Search
Close this search box.

Table of Contents

Ex Works (EXW)



Definition

Ex Works (EXW) is a term used in international trade agreements to define a deal in which the seller is only responsible for making the goods available at their premises, which can be a factory, workshop, or warehouse. Essentially, the seller is not obligated to load the goods on the buyer’s transport or clear them for export. The buyer then assumes all responsibility for transport, import, and export of goods.

Phonetic

The phonetic pronunciation of the keyword “Ex Works (EXW)” would be: “Eks Wurks (E-X-W)”

Key Takeaways

“`html

  1. Responsibility and Risks: Ex Works (EXW) is an international trade term that places the majority of the shipping responsibility and risks on the buyer. This means that the seller delivers when they place the goods at the disposal of the buyer at the seller’s premises or at another named place. The buyer is therefore responsible for loading the goods onto a vehicle, all export procedures, onward transport, and all costs involved thereto.
  2. Seller’s minimum obligation: Under EXW, the seller fulfills his obligation to deliver when he has made the goods available at his premises for the buyer to pick up. The seller doesn’t need to load the goods on the collecting vehicle or to clear them for export. This means the buyer has to bear all costs and risks involved in taking the goods from the seller’s premises to the desired destination.
  3. Limited obligations for the Seller: EXW minimizes the seller’s responsibilities more than any other International Commercial Term (Incoterm). It is the only one that requires the buyer to take care of import and export customs declarations, making it particularly advantageous for sellers – especially if they are not familiar with the customs rules of the buyer’s country.

“`

Importance

Ex Works (EXW) is a crucial term in international trade, a subset of Incoterms (International Commercial Terms), which defines the responsibilities of buyers and sellers. It is important because it stipulates that the seller is only responsible for making the goods available at their premises, or another named location. This means the buyer assumes all the risks and costs associated with the transportation of goods, including loading, transit, import/export duties, insurance, and other logistics. As such, EXW minimizes the seller’s obligations and risks, which can be beneficial in certain business scenarios. For the buyer, understanding this term is significant to accurately calculate the total cost of a procurement decision, considering all expenses beyond the product price alone. Therefore, EXW plays a key role in shaping the dynamics and agreements in global trade.

Explanation

The purpose of Ex Works (EXW) in finance and business primarily involves the stipulation and division of costs, risks, and responsibilities between a seller and buyer in international trade transactions. EXW is an international trade term that indicates that the seller’s obligations are fulfilled once the goods are made available for collection at their premises or another specified location (factory, warehouse, etc). Essentially, the buyer is responsible for transporting the goods from the seller’s location to their destination, bearing all costs and risks associated with that transport.EXW is used to provide clarity and coordination in international trade, making it easier to navigate the complexities of global logistics. For example, it is used by companies doing business overseas to ensure that they adhere to agreed contractual terms. Under EXW, the seller is only required to package the goods and make them available at a designated location, and then all other responsibilities including loading, shipment and insurance costs, fall on the buyer. Therefore, the usage of EXW clearly defines what is expected of each party, minimizes the risk of misunderstandings, and protects the parties involved in the transportation of goods.

Examples

Example 1: Timber IndustryA timber company in Canada sells logs to a furniture manufacturer in the United States under Ex Works terms – meaning the furniture company is responsible for the shipment, loading, and insurance of the goods from Canada to the U.S. The risk and costs are placed on the buyer once the seller has made the goods available for pick up at their premises.Example 2: Ceramic ProductsA ceramic producer in Portugal is selling its products to a retailer in England using EXW terms. That means all costs and risks involved in picking up and transporting the goods from the Portuguese location to the England store are taken care of by the English retailer. This includes relevant taxes, shipping and handling costs, insurance, and any other costs associated.Example 3: Electronics MarketAn electronics company located in Japan sells its products with Ex Works terms to a dealer in Australia. The Australian dealer is responsible for all transportation costs, loading costs, and insurance for the shipment. The Japanese company only ensures that the goods are ready for collection at their factories, thus the risks and costs are placed on the buyer once they are prepared for dispatch.

Frequently Asked Questions(FAQ)

What does Ex Works (EXW) mean?

Ex Works (EXW) is an international trade term that describes an agreement where the seller is required to make goods ready for pickup at his/her own place of business. All other transportation costs and risks are assumed by the buyer.

In which Incoterm category does EXW belong?

Ex Works (EXW) belongs to the E category of Incoterms. The categories range from E-terms (the minimum obligation for the seller) to D-terms (the maximum obligation for the seller).

When is the EXW term typically used?

EXW is typically used when the buyer wants to have full control over the goods’ transportation and is capable of handling all logistics and transportation risks and costs. It is also commonly used for small value shipments.

Does the seller need to load the goods onto a collecting vehicle under EXW?

No, under an Ex Works agreement, the seller is not responsible for loading the goods onto a collecting vehicle, it only has the obligation to make the goods available for the buyer at his premises.

Who is responsible for insurance under EXW?

Under the terms of Ex Works, the buyer is responsible for insurance once the goods have been made available at the agreed place. The buyer needs to bear all the risk and any costs associated with transporting the goods thereafter.

Why should one choose EXW as a trade term?

Choosing EXW is beneficial for the seller since it means less obligation and less risk. Sellers have minimum responsibility in terms of cost and risk of loss or damage to the goods. It also benefits the buyer who wants maximum control over the goods and transportation.

Can EXW be used for all modes of transport?

Yes, Ex Works (EXW) can be used regardless of the mode of transport chosen. This includes sea freight, air freight, road freight and rail freight. It is one of the few incoterms that can be used for any mode of transport or even multiple modes of transport.

Related Finance Terms

  • Incoterms
  • Freight Forwarder
  • International Commercial Transaction
  • Shipping Terms
  • Buyer’s Responsibility

Sources for More Information


About Our Editorial Process

At Due, we are dedicated to providing simple money and retirement advice that can make a big impact in your life. Our team closely follows market shifts and deeply understands how to build REAL wealth. All of our articles undergo thorough editing and review by financial experts, ensuring you get reliable and credible money advice.

We partner with leading publications, such as Nasdaq, The Globe and Mail, Entrepreneur, and more, to provide insights on retirement, current markets, and more.

We also host a financial glossary of over 7000 money/investing terms to help you learn more about how to take control of your finances.

View our editorial process

About Our Journalists

Our journalists are not just trusted, certified financial advisers. They are experienced and leading influencers in the financial realm, trusted by millions to provide advice about money. We handpick the best of the best, so you get advice from real experts. Our goal is to educate and inform, NOT to be a ‘stock-picker’ or ‘market-caller.’ 

Why listen to what we have to say?

While Due does not know how to predict the market in the short-term, our team of experts DOES know how you can make smart financial decisions to plan for retirement in the long-term.

View our expert review board

About Due

Due makes it easier to retire on your terms. We give you a realistic view on exactly where you’re at financially so when you retire you know how much money you’ll get each month. Get started today.

Due Fact-Checking Standards and Processes

To ensure we’re putting out the highest content standards, we sought out the help of certified financial experts and accredited individuals to verify our advice. We also rely on them for the most up to date information and data to make sure our in-depth research has the facts right, for today… Not yesterday. Our financial expert review board allows our readers to not only trust the information they are reading but to act on it as well. Most of our authors are CFP (Certified Financial Planners) or CRPC (Chartered Retirement Planning Counselor) certified and all have college degrees. Learn more about annuities, retirement advice and take the correct steps towards financial freedom and knowing exactly where you stand today. Learn everything about our top-notch financial expert reviews below… Learn More