Ex Works is obviously the best Incoterms rule for exporters. If you are new to foreign trade, you’d better agree on the term EXW with your buyer as you’ll bear no risk for anything including customs formalities but to make the goods ready at the named place of delivery with required documents like commercial invoice. However it’s not always a desirable choice for importers. Let’s explore the definition of EXW and the responsibilities of both sides.
What is Ex Works?
Ex Works (EXW) means that the exporter is obliged to make the goods available to the importer at the point of delivery and the required papers like commercial invoice that allow the importer to clear the goods smoothly. The place of delivery doesn’t have to be at the premises of the exporter; it can be any place inside the borders of the exporter’s country. That’s why both sides have to agree on the specific point of delivery and mention it on the contract of sale. Otherwise, the exporter may prefer a place that is suitable for it. Following the delivery of the goods at the named place, all the risks and responsibility transfers to the importer.
3 Must Know Points of EXW
The exporter’s responsibility ends when the goods are ready at the delivery point to be picked; and this is generally where parties conflict. They think that loading the goods on the collecting vehicle is not their responsibility; however, according to Incoterms® 2020 rules, it’s the importer that must load them unless otherwise agreed on the contract.
This is mostly passed over as the exporter loads the goods on the vehicle out of courtesy or when the collecting vehicle has not the equipment to load the goods on the truck; but the exporter forgets the risks that may arise at that point. If the goods are damaged for some reason when loading, who’s going to cover it? The EXW rule says that it’s on the buyer unless otherwise agreed and there the conflict starts.
Secondly, The exporter is not responsible for customs clearance in both countries. ICC says EXW means that the seller has no obligation to organise export clearance. So if the importer wants to avoid all the unexpected obligations, it should agree on the FCA (Free Carrier) in the first place. When FCA is agreed between parties, it’s the exporter that must take the responsibility for loading the goods on the collecting vehicle and clearing them at the customs.
Another point that the importer should always remember is that, the exporter must provide the importer with assistance and all the information that will help the goods out of the exporting country. These include the documentation, licensing, inspection, clearance and official authorisation. Such assistance should be negotiated beforehand to make it clear whether it will be charged or not.
What matters in trade is the satisfaction and goodwill of both sides. The ultimate goal for everyone is to end the transaction smoothly; and all these rules serve this purpose. When the rules of the game are clearly known, everyone plays its role accordingly and closes it problem-free leading to a long-term business partnership.