EXW shipping from China

I know you’re probably looking for the best Incoterm that will help you reduce liability and cost.

Well, the reality is:

Every Incoterm has advantages and disadvantages, depending on whether you’re the seller or buyer.

Also, the circumstances you’re doing the business also play a vital role.

Today, I want to talk about EXW Incoterm.

I will explain what it is and how it works.

Furthermore, I’ll walk you through its advantages and disadvantages.

And, later, you’re going to learn about buyers’ and sellers’ obligations under EXW incoterm.

What is EXW?

EXW is an international trade term that describes when a seller makes a product available at a designated location, and the buyer of the product must cover the transport costs.

What is the Advantages to the Buyer of EXW?

All expenses and charges are the responsibility of the buyer, so they have total control and openness of the entire delivery process.

Buyer enjoys complete control of the costs which would not be overcharged by the seller.

Buyer can organize for the transportation and delivery of goods on their personal terms. For example, they determine the provisions of transport, time of delivery, fulfilment method, and terms of insurance.

What is the Disadvantages to the Buyer of EXW?

Export customs clearance can be complex as on numerous occasions they entail a lot of paperwork from the seller.

There could be extra expenses when transporting across international boundaries. For example, you would need to purchase, export licenses. This is where you do not possess the necessary license to export their merchandise.

Buyer bears total responsibility for the better part of the shipping process. This can complicate the process and even incur hidden charges. The buyer is also liable for damaged, lost or faulty goods. Thus, it is necessary to carry out research prior and exercise due diligence during the whole process.

What does EXW shipping terms mean?

The seller makes the goods available at their premises, or at another named place. … The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included. EXW means that a buyer incurs the risks for bringing the goods to their final destination.

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Ask for the Best Shipping Rate from China

What is EXW?

EXW, an acronym for Ex Works. It implies that the delivery of goods is regarded as complete once the seller delivers them to the buyer’s location.

The buyer’s location can be his/her warehouse or factory.

EXW

EXW

With EXW terms, the seller is not responsible for loading the goods onto the transporting vessel or handling the export customs clearance.

This Incoterms gives the supplier the least responsibilities.

You should avoid it in case the buyer is not in a position to directly or indirectly manage the process of exporting goods.

The EXW shipping term is flexible, you can apply it, despite the mode of transport.

Nevertheless, if both transaction parties choose to share the risks and responsibilities associated with loading the product during shipment, the agreement must be plainly declared.

EXW shipping terms are more suitable for domestic transport of goods.

Where the buyer can employ the services of, their logistic partners or freight forwarding agent to manage the transport.

This way, it will be cheaper and efficient, unlike when the seller manages the whole delivery process.

How EXW Shipping Terms Work

EXW costs are calculated by importers so that they may be able to save money from their purchases.

It gets rid of the value added for shipping by the seller.

An alternative form of EXW terms is the Free on Board (FOB) Incoterms.

Here, the seller bears the cost of carrying its products to a shipping terminal.

Also, the seller covers all the customs expenses to get the consignment on board the vessel.

However, the buyer covers the cost of getting, engaging and paying the carrier.

Furthermore, the buyer pays for the customs fees when the shipment arrives at the country of destination.

The importer as well pays all costs of insurance.

In reality, the majority of buyers sign contract of sales mainly in EXW terms, but in essence end up shipping on FOB terms.

Evergreen shipping

Evergreen shipping

Many times, the export customs declarations are still done in the seller’s name and it is them who enjoy the gains from:

  • Foreign exchange
  • Tax write-off
  • Refund

The costs of export customs clearance are borne by the seller under such an arrangement.

But, in actual fact, this sharing of responsibilities and risks is FOB terms.

You should enter into an Ex works shipping from China term if the buyer is:

i. Capable of meeting all costs

ii. Cover risks during transactions – export and import taxes, alongside the paperwork

Also, this Incoterms compels the supplier in China to:

a) Assist in acquiring the shipping and customs paperwork

b) Ensuring they correctly register the contents of the consignment

However, as soon as the delivery has occurred at the seller’s location, all expenses associated to export violations or damages will be borne by the buyer.

Incoterms

Incoterms

Actually, EXW is at times not a practical Incoterms because of some jurisdictions’ customs rules.

For instance, in the European Union, a non-resident person or company cannot fill out the export declaration documentation.

Thus the importer may be left helpless.

In such situations, the most preferred shipping term is FCA.

Advantages and Disadvantages of EXW

In Ex Works, the importer is liable for all the risks and expenses from the point and time the goods have been made available to them.

So diligence and comprehensive planning are necessary.

EXW can be complicated and tricky for a buyer shipping from China.

This is because they will still require the supplier’s authority or communication in order to clear the merchandise through customs.

Or, give documents to freight partners during the transportation process.

Shipping on Ex Works terms may be the best alternative for sellers with inadequate knowledge in logistics and overseas shipping from China.

Considering that the only responsibility borne by the seller is to make sure that the goods have been packaged properly for delivery to the purchaser’s disposal.

There are minimal consequences for the supplier.

But irrespective of the reduced risk, the EXW terms may not be the most economical choice for the seller.

When you decide to solely use EXW Incoterm as a supplier, a buyer may opt to select another seller with a more appealing and simpler deal.

Port of Guangzhou

Port of Guangzhou

Obligations of Parties in EXW

Under EXW, the seller avails the goods to the buyer at the supplier’s chosen place of business.

This Incoterms gives the greatest responsibility to the importer and minimum obligations on the exporter.

The seller is not legally bound to do the customs clearance for export.

He/she is not responsible for the loading of goods onto the shipping vessel at the designated point of departure.

The table outlines the 10 responsibilities of both the seller and buyer as expressed in Incoterms 2010.

AThe Seller MustBThe Buyer Must
 

 

A1

Provision of Goods in adherence to the Agreement

The seller must issue the products and the commercial invoice or its alternative electronic message, in adherence to the agreement of sale and any other proof of adherence which may be needed by the agreement.

B1

Payment of the Price

The buyer must pay the cost as covered by the agreement of sale.

A2Provision of Goods in adherence to the Agreement

The seller must issue the products and the commercial invoice or its alternative electronic message, in adherence to the agreement of sale and any other proof of adherence which may be needed by the agreement.

B2Licenses, Permits and Formalities

The buyer must acquire at their personal risk and cost any import and export license or additional official permits and undertake, where appropriate, all customs procedure for the exportation of the goods.

 A3Agreement of Insurance and Carriage
(a) Agreement of Insurance
No obligation.(b) Agreement of CarriageNo obligation.
 B3Agreement of Insurance and Carriage
(a) Agreement of Insurance
No obligation.(b) Agreement of CarriageNo obligation.
 A4Delivery

The seller must take the goods at the reach of the buyer at the designated location of delivery, not loaded onto any collecting vessel, on the date or inside the duration negotiated or, in case no such time is negotiated, at the usual duration for delivery of such merchandise. If no particular point has been negotiated within the mentioned location, and if there are a number of points accessible, the seller may choose the point at the location of delivery which best fits its intention.

 B4Taking Delivery

The buyer must accept the goods delivered when the delivery has been done in adherence to A4 and A7/B7.

 A5Transfer of Risks

The seller must, depending on the stipulations of B5, carries all the risks of damage, loss or theft till such moment as the delivery is completed in adherence to A4.

 B5Transfer of Risks

The buyer must carry all the risk of damage, loss or theft from the moment the delivery is completed in adherence to A4; and from the negotiated date or the expiry date of any duration established for receiving delivery, which comes about due to failure to give notice in adherence to B7; so long as, the goods are correctly assigned to the agreement, that is to mean, distinctly identified as the agreement goods.

 A6Division of Costs

The seller must depending on the stipulations of B6, cover all the expenses associating to the goods till such moment the delivery is done in adherence to A4.

B6Division of Costs

The buyer must cover:
All expenses regarding the goods from the moment the delivery are done in adherence to A4; and any extra expenses experienced by failure to either accept the delivered goods when they have been brought to their reach, or to issue sufficient notice in adherence to B7 so long as, nonetheless, that the goods have been correctly assigned to the agreement, that is to mean, distinctly set aside as the agreement goods; and
Where appropriate, all taxes, duties and other fees also the expenses of undergoing through the customs procedure paid when exporting. The buyer must refund all expenses and fees sustained by the seller in offering help in adherence to A2.

 A7Notice to the Buyer

The seller must issue the buyer with adequate notice regarding the time and place the goods will be put in their reach.

B7Notice to the Seller

The buyer must, at any time it is authorized to decide the time inside an agreed duration and/or the location of receiving delivery, issue the seller adequate notice thereof.

 A8Evidence of Delivery, Transport Documentation or Alternative Electronic Message

No obligation.

 B8Evidence of Delivery, Transport Documentation or Alternative Electronic Message

The buyer must issue the seller with sufficient proof of having accepted delivery.

 A9Checking – Packaging – Marking

The seller must cover the expenses of the checking processes (including checking quality, measurements, weight, counting) which a mandatory for the intention of delivering the goods at the buyer’s reach.

The seller must offer at their personal costs, packaging (Except when it is common for the specific trade to deliver the goods of the agreement specification at the buyer’s disposal unpacked) which is needed for the transportation of the goods, to the scale that the conditions regarding the transportation (for instance destination, modalities) are communicated to the buyer before completing the agreement of sale. The seller should ensure correct marking of the packaging

 B9Inspection of Goods

The buyer must responsible for any pre-shipment inspection charges, including those ordered by the governments of the country of export.

A10Other Obligations

The seller must offer the buyer at the buyer’s demand, risk and cost, every help in acquiring any documentation or alternative electronic messages provided or relayed in the country of origin, which the importer may need for the exportation and/or importation of the goods and, where needed, for the transit across international boundaries. The seller must offer the importer, upon request, with the needed information for acquiring insurance.

 B10Other Obligations

The buyer must cover all expenses and fees sustained in acquiring the documentation or alternative electronic messages stated in A10 and refund those sustained by the seller in offering their help in adherence therewith.

Conclusion

Parties to an agreement must clearly define the law governing their trade contracts.

Ex Works shipping terms is the most preferred term by sellers.

It is because it gives them the least responsibility, leaving the buyers with the bulk of obligations.

Incoterms like EXW are legal terms, and their precise definitions are complex and vary depending on jurisdiction.

You can share your experience on EXW shipping from China with us.

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