Incoterms - Ex Works
‘Incoterms’ is an internationally accepted term by the International Chamber of Commerce. This is commonly used between exporters and importers as the International Commercial Terms while doing foreign trade. This helps in easy understanding of business arrangements.
Ex Works (EXW) transaction helps the sellers to perform their function more easily. In the Ex Works contract, the buyer agrees to take goods from the warehouse or picking points by themselves, deals with the related paperwork (including insurance and custom clearance) needed for the transaction and is fully responsible for the total shipping cost and logistics. This is quite clear that the buyer gets more responsibility than the seller. Ex Works can be used for any kind of transport mode.
Responsibilities of Seller and Buyer
The seller responsibilities vary from buyer responsibilities through many diversions. They include:
proper labelling of goods with excellent packaging condition,
complete updation of delivery scheme of a pick-up point which is pre-agreed by the buyer. This can be the manufacturer’s warehouse, local port or some other location.
helping the buyer in handling paperwork for the export license. This is done as a favor for buyers.
The buyers are the ones who are more responsible than sellers in case of Ex works. They include:
The complete shipping cost is to be made by the buyer.
Should handle all the risks related to expenses including all the damages occurred.
The unloading and loading of the goods are to be done by themselves in the home port.
Benefits of Seller and Buyer
The seller usually has less risk regarding handling of the goods. In case if the seller finds space for helping the buyer, it is the full responsibility of the buyer if any mishappening or damages occur. There is no agreement in Ex Works mentioning the duty of the seller that is to be strictly followed if anything badly happened or not.
Even though buyers have all the risky chapters, they can avail maximum profit from this agreement. Usually sellers arrange the method of shipping that are to be followed by the buyer. The seller arranges the shipping company for taking commission. There is a chance of increasing service prices by the company and will get forwarded to the buyer. In this case, the buyer deals with shipping activities and through this involvement the buyer can cut out the value added by the seller and can add it to buyer’s profit. This makes buyers more profitable.
Difficulties of Buyer
In some of the trading blocks, export declaration documents are to be done by the residents. In such cases, if the buyer or their representative is not a resident of the country, they cannot complete the paperwork which are very important in making receipt of goods. Pre checking this criterion will be beneficial as this cannot be uncovered by any means.
Comparison of Ex Works with shipping methods
Free on Board (FOB) and Free Carrier Agreement (FCA) are two shipping methods that have a clear-cut difference from Ex Works. In the case of FOB, the sellers have the responsibilities on goods until they reach the destination. Once they are reached at their destination point, the buyer assumes all costs and takes responsibilities like Ex Works. FCA is quite different from FOB and Ex Works. In FCA, the seller is fully responsible for goods from the warehouse or other starting point to destination point. The seller might take the responsibilities and risks regarding the safe journey of goods as well as all the needed paperwork for the entire purpose.
The buyer might seem to deal with risky nature with complete workload as per the Ex Works agreement. He/she can save money if they have complete knowledge regarding the agreement and have strong organizational connections. As per the seller, this agreement is a good option for reducing pressure and risk in the work.
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