EXW Incoterms 2020 rule – what does it mean?
In international trade, precise definition of the parties’ obligations is crucial to avoid disputes and misunderstandings. One of the most commonly used rules in this regard is EXW (Ex Works).
But what exactly is the EXW Incoterms 2020 rule? What obligations does it impose on the seller and the buyer? When should it be used? Let’s take a look at this step by step.
Want to learn more about all 11 International Commercial Terms? Read: What are Incoterms? International sales terms in practice >>>
What does EXW mean in Incoterms 2020?
EXW means that the seller makes the goods available at a designated place and the buyer organises all transport. This is one of the Incoterms 2020 rules established by the International Chamber of Commerce.
The EXW (Ex Works) rule means that the seller delivers the goods by placing them at the disposal of the buyer at their premises or at another designated place. From that moment, the risk of loss or damage to the goods passes to the buyer.
In short: EXW means minimum obligations for the seller and maximum responsibility for the buyer. The buyer bears all transport costs and formalities, as well as the risk.
What are the EXW delivery terms?
EXW delivery terms mean that the seller makes the goods available (usually on their premises) and the rest is up to the buyer.
In practice, this means:
- the goods are at the designated place of delivery, ready for collection,
- the seller’s obligations end when the goods are made available,
- the buyer organises the means of transport, customs clearance, insurance of the goods and bears all costs related to transport.
Summary: EXW delivery terms are advantageous for the seller but require commitment and well-established logistics procedures on the part of the buyer.
What are the seller’s obligations under EXW?
The seller’s obligations under EXW are primarily to make the goods available to the buyer on the agreed date.
The key tasks of the seller include:
- delivering the goods together with the commercial invoice and other documents,
- preparing the goods for collection at the designated place,
- informing the buyer when the goods are ready for collection.
What are the seller’s obligations under EXW? Only to make the goods available – without any obligation to load the goods or arrange transport.
Summary: In EXW, the seller’s liability is limited to a minimum – the risk is transferred from the seller to the buyer upon delivery of the goods at the seller’s premises.
What are the buyer’s obligations in EXW?
The buyer’s obligations in EXW include the complete organisation of transport from the moment of collection of the goods at the designated place.
The buyer must:
- accept delivery of the goods on the agreed date,
- provide a vehicle/means of transport at the place of collection
- organise the loading of the goods,
- carry out customs clearance (export and import),
- cover the costs of transport, insurance and any additional costs related to delays or irregularities.
Summary: In EXW, the buyer bears all costs and risks, while having full control over the transport process.
Where does the transfer of risk take place in EXW?
The transfer of risk in EXW takes place when the goods are made available at the designated place.
From that moment on, all risk of loss or damage passes to the buyer, even if the goods have not yet been loaded. It is therefore essential to clearly specify the exact point and place of delivery in the sales contract.
In EXW, the risk of loss passes to the buyer very early on.
What is the process of delivering goods in EXW?
The process of delivering goods in EXW begins with the preparation of the shipment by the seller and ends with the loading by the buyer.
For example:
- The seller prepares and makes the goods available on their premises,
- The buyer sends a vehicle to the place where the goods are to be loaded,
- The goods are transported by the means of transport chosen by the buyer,
- The buyer carries out customs formalities and organises further transport, e.g. by sea.
Summary: The EXW process is simple for the seller and means full logistical responsibility for the buyer.
Who bears the transport costs in EXW?
The transport costs in EXW are borne entirely by the buyer.
This includes not only the cost of transport, but also insurance of the goods, customs clearance fees and any additional costs related to delivery irregularities.
EXW allows the seller to reduce costs and risks by transferring them entirely to the buyer.
What are the advantages and disadvantages of the EXW rule?
The advantage of EXW is its simplicity and minimal obligations for the seller, while the disadvantage is the high risk and costs for the buyer. In fact, the balance of advantages and disadvantages in this rule is very biased.
Advantages of EXW:
- simple obligations for the seller,
- reduction of costs and risks for the seller.
Disadvantages of EXW:
- the risk of loss or damage to the goods is borne by the buyer from the outset,
- requires full logistics procedures on the part of the buyer.
EXW is ideal for the seller, but requires experience and resources from the buyer.
Summary
The EXW Incoterms 2020 rule is an option for parties who want to clearly divide responsibilities – the seller makes the goods available on their premises and the buyer is responsible for all transport. It works well in trade where the buyer has developed logistics facilities and wants to have full control over them.
FAQ – Frequently asked questions
Who pays for transport under EXW?
The buyer pays for all transport. The seller makes the goods available, and the buyer organises and finances the transport.
What is the difference between DAP and EXW?
Under DAP, the seller is responsible for delivering the goods to their destination (without unloading), while under EXW, the seller is only responsible for making the goods available at their premises.
What is the difference between EXW and FCA?
FCA requires the seller to load the goods and deliver them to the carrier (e.g. to the airport or terminal). In EXW, the seller is only required to make the goods available at the designated place.
Read also: FCA Incoterms 2020 – what does the Free Carrier rule mean? >>>
What does EXW Incoterms mean?
It means that the goods are available to the buyer at the seller’s premises. It also means that the buyer assumes all obligations and risks related to the goods and their transport from that moment on.
Is ExWork Incoterm beneficial for the seller?
Yes, because it minimises their obligations and transfers the risk to the buyer at the beginning of the transaction.