Ex Works (EXW) pricing is an international trade term used to describe an agreement wherein the seller is responsible for delivering goods to a designated location, with the buyer responsible for all costs associated with transportation and import duties. This type of pricing is often used by organizations that export goods overseas, as it allows them to control costs, as well as avoid any liabilities associated with delivering goods directly to the buyer. EXW pricing is advantageous for buyers, as it allows them to have more control over their supply chain and transport costs. It also allows them to utilize their own preferred shipping methods. With the right strategies, companies can make the most of this type of pricing and take full advantage of its benefits. In this blog post, we will discuss the advantages and disadvantages of EX Works pricing and provide tips to ensure that your business can make the most of this type of pricing.
Ex-works – pricing
How ex works pricing and shipping works
When a sale is made “ex works,” the seller packages and labels the goods before delivering them to a location that has been agreed upon by both parties, such as a port, warehouse, dock, or airport close to the seller. Sometimes the seller assists the buyer with necessary paperwork, such as obtaining any necessary export licenses, but frequently the buyer handles all shipping preparations alone and bears all associated costs.
When the buyer receives the shipment, they are responsible for covering any additional costs incurred to protect the products from damage during loading or unloading, transportation by ship, plane, or truck, dealing with customs authorities, storing the products, or reselling them. The purchaser also bears the cost of any damaged or unavailable goods. The seller isnt responsible for any expenses.
What is ex works?
Ex works, also known as EXW, is a term in finance that describes a type of international trade in which a seller makes a product available at a specific location and the buyer pays for the product’s delivery by way of transportation. The purchaser is also accountable for tasks like positioning the items on cargo ships or aircraft, loading them onto transport trucks, and adhering to all customs laws.
Ex works is an Incoterm, or International Commercial Term. The International Chamber of Commerce (ICC) issues a set of 11 standardized trade terms known as Incoterms, all of which address the conditions and rules of international shipping. The financial arrangement or agreement between the seller and the buyer to ship a product using ex works shipping is known as ex works pricing.
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Free on board vs. ex works
Both ex works and free on board (FOB) are Incoterms, but free on board places more responsibility on the seller. Sellers load goods onto the buyer’s preferred mode of transportation at the departure location when using free on board shipping. It is possible that the seller will be in charge of the goods during shipping and until they reach their destination. Free on board typically means that the seller is only liable up until the point where the goods are on the shipping vessel and prepared for shipment to the seller’s port or airport. The buyer is then responsible for all expenses and arrangements.
However, with ex works, the seller only gets ready the items for shipping and leaves them at a predetermined place where the buyer can pick them up. The purchaser arranges for ex works and pays for all remaining expenses.
Seller vs. buyer in ex works
When it comes to exchanged works, the buyer is largely responsible while the seller bears very little responsibility. The obligations of the buyer and the seller are as follows:
Seller
The seller has almost no responsibilities with ex works. The seller packages the goods and prepares them for export. Frequently, this entails packing the goods in export cartons or special packaging. The seller ensures that the buyer can pick up the items from the agreed-upon location, which is typically close to the seller. Once the seller has delivered the items to the pickup location, they are done with their obligations.
Buyer
The buyer has many responsibilities with ex works. They handle the majority of the logistics involved, pay for nearly all costs associated with transporting the goods, and bear almost all liabilities. Here are some things for which the buyer is responsible:
Benefits of ex works
Buyers who purchase used goods benefit in a variety of ways, including:
Example of ex works pricing and shipping
Here’s an illustration of how ex works in terms of pricing and shipping:
From Sacramento, California, a walnut shipper sells to a German walnut purchaser. From the walnut processing plant in Sacramento, they must transport the walnuts in a single container to an ocean shipping facility in Oakland, California, and then on to Hamburg, Germany.
Under ex works, the buyer bears the majority of the costs while the walnut shipper is in charge of packaging and export preparation. The cost of the truck transportation from the warehouse to the port is covered by the walnut buyer. They also cover the price of the goods and the cost of ocean transportation. The walnut purchaser also pays any additional charges for the walnuts’ insurance as well as German import taxes and duties.
FAQ
What is the difference between FOB and Ex Works?
Ex Works is an incoterm under which the buyer of a shipped good pays the seller when the goods are delivered to a specific location. Instead, FOB, or Free on Board, passes ownership of the goods to the customer as soon as they are loaded onto the ship.
What does EXW mean in shipping terms?
When the seller places the goods at the buyer’s disposal at the seller’s premises or at another designated location, it is said to have delivered (i e. , works, factory, warehouse, etc. ). No goods must be loaded or cleared for export by the seller.
What is ex mill price?
The seller is required to load the specified number of goods at the specified price onto trucks, railroad cars, or any other specified means of transportation and deliver them to his mill “ex mill” (ex warehouse, ex mine, or ex factory). The buyer is required to accept the goods in this way and make all necessary transportation arrangements.
