The EXW condition is one of the basic terms in the international sale of goods. Although the EXW condition is not used as much as CIF or FOB, it is essential to understand it for those working in the field of import and export or in logistics services. Then what is the EXW condition? And what are the responsibilities of the parties? Let's find out with Giaiphapdonggoi.net!
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1. What is the EXW condition?
The EXW condition stands for ExWork - an international trade term that describes when a seller delivers a product at a specific location and the buyer of that product has to pay for the shipping costs. ExWorks (EXW) is one of 11 applicable Incoterms, a set of standardized international trade terms published from the International Chamber of Commerce.
What is the EXW condition?
EXW acts as a contractual option, which is particularly good for sellers and bad for buyers. The seller is only required to securely pack the goods, properly label the goods, and deliver the goods to a previously agreed place, such as the seller's nearest port. The seller also helps the buyer obtain an export license or other relevant paperwork, although the buyer must pay the actual fees for the documents.
After the buyer has the goods, the buyer will cover all costs and bear all risks associated with the goods. Risks can include loading a truck, transferring it to a ship or plane, dealing with customs officials, unloading at destination and storing or reselling. For example, even if the seller helps the buyer by loading the product on the ship, the buyer still has to pay if anything goes wrong during the loading process.
2. EXW Responsibilities and Risks
Under the Incoterms 2020 rules, EXW means that the seller has fulfilled its obligations when the goods are delivered to the buyer, usually at the seller's place. The seller should pack the goods appropriately or as specified in the agreement between the two parties. The buyer is responsible for loading the goods on their own means of transport and everything else necessary to bring the goods to their final destination.
Ex Works Responsibilities and Risks
The risk or responsibility for the goods passes from the seller to the buyer when the goods are delivered at the named place. That means if damage occurs while the goods are being loaded onto the buyer's vehicle, the buyer is at risk even if the seller is assisting with the loading. Precautionary measures should be taken.
3. Ex Works (EXW) Terms for Buyers and Sellers
About factory terms
For sellers: The goods supplied by the seller are mostly from their own factory/warehouse. The seller is obliged to prepare the goods for collection, and then the buyer will inspect and load the goods for shipment according to the terms and conditions of ex-works agreed between the buyer and the seller.
For Buyer: Buyer must arrange freight from seller's factory to his own factory. The buyer has to take care of loading the goods from the seller's factory, then completing the shipping and finally unloading at his own factory.
About packing terms
For Sellers: These packaging terms cover the inspection, marking and packaging of goods in international trade. The seller must ensure that the packing is done in a manner approved for export and must do so at his own expense.
For the buyer: There may be some exceptions to the terms of packaging such as the seller providing an invoice or labeling/marking the goods, but other than that, the buyer has no obligation to pack goods.
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About loading and unloading
To the seller: In EXW terms, the seller is not obligated to assist the buyer in loading and unloading the goods, as the seller is only responsible until the delivery of the goods at the named place, usually his own warehouse. . However, the seller may load the goods, but the buyer bears the risk and cost.
For the buyer: Due to the formalities carried out by the buyer, the loading and unloading of the goods at all stages belongs to the buyer.
First stage: Loading goods from seller's factory/warehouse.
Second stage: Load them and prepare for shipping procedures.
Third stage: Loading for shipping.
Fourth stage: Load them at the port (the buyer's port).
Fifth stage: Loading goods from the port for transportation to the factory (buyer's warehouse).
About the document
For the seller: The seller must provide the buyer with the following documents as documentation:
Bill of lading
Commercial invoice
Insurance certificate
List of goods
Export Licenses: These licenses are needed in situations where the seller is authorized to make the delivery.
For the buyer: The seller provides proof to the buyer,
for the goods arranged by him. The seller can provide documents to the buyer such as quality products, licenses, certificates, receipts, etc.
About delivery terms
For the seller: The seller must deliver the goods at the specified place, within the specified time frame. In terms of delivery of ex-factory works, where no mention is made of the named place, it can be assumed that the goods will be factory-made.
For Buyer: The point of shipment during ex-factory is the seller's factory, so the buyer's receipt and delivery starts at the place of origin. The stages involve taking the goods from the factory, transferring to the port, the shipping process and then receiving the goods at the buyer's own warehouse.
About freight terms
For the seller: Since the seller is not engaged in any activity related to the transportation of the goods, the seller is not responsible for the shipping charges under the shipping terms. But at the buyer's risk and expense, the seller can assist the buyer in the export process.
For Buyers: Buyers have almost complete control over shipping and handling operations. Buyer is responsible for paying trucking fees, ocean freight charges and shipping charges. Furthermore, the buyer is also responsible for all future costs associated with delivery.
About customs procedures
For the seller: The seller has no obligation to clear the goods because the seller has no role in the delivery and transportation process. However, if required by the buyer, the seller can provide export clearance documents, at the buyer's risk and expense.
For the buyer: Since the whole process is done by the buyer, the buyer has to pay the customs duty and bear all the import and export costs.
About insurance
To the seller: The seller is under no obligation to provide any insurance. However, the seller may assist the buyer in arranging insurance for the goods during transit, at the buyer's expense.
To the buyer: The risk of the goods is the responsibility of the buyer. Any damage to the goods during transportation will be borne by the buyer. Therefore, the decision about insuring the goods is up to the buyer, and the buyer may or may not insure the goods.
Above is some information about EXW conditions that Giaiphapdonggoi.net we provide to you. Through this article, Giaiphapdonggoi.net hopes to bring you useful knowledge.
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