What is Ex Works?
EXW, or Ex Works, is an international trade term, describing when a seller makes a product available at a designated location, and the buyer of the product must cover the transport costs.
During EXW, the seller makes the goods available at their premises, or at another named place like a warehouse, factory, etc. Ex Works places the maximum responsibility on the buyer. The Ex Works term is often used in the quotation phase, making it easier to compare the cost of goods between several suppliers. It is also used by buyers that prefer to arrange their own transportation from the origin.
In this scenario, a buyer takes on the responsibility of moving the goods to their final destination. Under EXW terms, the seller does not have to load the goods on collecting or ‘pick up’ vehicles, and does not clear them from export. If the seller performs any of the tasks, he or she does so at the buyer’s risk and cost. If the buyer and the seller agree that the seller will load the goods, and would bear the risk of costs of loading, this should be clarified by adding exact wording in the contract of sale.
There is also no obligation for the seller to make a contract of carriage. In turn, the buyer does not always arrange for transport but can sell the goods on to their own customers and have that party arrange collection from the original seller’s warehouse. In most cases, however, the buyer arranges the collection of the goods from the designated location, as well as clears the goods for export through customs. The buyer is responsible for completing all the export documentation, although the seller must provide the information and documents requested by the buyer.
What are some potential issues with EXW?
Some potential issues with documents to be considered under EXW incoterm are as follows:
Under EXW Incoterm, the buyer is responsible for arranging export clearance. This may be a problem in some countries, which require a local business or a person to act as the importer. The European Union and some Eastern European countries are very strict in this regard. In these cases, it is best to specifically request the seller to act as the exporter in the contract of sale.
Another potential issue is proof of export for tax purposes. In many countries, the seller may be required to provide proof of export to avoid sales tax liability. In others, like China, the seller receives a refund of sales tax paid on raw materials upon presentation of proof of export. Under EXW, the buyer is under no obligation to provide such proof to the seller. In fact, they are not even required to export goods. Any such requirements must be specifically mentioned in the contract of sale.