3-2. Incoterms E Group (EXW)
Overview
The main actors in EXW are the importers.
Learning Points
- Review of Incoterms
- Terms and Conditions of EXW
- Pros and Cons
- The Cases When EXW is Used
- How to Prepare an Invoice
Review of Incoterms
As explained in the previous topic, Incoterms are broadly divided into four groups. EXW belongs to the E Group.
Terms and Conditions
EXW (Ex Works) is the incoterms where the seller makes the product available at their premise. Once the goods are handed over to the importer at the exporter’s designated place, the importer bears all the costs and risks associated with the shipment.
Pros and Cons
Here, we will explain the pros and cons of EXW.
Considering the perspective of both the exporter and the importer makes it easier to understand trade terms.
Pros for Exporter
- Easy to arrange
- No need to be familiar with the trade
In EXW, once the goods are handed over to the importer at the exporter’s facility, the importer bears all costs and risks. From the exporter’s perspective, after producing the goods and handing them over at their facility, the importer takes full responsibility after that.
Cons for Exporter
- Have no control over the price
- Difficult to get favorable terms and conditions
Importers who choose EXW, where they need to arrange all transportation themselves, might be more knowledgeable or experienced in the trade. While this could vary case by case, negotiating favorable terms unilaterally can be challenging for the exporter.
Pros for Importer
- Can choose the most beneficial companies
In EXW, importers control all transportation from the exporter’s factory to the final destination. The importer can choose their preferred transportation provider, ensuring they receive the most advantageous service.
Cons for Importer
- Bear the full burden, including the risk
Especially when issues arise on the exporting side, the importer needs to solve problems from a foreign land.
If there are no local branches or offices in that country, or if the importer doesn’t have dealings with a forwarder familiar with transportation in that country, problem resolution could be challenging.
・Cons: May not have an advantage in price negotiations
・Pros: Can control all transportation, choose the best carrier
・Cons: Taking all the risks
Considerations
As mentioned earlier, the advantages and disadvantages vary depending on whether you are the exporter or importer.
If you are not familiar with international trade, the following option is advisable.
- Exporter: Use EXW and leave everything to the importer
- Importer: Not to use EXW and apply different terms
How to Prepare an Invoice
EXW is a trade condition where the importer bears all transportation costs. Therefore, it is stated as follows:
- Incoterms: EXW
- Unit Price: Only the goods’ cost (Excluding transportation charges)
Summary
EXW (Ex Works) is the Incoterms where the seller receives the goods at the exporter’s premises or another named place (factory, warehouse, etc.).
In this arrangement, the buyer bears responsibility for all transportation costs, risks, and handling charges from the seller’s location to the final destination. While EXW provides flexibility, the buyer must manage the entire logistics process.
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Test Yourself
Reinforce your understanding of this topic by working through the exercises. Attempting the exercises without referring to the material as much as possible is advisable.
