Ex works (EXW) are a crucial piece of international commerce. They are one amongst many alternatives buyers have when determining the most cost-efficient method for transporting their products. But, what does this term actually mean and how does it impact companies around the world?

What Does Ex Works Mean?

The term “ex works” refers to the shipping arrangement where a buyer is in full responsibility for the transportation of goods that were acquired. These arrangements are commonly referred to as “incoterms” and are legally binding as well as regulated by the International Chamber of Commerce.

When using “ex works” as a shipping arrangement, sellers will prepare the product at their warehouses or any facilities of their ownership. This includes packaging the products and placing them in an area where they can be easily found by the buyer. Thereafter, the buyer is in possession of the goods and must make all the arrangements for their transportation.

When the buyer is moving a product between countries, this also means it will become responsible for all import-related activities, from submitting relevant paperwork to the corresponding customs agency, to paying any resulting fees that might arise.

Buyers are also responsible for hiring all relevant transportation, including the initial pick up at the seller’s facility, to any potential maritime or air transportation.

Is Ex Works a Type of Incoterm?

Yes, ex works are officially recognized as one of the 11 different kinds of incoterms. Generally speaking, Incoterms are a set of legal terms approved by the International Chamber of Commerce to help buyers and sellers of products to gain better clarity of their duties and responsibilities. 

These terms are used by logistics exports in specialized conversations. However, they are also legally binding terms usually agreed upon on the first contract between buyers and sellers. Thus, it is common to see “ex works” referenced across delivery contracts—more so when it requiresThe specific incoterm used will depend on the specific needs of each buyer and the capabilities of sellers.

What Is the Meaning of EXW?

EXW is the official acronym for Ex works, as recognized and used by the International Chamber of Commerce. In fact, Ex works are most commonly referred to through this acronym in written conversations. Much like the term itself, EXW can be used in contracts to refer to the shipping agreement where buyers hold full accountability over the transportation of goods and sellers are only responsible for packaging and providing the goods to their buyers in their warehouses or facilities.

When Should You Use Ex Works?

Ex works are, by far, the least generous incoterm for buyers. Since they require buyers to arrange all transportation and imports processes, they are generally used by larger companies that can afford to hire an entire logistics department. Otherwise, companies might end up losing considerable time and resources in arranging the transportation of goods. More so if a company is importing products from a different country where they might lack local knowhow needed to transport products to a maritime port or an airport.

However, for larger companies able to spend resources in transportation, ex works offers an opportunity to gain full visibility on the shipping processes needed to import a product. More importantly, it allows companies to arrange transportation at their liking, using carriers and 3PLs they trust. Not to mention that, by taking ownership of the logistics process, companies that use ex works can also negotiate with transportation providers to secure better prices. This is ideal when a company might believe a provider is charging more for shipments than they should.

What Is the Opposite to Ex Works?

The opposite incoterm to Ex Works is called Delivered Duty Paid (DDP). In this incoterm, the responsibility for transporting a product falls not with the buyer, but with the seller. Under DDP, sellers must arrange any form of transportation for a product, as well as any needed imports arrangements. In this case, sellers are also responsible for any potential fines that might arise at the customs border and any other risks associated with the transportation of a product.

FOB vs Ex Works

Free on Board (FOB) and Ex Works (EXW) are both types of incoterms—ie, established agreements that lay out responsibilities in the shipping process. The main difference between the two is that EXW gives the entire transportation responsibility to the buyer, while FOB divides the responsibility between the two. In FOB, the seller is responsible for transporting a product from their warehouse to a port. Once at the port, the responsibility over the products is transferred to the buyer. Under EXW, buyers are also responsible for this initial form of transportation.

There are multiple other incoterms—11 in total—that split the responsibility in other ways. However, Ex Works remains as the most demanding for buyers (ie, one extreme of the incoterm possibilities).

What Is Exw Price?

There is no established price range for Ex Works. Since, when using this incoterm, the is in full responsibility of transporting the goods, the final price of transportation will be a function of the shipping alternatives they considered and the impact of potential disruptions. However, it might well be the case that, for larger companies, using Ex Works might result in lower transportation costs by contrasting various alternative carriers.