What are EXW Shipping Terms?
When importing on Ex Works terms the buyer is responsible for the whole shipment from door to door. All costs and liabilities are with the buyer.
Ex Works (sometimes shown as EXW or ExWorks) is a widely used international shipping term or Incoterm. The terms allocate the division of responsibility between the Shipper (usually the supplier) and the Consignee (usually the buyer) in the process of shipping the goods from one to the other.
Under Ex Works shipping terms the only responsibility for a seller during the whole transportation process is to ensure that the goods they are selling are made available for collection at their premises.
EXW Shipping Terms | Pros & Cons
The Advantages of Ex Works Terms
When using these terms all of the costs and risks of shipping the goods lie with the buyer alone. As a result, with the supplier’s assistance, Ex Works terms are a good way for the buyer to get a clear picture of all of their costs upfront.
Apart from when the goods are with customs, the buyer is in control of the entire shipment. This gives the buyer full visibility and ensures that the supplier isn’t inflating their local costs or adding a margin to the delivery fee.
The Disadvantages of Ex Works Terms
The main disadvantages of Exworks terms surround customs clearance in the country of origin.
Information from the supplier is used when arranging the customs clearance in the country of origin. If this information is incorrect the buyer will still be liable for any additional costs that can occur as a result. In addition to this you’d have to pay for any costs that would occur if your goods were randomly (or otherwise) selected for a customs inspection when being cleared for export in the country of origin.
Another disadvantage is the uncertainty over export licences. If the supplier doesn’t have an export licence then they often use Exworks shipping terms so the buyer has to pay for one. These can be very expensive so if your supplier won’t offer FOB terms don’t forget to ask about an export licence before committing to buy the products.
Beware of Exworks terms if you travel overseas to source goods from multiple local traders or shops. They won’t tell you but you are effectively buying on Exworks terms from each trader. You could easily end up having to pay a considerable amount in overseas charges if you’re not careful.
Your freight invoice may be higher using Ex Works terms but your overall costs shouldn’t be. They are safe terms as buyers have visibility of all the foreseeable costs.…. as long as you get a complete price in advance.
EXW Shipping Terms | My Responsibilities
When importing goods to the UK on EXW shipping terms, outlining your responsibilities as an importer is pretty simple. You are responsible for all costs, arrangements and liability. From collecting the cargo from your supplier’s factory all the way up to getting the goods delivered to you in the UK.
Don’t worry too much about all of this, Shippo can make this process simple. If you’ve agreed an Ex works purchase with your supplier, we can arrange all of the transport, documentation and handling of the goods and simply include the costs in an all-inclusive quote.
If your supplier offers you EXW terms, and you have an EXW quote from us… you’ll know all the costs to buy and get the products to you. All there is to look into now is the Duty and VAT and you can work that out here.
EXW vs FOB Shipping Terms
Both of these terms have their benefits and can be used successfully when importing cargo from Asia. FOB shipping terms stand for Free on Board and are the most commonly used. This term splits responsibility and cost between the buyer and the seller fairly equally.Exworks shipping terms allocate all cost and responsibility to the buyer, however you may get your goods slightly cheaper when importing cargo under these terms.
FOB and Ex Works terms can both be used to ensure you know all of your costs from the start of the shipping process all the way up to receiving your goods. Ex Works terms leave all responsibility and risk in the hands of the buyer, whereas FOB terms split the responsibility down the middle.
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- Manage your costs without hidden extras throughout the process
- Your supplier should know the export documents they need for their products
- Cost sellers work to FOB terms as standard
- All costs are outlined from the outset
- Fairly rare to incur extra costs
- Supplier can’t add any margin to the shipping
- Seemingly increases the cost of goods
- Your supplier could add a margin to their FOB costs
Ex Works Disadvantages
- You are responsible for all risks from your suppliers premises to your door
- Costs not as clear without investigation
- You are liable for any costs incurred at customs in the country of origin
There are positives and negatives for both shipping terms and this showdown does not have a winner by knockout, it’s definitely a judge’s decision! Ex Works can be just as simple as any other shipping term but there can slight uncertainty when you are negotiating with your supplier as to the exact export documents you’ll need to clear the goods through the local Customs.
We would generally recommend FOB terms for first time importers. However, if you have a good relationship with your supplier and you know exactly what your costs are likely to be, shipments can be managed very smoothly on Exworks shipping terms.
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EXW VS CIF/CFR Shipping Terms
If these are your two options we’d strongly recommend using ExWorks terms.
As mentioned throughout this page, Exworks shipping terms can be useful for importers when suppliers are not willing or able to offer FOB terms. When importing cargo on these terms, your costs are very clear cut. As long as you know all of the transport and documentation fees, your costs can be very well controlled from the outset. Your shipping agent should be able to establish the local costs for you and make the process very simple.
There is as with anything, a negative aspect of importing goods on Ex works shipping terms. You can be responsible for any cost that arise from errors in your supplier’s documentation. The process can also be slightly prolonged due to your agent needing to establish the overseas costs.
On top of this, your costs aren’t always dead set in stone. The reason for this is that you are liable for any costs incurred at any point on the journey. For example, if the goods are pulled by customs at the outbound port for inspection (randomly or otherwise), you will have to pay for this. This can be really frustrating as you have no control over the export declaration, yet could find yourself being punished for a mistake made by your supplier.
CIF shipping terms can be a good way to import goods, so long as you have a strong working relationship with your supplier and know EXACTLY what costs you’ll pay when the ship lands in the UK. If there is transparency all the way throughout the process and it is clear who the goods need to be released to on arrival to the UK (your clearance agent) then CIF shipping terms can used successfully.
We would advise steering clear of CIF shipping when importing LCL shipments. For full container loads they can really work, as long as there is good communication between yourself, your supplier, their UK agent and your clearance team.
While CIF shipping terms can be useful in some cases, they by no means come risk free. Your supplier may offer you an extremely cheap price to get the goods to a UK port, but the chances of that being the final cost you will pay are very low. If your supplier offers youCIF terms on your first shipment, stay away! There is absolutely no such thing as a free lunch and it is not a risk worth taking.
The above should have given you a good idea of the pros and cons of each shipping term, but if not here is our summary.
Ex works terms can be really simple, and you shouldn’t be put off by the ‘extra transport costs’ as you probably would have saved money on the goods by working to these terms. All we would advise is that you get in contact with your shipping company a week or so in advance to ensure that all costs are outlined and in place for the moment the goods are ready to go. Ensure that the margin is great enough to take the (very small) risk of a customs inspection and you are good to go.
As for CIF shipping terms, they can work particularly for full container load shipments. If you’ve worked with your supplier enough and have a good level of trust in them, CIF could be a cheap and manageable option for you to work on. You should always ensure that you clarify with them that you don’t want to have to pay anything more than the costs mentioned at the start and try to get as much confirmation as possible in writing.