# Ex Works (EXW): Definition, Pros and Cons, Plus More Incoterms

## What Is Ex Works (EXW)?

Ex Works (EXW) is a term used in international trade. It describes an arrangement in which a seller makes a product available at a designated location, and the buyer of the product must cover the transport costs.

Ex Works (EXW) is one of the 11 standardized international trade arrangements published by the International Chamber of Commerce, which are known as [Incoterms](https://www.investopedia.com/terms/i/incoterms.asp) (International Commercial Terms). These terms outline and standardize the responsibilities of both buyers and sellers in different types of transactions.

### Key Takeaways

*   Ex Works (EXW) is a shipping arrangement in which a seller makes a product available at a specific location, but the buyer has to pay the transport costs.
*   Once buyers have their goods, they are responsible for other risks, such as loading them onto trucks, transferring them to a ship or plane, and meeting customs regulations.
*   Ex Works is one of 11 Incoterms (International Commercial Terms), or standardized international trade terms published by the International Chamber of Commerce.

![Ex Works](https://www.investopedia.com/thmb/g7s0owWryY_Fjt_7u0uDKgDNL9M=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/Ex-Works-FINAL-c2c85c57891e4bf8a1b8fcd56dd4ed73.jpg)

*— Investopedia / Jiaqi Zhou*

## Understanding Ex Works (EXW)

Ex Works (EXW) requires a seller to safely package goods, label them appropriately, and deliver them to a previously agreed-upon location. A commonly used option is the seller's nearest port. The seller must also help the buyer get [export](https://www.investopedia.com/terms/e/export.asp) licenses or other required paperwork, although the buyer must pay the actual fees for the documents.

Once the buyer has the goods, it is up to the buyer to cover any expenses and account for any risks that pertain to the goods. [Risks](https://www.investopedia.com/articles/financial-theory/09/risk-management-business.asp) could include:

*   Loading products onto a truck
*   Transferring products to a ship or plane
*   Dealing with customs officials
*   Unloading products at their destination
*   Storing or reselling products

The seller can choose to load the goods on the buyer's designated method of transport but is not required to do so. All the seller is required to do is make the product available at a selected location while the buyer pays for transport.  

> **Important**
>
> Even if the seller helps the buyer by loading the product onto a ship, it's still up to the buyer to pay if anything goes wrong during the loading.

## Ex Works vs. FOB

An Ex Works agreement differs from a [Free-on-Board](https://www.investopedia.com/terms/f/fob.asp) (FOB) agreement, in which the seller covers the cost of getting its goods to a shipping terminal and pays all the customs costs to get them on board. The buyer still has to pay to find, contract, and pay the shipping company, as well as the customs costs incurred when the goods reach their country of destination. In addition, the buyer also pays the insurance costs.

Ex Works places almost all responsibility on the buyer, while FOB requires the seller to handle more of the export process and initial transportation. FOB is generally more favorable to the buyer compared to Ex Works.

FOB is used for sea or inland waterway transport. Under FOB, the seller is responsible for delivering the goods on board the vessel nominated by the buyer at the named port of shipment. The seller also handles export clearance. The risk transfers to the buyer when the goods are on board the vessel, and the buyer bears all costs from that point onward.

Generally, FOB transfers ownership of goods to the buyer once they are loaded on the buyer's transportation method. However, there is a possibility that the seller might remain responsible for them during transport to the final destination. Who is responsible will be specified in the contract terms the buyer and seller have agreed on.  

## Responsibilities Under Ex Works

Under EXW, buyers and sellers have distinct responsibilities as part of their transaction. These are standard under an Ex Works agreement but should also be outlined in the contract.

### Buyer's Responsibilities

The buyer assumes most responsibilities once they collect the purchased goods from the seller. Some of the duties transferred include:

*   **Loading charges**: Any costs for loading goods at the pickup point
*   **Delivery to the port of origin**: Costs for transporting goods to the port for shipping
*   **Customs export fees**: Any costs associated with duties, tariffs, and documentation for goods leaving the country of origin
*   **Loading on carriage**: Costs for loading goods on the shipping method
*   **Carriage charges**: Any shipping [costs for moving goods](https://www.investopedia.com/cost-to-cross-the-panama-canal-11730860) between ports
*   **Insurance**: If needed or desired
*   **Customs import fees**: Any costs associated with duties, tariffs, and documentation for goods entering a new country
*   **Terminal charges**: Any charges incurred at the arrival terminal
*   **Destination delivery**: The costs for delivering goods from the arrival port to the final destination
*   **Unloading**: Cost to unload goods, such as labor and equipment.

### Seller's Responsibilities

Sellers in an EXW agreement, in contrast to buyers, have very few responsibilities. Generally, they are responsible for:

*   **Packing**: Packing the goods to be loaded and transported
*   **Location**: Providing a place for the buyer to pick goods up  
    

## Advantages and Disadvantages of Ex Works

Advantages

*   Consolidate multiple purchases
    
*   Anonymize a supplier
    
*   Least expensive option
    
*   Purchase in the domestic market
    

Disadvantages

*   Buyer assumes all risk and costs
    
*   Requires a trusted representative
    
*   Disadvantages unfamiliar buyers
    

### Advantages Explained

*   **Consolidate multiple purchases**: Consolidating purchases from various suppliers helps buyers with the costs after goods are loaded at pick-up locations. Buyers need fewer containers or transportation methods to get the goods to the port of arrival and delivery.
*   **Ability to anonymize a supplier**: Goods can be shipped under an incoterm or different exporter name to keep the supplier anonymous from competitors.
*   **Least expensive option**: The costs to the seller are lower, which in turn lowers costs to buyers who don't have to pay markups to cover seller expenses.
*   **Purchase in the domestic market**: Buyers can more easily find goods in a domestic market that doesn't have a strong exporting presence.

### Disadvantages Explained

*   **Buyer assumes all risk and costs**: The buyer inherits the risk of loss from the seller and is responsible for all costs and damages incurred during transportation.
*   **Requires a trusted representative**: Buyers making purchases in another country will need a trusted representative on the ground to ensure goods are present, delivered as promised, loaded, and shipped.
*   **Disadvantages unfamiliar buyers**: Buyers who aren't familiar with the costs and transportation of EXW may end up paying more than they originally expected or intended.  
    

## Incoterms

Ex Works, Free on Board, and Free Carrier are all part of the International Chamber of Commerce's Incoterms. They are used in international trade contracts to outline the process and responsibilities associated with different trade arrangements. Incoterms are used to standardize:

*   The time and place of delivery and payment
*   When the risk of loss shifts from the seller to the buyer
*   Who is responsible for paying freight and insurance costs

The Incoterms aren't actual contracts and don't supersede the governing law in their jurisdiction. Incoterms can be modified by explicit clauses in a trade contract.

There are seven Incoterms that are used with any form of transport:

1.  **EXW:** Ex Works, followed by a named place of delivery
2.  **FCA:** Free Carrier, followed by a named place of delivery
3.  **CPT:** Carriage Paid to, followed by a named destination
4.  **CIP:** Carriage and Insurance Paid To, followed by a named destination
5.  **DAP:** Delivered at Place, followed by a named destination
6.  **DPU:** Delivered at Place Unloaded, followed by a named destination
7.  **DDP:** Delivered Duty Paid, followed by a named destination

There are an additional four Incoterms used to describe transactions involving sea and inland waterway transport:

1.  **FAS:** Free Alongside Ship, followed by the port of loading
2.  **FOB:** Free on Board, followed by the port of loading
3.  **CFR:** Cost and Freight, followed by the destination port
4.  **CIF:** Cost Insurance and Freight, followed by the destination port

Incoterms were first established in 1936, and the current version—Incoterms 2020—has 11 terms. These are often identical in form to domestic terms, such as the American [Uniform Commercial Code](https://www.investopedia.com/terms/u/uniform-commercial-code.asp), but may have different meanings.

Other countries and jurisdictions that govern import and export may have different methods of calculating duties on shipping based on their Incoterms. As a result, parties to a contract must indicate the governing law of their terms.

## What Does Ex Works Mean in Incoterms?

Ex Works is a term used in shipping arrangements where the seller is only required to deliver goods at a predetermined location, and the buyer bears responsibility for shipping costs. Along with these costs, the buyer assumes responsibility for the related risks of the goods, which may include anything from customs regulations to loading and transferring to other ships. Ex Works is one of 11 Incoterms (International Commercial Terms), a standard framework of terms designed to clarify various international trade contracts.

## What Is the Difference Between Ex Works and FOB?

In shipping arrangements, the [difference between Free on Board and Ex Works](https://www.investopedia.com/ask/answers/041515/what-are-differences-between-ex-works-exw-and-free-board-fob.asp) is based on transferring the liability of goods between the buyer and seller. In free-on-board contracts, the seller takes responsibility for bringing goods to a terminal in addition to customs costs and loading the goods onto the ship. The buyer, meanwhile, is liable for shipping costs, insurance, and customs costs at the final point of arrival. In other words, once the goods are shipped, the buyer assumes liability and ownership of the goods, known as “FOB origin” or “FOB shipping point.” By contrast, in an Ex Works agreement, the seller is only responsible for delivering goods to an agreed-upon location.

## What Does Ex Works Mean for Shipping?

With an Ex Works agreement, the seller saves on shipping, customs, and liability for damaged goods after being delivered, packaged, and labeled at the shipping terminal. While this may be optimal sometimes for sellers, it is not always possible due to customs requirements in certain jurisdictions. The European Union, for example, restricts non-resident corporations from completing export declaration forms. In this case, an Ex Works contract would be detrimental to both the seller and the buyer. In contrast, a free carrier contract that places shipping responsibility on the seller could offer a more suitable alternative.

## How Does Insurance Work With Ex Works Terms?

Under Ex Works terms, the responsibility for insurance falls entirely on the buyer. Since the risk transfers to the buyer as soon as the goods are made available at the seller's premises, the buyer must arrange insurance coverage from this point onward.

## Who Arranges Customs Documentation in Ex Works?

In Ex Works terms, the buyer is responsible for arranging all customs documentation, both for export and import. This includes obtaining any necessary export licenses or permits from the seller's country, as well as managing import documentation in the destination country.

## The Bottom Line

Ex Works is an international trading term that spells out the responsibilities of the buyer and seller. Under an EXW agreement, the buyer accepts all responsibilities and costs of picking up and transporting goods to their desired destination.

Under specific circumstances, an EXW agreement is less expensive than the free-on-board (FOB) alternative, but the buyer must be prepared for and know the costs of transporting goods to their destination. The best instances for using an EXW are when the seller cannot export goods or when the buyer intends to consolidate purchases to reduce costs.  

> **Article Sources**
>
> 1.  International Trade Administration. "[Know Your Incoterms](https://www.trade.gov/know-your-incoterms)."
>     
> 2.  AIT Worldwide Logistics. "[Incoterms EXW: Ex Works](https://www.aitworldwide.com/resources/incoterms/incoterms-exw-ex-works/)."
>     
> 3.  Inbound Logistics. "[What is FOB Destination? Meaning, Terms, Who Pays?](https://www.inboundlogistics.com/articles/fob-destination/)"
>     
> 4.  AIT Worldwide Logistics. "[Incoterms 2020 Overview: Breakdown of Seller’s and Buyer’s Responsibilities](https://www.aitworldwide.com/getmedia/c35dd9c1-c6c4-415f-bcbb-41d786f8ec9c/incoterms2020_overview.pdf)."
>     
> 5.  AIT Worldwide Logistics. "[Incoterms FOB: Free on Board](https://www.aitworldwide.com/resources/incoterms/incoterms-fob-free-on-board/)."
>     
> 6.  AIT Worldwide Logistics. "[How to Use Incoterms® Rules, Common Shipping Terms](https://www.aitworldwide.com/resources/incoterms/)."
>     
> 7.  International Chamber of Commerce. "[Incoterms® Rules History](https://iccwbo.org/business-solutions/incoterms-rules/incoterms-rules-history/)."
>     
> 8.  International Chamber of Commerce. "[Incoterms 2020](https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/)."
>     
> 9.  European Commission. "[Incoterms “Ex Works” Rule (EXW)](https://finance.ec.europa.eu/eu-and-world/sanctions-restrictive-measures/overview-sanctions-and-related-resources/eu-sanctions-factsheet-incoterms-ex-works-rule-exw_en)."