What is EXW Incoterms (Ex Works)
The EXW Incoterms was mentioned as one of the 8 Incoterms you should know before you pay your supplier. A post that was made earlier. As an importer/exporter or a trader involved in the international trade business, it is important you know these terms
EXW Incoterm (Ex Work) means that the buyer takes all the risks of bringing the goods to their final destination. The seller may decide not to load the goods and clear them for export.
Even if they load the goods, they do so at the buyer’s risk. In quick short terms, the buyer assumes the responsibility for goods from the seller’s factory and is responsible for carriage/loading and completing all export documentation in the seller’s country. Although, the seller has an obligation to provide him with the necessary information.
Ex-works, as a contract option, is particularly good for the seller and not so good for the buyer.
Two issues with the EXW terms
- In some countries where customs may require a declarant for the export of goods must be an indigenous individual or cooperation, the stipulation that the buyer is to complete the export declaration suddenly becomes an issue. In this case, the buyer may declare the goods in the name of the seller, even though the export responsibilities are the buyer’s under the EXW terms.
- Most countries require sellers to provide proof of export for tax purposes. In an EXW shipment, the buyer has no obligation whatsoever to provide such. If the buyer likes, he/she may not export the goods at all. In a country like china, this will make the seller liable for a sales tax bill as if the goods were sold to a domestic customer. However, in China, their bills also grant the seller the privilege of automatically getting the proof sent to them upon billing the buyer a certain fee, which may be outside the control of the buyer. This will make them recover the task paid on the sales of the product.
I recently had a client, requesting to go pick up goods from his supplier. The supplier required that the goods will be labeled on the EXW terms with the mandate that the customs clearance cert will be sent to them. Knowing the fees that are accrual, our office in China had to inform our client if he is willing to pay the fees. He refused, got back to the seller, and requested the clause of clearance cert be revoked. They did, and the goods were shipped to us for freight to Nigeria. The seller sacrificed their tax refund mission, the buyer was happy, and business continued for everyone.
When You pay for goods under this condition, you are telling the supplier that you are completely responsible for loading goods to your carrier that will convey your goods to our warhouse, or the port. If you send it to the port, you are also going to be responsible for customs clearance declaration. If however, you choose to ship to our warehouse, we take care of all till the goods arrive at your doorstep.
When to use EXW Incoterms
If you are doing a container load, I will advise strongly against paying on EXW terms. Your best bet is to pay for FOB or FCA. That way, your supplier conveys the goods to the port, declares for export at least, and ensures goods are unboarded.
Source:
investopedia
wiki
