything involved with getting your goods to their final destination.
For this reason, many sellers may offer goods at a lower rate under the EXW Incoterm. However, buyers should account for all the costs associated with moving the goods to understand their true cost.
What Is the Seller Responsible for Under the EXW Incoterm?
Once the seller hands off the goods to the transportation provider who picks up the goods, they’re not on the hook for any costs or liability after that point.
What Is the Buyer Responsible for Under the EXW Incoterm?
Under the EXW Incoterm, the buyer is responsible for all the transportation costs, starting with the pickup from the seller’s warehouse or place of business. All the costs from there on out—loading and unloading; over-the-road, rail, and ocean freight; import and export fees, including customs duties; insurance, any port fees—are all the buyer’s responsibility.
Incoterms Insights: EXW
As we mentioned, EXW can be an attractive Incoterm for buyers, since it often comes with the lowest cost from the seller. However:
If you’re a buyer working with a seller in a foreign country, EXW can be a tricky Incoterm to manage. If you’re not familiar enough with the country to arrange for (and negotiate!) transportation, it might end up creating significant frustration—and costing you more money.
Additionally, you might find it challenging to deal with multiple carriers. If, for example, you’re working with a factory in Vietnam, you’ll need a local delivery company to move the items to the port, an ocean freight carrier to move it across the Pacific Ocean, another delivery company to pick it up from the port, etc. And that’s not to mention all the customs procedures and paperwork.
In summary, EXW can be a challenging Incoterm for a buyer who’s new to the business or country of origin.
This is where a freight forwarder can really come in handy. A forwarder can arrange all the transportation from the seller’s warehouse to the buyer’s final destination, including assembling all the paperwork for customs procedures, negotiating the best rates, and managing each moving piece.
If you’re considering a contract with the EXW Incoterm, talk to one of our experts. They can help you calculate the final costs and arrange for transportation, every step of the way.
Is There a Difference Between the 2010 Incoterms and 2020 Incoterms?
Yes. The ICC updates the Incoterms rules every ten years, with the most recent version published in 2020. (See what’s new in the 2020 Incoterms rules.) However, some parties may still use the 2010 Incoterms rules, which are still considered valid. Read your contract carefully to see which version of the Incoterms rules is specified.
Want a handy printable PDF for quick reference? Download our Incoterms 2010 PDF or our Incoterms 2020 PDF.
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