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EXW (Ex Works) Incoterms 2020 – Key Responsibilities:
- Transport (Organization and Costs):
Seller: No transport obligations. Must only make the goods available
to the buyer at the designated place (e.g., on the floor of their own
warehouse or factory). There is no obligation to load the goods onto the
provided vehicle.
Buyer: Bears 100% of the costs and organizes the entire logistics chain.
Responsible for physical loading at the seller's premises, domestic transport, main
international transport (sea, air, or road freight), and
final delivery.
- Transfer of risk:
Critical point: The risk of accidental damage to or loss of goods
transfers from the seller to the buyer when the goods are made available
at the designated place of delivery.
Key fact: The transfer of risk occurs BEFORE the goods are loaded onto
the buyer's transport. If the goods are damaged during
forklift lifting and loading onto the trailer, full
financial responsibility for the damage lies with the buyer.
- Customs clearance:
Export clearance: 100% buyer's obligation and cost. The buyer must
independently complete the export procedure in the seller's country, which in international shipping
often creates legal barriers for foreign entities
without local customs registration.
Import clearance: 100% buyer's obligation and cost. The buyer
is responsible for formalities, duties, and taxes in the country of destination.
Seller's role: The seller is only obliged to assist the buyer (at the buyer's cost and
risk) in obtaining the documents and information necessary for
leaving the country (e.g., certificates of origin). The seller does not control
the export declaration.
The EXW Insurance Myth: Fact or Error in Diagrams?
Many diagrams and educational graphics online show that at the moment of
EXW, either the seller or the buyer has a strict obligation to insure the goods. This is
a factual error.
According to the official interpretation of the International Chamber of Commerce (ICC) for the EXW rule:
1. No mandatory insurance: Neither the seller nor the buyer has
any legal obligation to insure the cargo under this Incoterm.
2. Entirely optional: Purchasing a cargo insurance policy is 100%
voluntary (optional).
3. Practical recommendation: Since the buyer assumes risk already at the seller's premises,
it is in their interest to voluntarily insure the transport for the entire
transit. If the goods are damaged, without cargo insurance, the buyer is left with
a huge financial loss.
EXW: Pros and Cons
Export Perspective (Selling on EXW Terms)
Pros:
- No responsibility for organizing logistics and international
transport.
- No risk associated with damage to goods during sea
or air transit.
- Clear moment of operation completion at the seller's own facility.
Cons:
- Tax risk: Complete reliance on the buyer for
providing documents confirming the export of goods outside the EU. If
the buyer does not provide the relevant confirmation, the seller loses the right to
the 0% VAT rate.
- No responsibility means that we do not build our own channels
distribution.
Import Perspective (Purchase on EXW)
Pros:
- Full control over freight costs. The buyer chooses the shipping company and
optimizes operational costs.
Cons:
- Full control over freight costs is often a myth; the buyer frequently operates in an unfamiliar market and
is reliant on a chain of intermediaries.
- Maximum risk: The buyer is responsible for damages incurred as early as
when the goods are lifted from the ground at the seller's premises.
- Administrative burden: The need to independently navigate complex
customs procedures and export customs clearance in a foreign country,
often without knowledge of the local language and legal realities.
- Hidden costs: If the seller refuses to assist with container loading,
the buyer must pay for an external company or equipment, which drastically increases
the final cost of the operation.
If you wish to consult on delivery terms (FOB, CIF, DAP), cargo insurance, and
Optimal ocean freight costs for your business:
Contact our experts at Insphera S.A. and review your terms
of delivery: www.insphera.pl/kontakt
Our guide to all Incoterms rules: www.insphera.pl/blog/incoterms-kompletny-przewodnik
Official source: Training materials and official interpretation of the International Chamber of
Commerce (ICC) – Incoterms 2020.