Exw conditions in Incoterm 2020 - Things you may not know

 

I. WHAT ARE EXW CONDITIONS?

 

EXW (abbreviated as Ex works, meaning Delivered at Work) is the international trade conditions that specifies the respective obligations, costs and risks associated with the transfer of goods from the seller to the buyers according to Incoterms standards published by the International Chamber of Commerce (ICC).

 

The EXW conditions are an agreement that maximizes the buyer's liability, by requiring the seller to deliver the goods only at their workshop, warehouse, or factory. After the buyer receives the goods, the buyer bears all other responsibilities: arrange transportation, pay the shipping costs, carry out the import and delivery process. Once the goods are placed at the disposal of the buyer at the seller's premises or at the named place, the risk is transferred to the buyer.

 

This condition is used for all modes of carriage, regardless of mode or sector of carriage. Therefore, this condition is suitable for domestic trade, in spot import and export.

 

It can be seen that EXW is written with the seller's shipping address, usually the exporter's warehouse: EXW [Delivery Location] Incoterms version.

 

For example: If the seller's delivery location is Hanoi Industrial Park 1, Hanoi. Documents and contracts should clearly show: EXW Hanoi Industrial Zone 1 - Vietnam, Incoterms 2020.

 

I. USE GUIDE

 

1. Delivery of the Goods and Risks (EXW - Ex-Works): Delivery of the Goods means that the goods are delivered to the buyer when the seller places the goods at the disposal of the buyer.

 

-> At the seller's premises or at a designated location (e.g. factory or warehouse, workshop, etc.).

 

-> This specified location is not necessarily a seller's premises.

 

When delivering goods, the seller is not obliged to load the goods on the means of transport nominated by the buyer to pick up the goods, without having to go through customs procedures for export.

 

2. Method of transport: This term is used for all manner of transport and can be used when there are many means of transport involved. This condition is suitable for domestic trade.

 

3. Specific place of delivery or place of delivery: The parties should specify as clearly as possible the place of delivery at the named place of delivery. This will help the parties to clearly determine when and where the goods and risks to the goods are transferred from the seller to the buyer, and also the point from which all costs related to the goods are transferred. Shipping will be borne by the buyer. If the two parties do not agree on a specific place at the named place of delivery and if there are multiple possible delivery points at the named place of delivery, the seller may choose the one that best suits the item its destination.

 

4. Packaging, sign code

 

Sellers of EXW must package and code the goods "in the appropriate manner for their transport". It has been suggested that this would include packaging and marking for export, however the seller of EXW is under no obligation to export the goods.

 

The buyer should clearly specify the destination of the goods to oblige the seller to pack and mark the goods suitable for transportation there. If the destination is a country other than the seller's country, it is implied that the goods will be exported for transportation to that destination. The seller should note the destination specified in the contract for proper packaging and marking.

 

In order to avoid disputes over this obligation of the seller only in terms of basic requirements or including requirements for export, the parties should specify requirements for packaging and marking.

 

5. Note to Buyers: EXW is an Incoterms condition where the seller's obligations are minimal. This condition should be carefully applied with the following caveats:

 

- About the risks of loading the goods: The goods and risks with the goods are considered to pass to the buyer when the goods are placed at the disposal of the buyer at the place of delivery, not yet loaded on the means of transport. Load to pick up. In fact, the seller will be the one with better conditions than the buyer in organizing the loading on the means of transport to receive the goods. If the buyer deems it necessary, the buyer may ask the seller to load the goods onto the means of transport at the buyer's expense. This is sometimes done by adding the phrase "loaded" after the EXW (EXW loaded). However, such an addition does not state whether the seller bears the risk during loading. The parties should clarify whether this addition of the word "shipping" means "loaded at seller's risk" or "loaded at buyer's risk”.

 

If the buyer does not feel like taking the risk of loading the goods at the place of receipt, the buyer may consider using the FCA term instead of adding the word "loading" after the EXW (EXW loaded) however the obligation to inform through goods exported from buyer to seller. If the seller agrees to an additional export clearance obligation, FCA is appropriate. (With FCA, if the goods are delivered at the seller's premises, the seller will be responsible for loading the goods onto the means of transport with the risk of loss of or damage to the goods in the process being borne by the seller.)

 

- Regarding export clearance: With the EXW condition, the seller is not obligated to carry out export clearance procedures or customs clearance in 3rd countries if the goods are in transit. In essence, the EXW term is usually more suitable for domestic trade when there is no obligation to export the goods. The seller is only obliged to assist the buyer when the buyer requires to carry out the export formalities, but the seller is not obliged to do the customs clearance.

 

Buyers should use EXW with caution when the political situation in the seller's country is unstable. If there is an export ban in the seller's country, that is a risk for the buyer, not the seller.

 

If the buyer wishes to avoid the export clearance obligation, the phrase "cleared for export" must be followed by the term EXW (EXW cleared for export). Preferably in this case, the buyer uses the FCA term attached to the seller's premises, provided that the seller agrees to bear the responsibility, cost and risk of loading the goods on the means of transport.

 

II. OBLIGATIONS OF BUYER AND SELLER IN EXW CONDITIONS?

 

1. Seller's obligations

 

According to EXW Incoterms, the seller's liability is very low. Basically, their only requirement is to ensure that the goods are prepared according to the agreed contract, delivered to the buyer at the seller's premises or at the specified place. In addition, the seller will bear all risks, costs and expenses incurred until the shipment is ready to be accepted by the buyer.

 

From the seller's position, EXW may not be a good choice if a letter of credit is involved. Because the forwarder follows the buyer's instructions, the seller may have trouble meeting the letter of credit.

 

When using EXW, the seller should add terms and conditions in the contract such as: "If the buyer does not pick up the goods within 'x' days from the date of notification of the availability of the goods, the seller has the right to charge for storage or transfer them to public storage at the buyer's expense." Without this condition in the contract, the seller could be used as free storage or at the risk of the buyer delaying the payment cycle.

 

A1. General obligations of the seller

 

The seller must provide the goods and commercial invoice in accordance with the contract of sale and provide all proof of conformity that the contract may require. Any document provided by the seller may be in the form of a traditional paper document or in electronic form if agreed upon by the parties or by custom.

 

A2. Delivery

The seller must deliver the goods by placing the goods at the disposal of the buyer at the named place of delivery, if any, not yet loaded on the arriving means of transport. If there is no agreement on a specific place at the named place of delivery and if there are multiple possible delivery points at the named place of delivery, the seller may choose the one that best suits the purpose of the seller. me. The seller must deliver the goods on the agreed date or within the agreed period.

 

The EXW rule requires the parties to include the specified place of delivery. That place of delivery is usually the seller's premises or the place the seller rents to store the goods. If there are multiple possible delivery locations and the parties do not agree on a specific location at the place of delivery, the seller can choose the most convenient location for him. Most likely, the location chosen by the seller is unfavorable to the buyer receiving the goods.

 

A3. Risk transfer

The seller bears all risks of loss of or damage to the goods until they have been delivered in accordance with A2, except in cases of loss or damage mentioned in B3.

 

A4. Carriage

The seller has no obligation to the buyer to conclude a contract of carriage. However, the seller must, at the request of the buyer, at the buyer's risk and expense, assist the buyer in obtaining documents and information, including security information, which the buyer needs to organize the transport of goods. Freight.

 

A5. Insurance

The seller has no obligation to the buyer to enter into a contract of insurance. However, the seller must provide the buyer, at the buyer's request and risk and expense, with the information the buyer needs to obtain insurance.

 

A6. Delivery/transportation documents

The seller has no obligation to the buyer.

 

A7. Import/Export Clearance

 

At the request of the buyer, at the buyer's risk and expense, the seller must assist the buyer in obtaining any documents and/or information relating to all export customs clearance/ transit/import required by the exporting/transit/importing country, if any, such as:

• Export/transit/import permits;

• Security check for export/transit/import

• Pre-shipment inspection; and

• Any other official license.

 

The seller of EXW does not have any customs clearance obligations, but if so requested by the buyer, the seller must assist the buyer, at the buyer's risk and expense, in obtaining documents and information relating to any customs clearance. customs clearance procedures required by the country concerned.

 

A8. Inspection – Packing, packaging – Marking

The seller must pay the costs of any inspection (such as quality control, weighing, measuring, counting) necessary to deliver the goods in accordance with A2.

 

The seller must pack the goods and bear the costs of doing so, unless industry practice specifies that the goods are sent unpacked. The seller may package and mark the goods in accordance with the mode of transport, unless the two parties have specifically agreed on how to pack and mark the goods when the contract is signed.

 

A9. Cost division

The seller must pay all costs relating to the goods until they have been delivered to the buyer in accordance with A2, except those to be paid by the buyer pursuant to B9.

 

A10. Notice to Buyer

The seller must notify the buyer of any information necessary to enable the buyer to receive the goods.

 

2. Buyer's Obligations

For buyers, using EXW means that they not only have to deal with export requirements from abroad, but also have to prepare the goods to be loaded onto a vehicle for transport from the seller's location or another place named in the contract.

 

Buyer assumes all risks and liabilities after they receive the goods from the seller. These responsibilities include the following:

- Loading fee: Loading goods at the pick-up location for the goods to be delivered to the port of export.

- Delivery to Port: Transport the goods to the port to start the export process.

- Export Tax: Prepare export documents and pay any taxes to export the goods.

- Loading in transit: Responsibility related to loading goods on the means of transport.

- Shipping fees: All transportation costs associated with moving goods from one port to another.

 

Insurance: Transport insurance to protect against damage, theft or loss.

- Delivery to destination: The costs involved in transporting the goods from the port of destination to the final destination.

- Unloading at destination: The cost associated with unloading from the final carrier when the goods have arrived at the destination.

- Import Tax: All taxes related to the importation of goods into the destination country.

 

B1. Buyer's General Obligations

The buyer must pay for the goods as specified in the contract of sale. Any document provided by the buyer may be in the form of a traditional paper document or in electronic form if agreed upon by the parties or by custom.

 

 B2. Receive

The purchaser must receive the goods when the goods have been delivered in accordance with A2 and upon receipt of notice under A10.

 

This means that the buyer of EXW is only obligated to receive the goods when the seller has given the buyer notice of the specific place and time of delivery. Without such notice by the seller, the buyer can assume that the seller has no intention of delivering the goods.

 

B3. Risk transfer

The buyer bears all risks of loss of or damage to the goods from the time they are delivered in accordance with A2.

 

If the buyer fails to give the seller notice as provided in B10, the buyer bears all risks of loss of or damage to the goods from the specified date or the last day of the period specified for delivery. goods, provided that the goods have been clearly identified as the contract goods.

 

B4. Carriage

The buyer contracts for the carriage of the goods himself or arranges the transportation at his own expense to transport the goods from the time of receipt of the goods.

 

B5. Insurance

The buyer has no obligation to the seller to enter into a contract of insurance.

 

B6. Proof of purchase

The buyer must provide the seller with appropriate proof of receipt of the goods.

 

Only Article B6 of the EXW rules requires the buyer to provide the seller with appropriate proof of receipt of the goods after the seller has delivered the goods. If the buyer appoints a carrier to pick up the goods on his behalf, the buyer must instruct the carrier to provide such documentation on behalf of the buyer.

 

B7. Import/Export Clearance

Where applicable, the buyer must carry out and pay for all export/transit/import formalities required by the exporting/transit/importing countries, if any, such as:

• Export/transit/import permits;

• Security checks for export/transit/import;

• Pre-shipment inspection; and

• Any other official license. Since the EXW buyer has the discretion to either export or not to export the goods out of the seller's country, all customs clearance for export, transit or import of the goods are up to the buyer. or does not need to be done.

 

B8. Inspection – Packing, packaging – Marking

The buyer has no obligation to the seller.

 

B9. Cost Sharing Buyers must:

a) Pay all costs relating to the goods from the time they have been delivered in accordance with A2;

 b) Refund all costs and fees paid by the seller in assisting the buyer under A4, A5 or A7;

c) Where applicable, pay all taxes, fees and other costs as well as the cost of customs clearance for export; and

d) Pay all costs arising from failure to receive the goods from the time when the goods are placed at his disposal or from failure to promptly notify the seller in accordance with B10, provided that the goods have been clearly identified as of the contract.

 

 B10. Notice to the seller

Where the buyer has the right to determine the date and/or point of receipt of the goods at the agreed place of receipt, the buyer must promptly notify the seller thereof.

 

III. EXW CONDITIONS AND CONDITIONS FOR BUYERS AND SELLERS

1. Advantages for the seller:

- Focus on production and stocking

- Liability for goods is minimal

- No need to organize the delivery process.

- Buyers take full responsibility for logistics so sellers can focus on completion and production schedule.

 

 Cons for the seller:

- Seller cannot choose a shipping company

The seller cannot influence the negotiation cost.

- Buyers choose EXW conditions by experience

 

2. Advantages and disadvantages of EXW conditions for buyers:

Advantage:

- In certain cases, EXW is the most practical solution for transporting goods. For example, businesses that frequently purchase from one country can take advantage of EXW if they plan to purchase goods from multiple suppliers and consolidate them for shipping. In this case, EXW allows the buyer to export the goods as a single export.

- Another advantage is when buyers want to keep their supplier information confidential. They may ship under EXW and use a different named exporter on the shipping documents. - When looking at the cost, EXW will usually be the least expensive option. There are some circumstances where a seller may receive a tax return on the products they export and if the seller relies on this refund as part of their profits, the final FOB price may be cheaper for the seller. both buyer and seller. However, in most cases, EXW will be the cheapest option, as it requires a lot on the part of the seller.

 

Defect:

- While EXW sounds attractive to buyers because of its lower unit costs than other Incoterms, the disadvantage for acquirers is significantly higher as follows:

- First of all, the buyer bears all risks and costs associated with the export, transportation and import of the goods.

Most other International Trade Agreements allow sharing of responsibilities between buyer and seller.

 

However, EXW is the only condition that does not require the seller to load, deliver and ship the goods to the terminal. In addition, if the buyer is uncertain about the process or costs involved in exporting a product, EXW may result in the buyer paying more than they originally intended to pay.

 

IV. WHEN SHOULD I USE EXW AGREEMENT IN IMPORT AND EXPORT CONTRACT?

Most businesses will choose to use an EXW conditions when the seller is unable to export or the buyer is looking to combine multiple shipments and export them under one name.

 

Another scenario where a buyer may want to choose EXW is in case where they are shipping through global express delivery companies. Because these couriers usually pick up the goods from the seller's location and integrate into their service including all shipping and exporting formalities. Hence, buyers shipping through express shipments can save money by changing their terms to EXW.

 

In other cases, reputable importers can set up offices in their exporting country to easily process shipments. But unless there is a good reason why a buyer wants to use EXW, most sellers with experience in international trade will apply a different Incoterms® term.

 

Conclusion with EXW

 - The place of delivery can be the seller's premises or elsewhere.

 - The seller is not obliged to clear the goods for export and to load the goods.

- Should switch to FCA if the seller agrees to load and clear the goods for export

 

Thus, FDVN has worked with you to find out the details of the EXW delivery conditions in Incoterms® 2020. In EXW, the seller and the buyer have their own responsibilities, benefits and risks, so it depends on the conditions. of goods and businesses to use appropriate delivery conditions! Hope you have understood and successfully applied it to your work. Don't forget to follow FDVN Lawyer youtube channel, like fanpage to see more useful articles about Incoterms® 2020!

 

Read more: WHAT ARE INCOTERMS? - THE HISTORY OF THE FORMATION OF INCOTERMS® RULES

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