What it means
EXW is one of the Incoterms, a set of standard trade terms published by the International Chamber of Commerce and used in contracts for the sale of goods across borders. Each term says who pays for what, and who bears the risk of loss or damage, at each stage of a shipment.
EXW is the simplest for the seller because its obligation ends at its own factory or warehouse gate. Under EXW the seller makes the goods available at an agreed place, usually its own premises, and does nothing more.
The buyer arranges the truck, loads the goods, handles export paperwork, pays freight and insurance, and clears customs at the destination. Risk passes to the buyer as soon as the goods are placed at its disposal.
This makes EXW attractive for sellers who want to avoid dealing with export rules and for buyers who have their own logistics teams and want control over costs. It also creates a headline price that looks low, because it excludes all the transport costs.
A buyer who compares an EXW quote with a quote that includes delivery is not comparing like with like. The main practical problem is export clearance.
In many countries only a local party can file the export declaration, so a foreign buyer under EXW may struggle to do so. For this reason, many traders use a term such as FCA (Free Carrier), where the seller handles export clearance, whenever the buyer cannot legally do it.
Finance teams care about EXW because it decides when ownership risk transfers, and so when revenue and inventory move between balance sheets. A seller usually treats the sale as complete when the goods are handed over, while a buyer may need to record goods in transit and insure them from the pickup point.
Both sides should confirm the exact point in the contract. Whichever side you are on, compare offers on a landed cost basis, which means the full cost of getting the goods to your door.
Add freight, insurance, duties, handling and agent fees to the EXW price, and only then decide whether it is cheaper than a delivered quote.
In practice
Real-world examples.
Example
A furniture importer in Dubai buys chairs from a factory in Vietnam on EXW terms. Its freight forwarder collects the goods from the factory door, completes export formalities and books the sea freight. The importer controls the freight cost and pays no mark-up to the seller.
Example
A small craft brewer sells kegs to a trader on EXW terms and has a quote ready within minutes. The trader sends a truck, the brewer loads the kegs, and the brewer's responsibility ends. The brewer books the sale that day because risk has passed.
Example
A buyer of electronic components receives two quotes, one EXW at $50,000 and one delivered at $54,000. After adding freight, insurance and handling to the EXW price, the buyer finds that the cost is almost the same at $53,600. The buyer picks the delivered quote for simplicity.
Formula
Calculation
Landed cost = EXW price + inland transport + export clearance + main freight + insurance + import duty
Suppose a buyer agrees to buy machine parts at an EXW price of $80,000. Inland haulage to the port is $1,500, export clearance is $800, ocean freight is $5,200, insurance is $500, and import duty is $4,000. Landed cost = 80,000 + 1,500 + 800 + 5,200 + 500 + 4,000 = $92,000. The true cost is $12,000, or 15%, above the headline EXW price.Case study
Seen in the real world.
Cobalt Ridge Trading is an illustrative, fictional distributor that buys tools from a manufacturer on EXW terms. It was attracted by the low unit price and did not count the cost of arranging transport from a remote factory.
On the first order of $120,000, the company paid $9,000 in inland haulage and a further $2,500 in export clearance fees to a local agent, because it could not file the export declaration itself. The goods were also damaged during loading, and since risk had passed at the factory gate, the claim fell on Cobalt Ridge and its insurer.
In this fictional story the company moved to FCA terms for future orders, so that the seller handled loading and export clearance. The unit price rose slightly, but the total landed cost fell and the risk of loading damage returned to the seller. The lesson is that the cheapest price is not always the cheapest deal.
Watch out
Common mistakes.
- Comparing an EXW price with a delivered price without adding freight, insurance, duties and fees to the EXW figure.
- Assuming the seller will handle export clearance, when under EXW this is normally the buyer's responsibility.
- Forgetting that risk passes at the seller's premises, so goods damaged during loading may be the buyer's loss.
Questions
People also ask.
Who loads the goods under EXW?
The buyer is responsible for loading at the seller's premises, which is one reason many traders prefer other terms.
Is EXW suitable for every shipment?
No, it works best when the buyer has strong local logistics support and can legally handle export clearance.
Is EXW the cheapest term for the buyer?
The headline price is lowest, but the buyer pays all the other costs, so the total depends on how efficiently it can arrange them.
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