- 1 Aspects of EXW?
- 2 What is EXW?
- 3 Delivery location of cargo that stated in EXW
- 4 Bifurcation point of cost burden and risk burden in EXW
- 5 What is the condition of EXW? From the exporter’s point of view
- 6 EXW’s advantages and disadvantages for exporters
- 7 What is the condition of EXW? From the importer’s point of view
- 8 EXW’s advantages and disadvantages for importers
- 9 Summery
Aspects of EXW?
EXW (EX Works) is one of the abbreviations called INCOTERMS that indicate the terms and conditions of trade.
What is EXW?
・EXW is the least burdensome trade condition for sellers!
INCOTERMS(International Commercial Terms) has 11 kinds of trade conditions, but EXW is the least burdensome and least risky condition for the seller.
Delivery location of cargo that stated in EXW
・Delivery is completed at the seller’s factory or warehouse. Loading is also done by the buyer
In EXW, the seller delivers the cargo to the buyer on their premises, such as a factory or warehouse.
EXW stated for the seller only needs to keep the cargo at their own facilities.
Basically, the buyer will also load the cargo into the truck (but the seller has to cooperate if the buyer is ask them to support the loading).
Bifurcation point of cost burden and risk burden in EXW
・Costs and risks transfer to the buyer at the seller’s location
In EXW, when the seller delivers the goods to the buyer at the factory or warehouse, the responsibility to absorb the costs and risks shifts to the buyer.
In other words, the buyer will cover all costs and risks, from transport costs in the exporting country such as the cost of trucks used for pick-up, to export customs clearance, freight charges for ships and planes, and transport costs at the importing country.
Among the 11 rules established as Incoterms, EXW is the only rule that the buyer pays for transportation costs in export countries and export customs clearance.
However, sellers are also required to assist in obtaining export approvals from relevant ministries and agencies, and providing information that importers need for export customs clearance.
What is the condition of EXW? From the exporter’s point of view
・The least burdensome trade conditions for exporters! Recommended for trade beginners
EXW is the trade condition with the least obligation and risk burden for the seller.
From the exporter’s point of view, if the goods are produced on time and the goods are delivered to the buyer on their own premises, the importer will do almost all the work after that.
In that sense, it can be said that this is a suitable trade condition when you just start exporting to foreign countries, or you have never exported to that country concerned.
If you have less experience of export, you may better to consider trading on EXW terms first.
EXW’s advantages and disadvantages for exporters
Now, let’s consider the advantages and disadvantages of EXW from the perspective of the exporter.
・Exporters have less cost, less risk and minimal procedures
First, you only need to deliver the cargo at your site, so the costs such as shipping costs are the lowest.
In addition, since the importer is responsible for any risk that may occur during transportation, such as an accident or misdelivery, the risk burden can be reduced.
In addition, contracts with forwarders and other administrative procedures such as customs clearance are also obligated to the importer, which minimizes the burden of exporting works.
These benefits can be summarized as follows:
Advantages of exporters using EXW
・The cost burden such as transportation can be minimized
・The risk burden is minimal when there is an accident.
・There is no need to carry out trade procedures such as customs clearance
Does EXW have no disadvantages for exporters? Certainly, EXW is said to have the least burden on exporters, but it can be considered to be disadvantage will given its relationship with the buyer.
Let’s consider the real deal.
In the case of importing under EXW conditions, importers must arrange all transportation operations by themselves after delivering the cargo on the exporter’s site.
To do so, importers need to be familiar with trade transactions. In other words, importers in EXW are likely to be trade expert.
It may be quite difficult for exporters to contract with such trading partners in good price conditions. They are advanced trader and take on risks such as shipping.
For this reason, relatively inexperienced exporters may be difficult to make significant gains using domestic and international sales prices under the EXW condition.
The disadvantages are summarized below.
Disadvantages when exporters use EXW
・ Exporter can not choose transportation after delivery of goods
・ As the buyer does a lot of work, it may be disadvantageous in price negotiation.
What is the condition of EXW? From the importer’s point of view
From the importer’s point of view, EXW needs to arrange everything from transport in the exporting country, so it is a condition that requires a wealth of experience and knowledge, such as being accustomed to trading in exporting country.
EXW’s advantages and disadvantages for importers
Now let’s consider what advantages and disadvantages EXW have from the importer’s point of view.
Importer side benefits
In EXW condition, there are also good points for importers.
In addition, it is also said that EXW is the condition that can be imported by the buyer with the lowest cost because it allows importers to select the shipping company or insurance company.
Furthermore, by importer pay for all the labor such as transportation, it is possible to take an advantageous position in negotiations with a trading partner, and it becomes easier to get across to exporter favorable conditions such as price reduction.
Advantages of Importers Using EXW
・ It is said that the condition that can import goods the cheapest
・ Being in an advantageous position in negotiating with trading partners because importer bears the burden of transportation and danger
The disadvantage of the importer is that the dangers of transportation have to be the most extensive. You have to be responsible for all the risks from the site of the exporter to the predetermined domestic point.
Importer also need to do shipping and export customs in the country of export, so exporter need to make sure that the forwarder can arrange for them.
If forwarders can not do these tasks, importer must look for other forwarders or contract without using EXW.
Disadvantages of importers using EXW
・ Be responsible to the greatest extent for all risks and expenses.
High ability is needed for customs clearance in the exporting country and forwarder selection
This time, we have looked in detail about EXW. In here, we consider the conditions of EXW from the standpoint of both exporters and importers, it would be easier to understand if you imagine your company’s situation.
Since EXW is the condition that imposes the least burden on the exporter side in INCOTERMS, for companies that are considering overseas development from now on, it is good to persuade trading with EXW to trading partner.
In addition, if you are the importer who wants to reduce the price, you better to consult with a forwarder, to consider the chance to import with EXW.