EXW (Ex Works) Explained for Buyers of Manufactured Parts from China

Quotations for manufactured parts state a price together with a trade term. "EXW factory, Incoterms® 2020" means something precise: the price covers the parts made available at the named place, and almost everything after that point is the buyer's responsibility. This article explains what EXW requires of each party under the Incoterms® 2020 rules published by the International Chamber of Commerce (ICC), where risk passes, who handles export clearance, and what a buyer should arrange in practice. It also sets out why EXW suits many buyers of manufactured parts. It is general information, not legal or customs advice; confirm the arrangements for a specific order with your forwarder or customs adviser.

What the Incoterms® rules do, and what they do not do

The Incoterms® 2020 rules are eleven three-letter trade terms. According to the ICC, they describe "who does what as between seller and buyer," where risk transfers from seller to buyer, and which party is responsible for which costs ¹.

The ICC is equally clear about their limits. The rules are not in themselves a contract of sale and are no substitute for one ¹. They do not deal with the price or the time, place, method or currency of payment, with the transfer of title to the goods, or with remedies for breach of contract ¹. Those points belong in the purchase order and the seller's terms.

The ICC recommends incorporating the rule in the form "[the chosen Incoterms® rule] [named port, place or point] Incoterms® 2020" and stresses that the year should be included and the place named as precisely as possible ¹.

What EXW means

Under EXW, the seller delivers when it places the goods at the buyer's disposal at a named place, such as a factory or warehouse ². The rule may be used with any mode of transport ². Of all the rules, EXW places the fewest obligations on the seller ², and the ICC Academy summarizes it as "minimal responsibility on the seller and maximum on the buyer" ³.

Seller and buyer duties in summary

The points below are our own plain-language summary of the main duties, not the text of the rule. For the authoritative wording, refer to the ICC's Incoterms® 2020 publication ².

• The seller provides the goods and the commercial invoice as the contract of sale requires; places the goods at the buyer's disposal at the agreed point, not loaded on the collecting vehicle; packages and marks them suitably for transport unless otherwise agreed; and gives the buyer the notice it needs to take delivery. At the buyer's request, risk and cost, the seller helps with the documents and information needed for clearance and for insurance. The seller has no obligation to the buyer to arrange carriage or insurance ².
• The buyer takes delivery once the goods are placed at its disposal and notice has been given; arranges and pays for carriage from the named place; carries out and pays for all export, transit and import clearance formalities; pays all costs from delivery, including the seller's costs of assistance; and gives the seller sufficient notice of the collection time where it has the choice. The buyer has no obligation to the seller to insure ².

Where risk passes

Under EXW, the seller bears the risk of loss or damage until the goods have been delivered ². Delivery, and with it the transfer of risk, happens when the goods are placed at the buyer's disposal, not when they are loaded ². The ICC Academy adds that loading onto the collecting vehicle is the buyer's job, at the buyer's expense and risk ⁴.

Factory staff may help load the collecting vehicle. The ICC recognizes this situation and recommends that, where the seller is to load, the parties agree in advance who bears the risk of loading ². For a buyer of manufactured parts, the simplest protection is to agree in writing who loads, and to make sure the cargo insurance arranged by the buyer or its forwarder starts at the factory, before loading. Confirm the start of cover with your forwarder or insurer.

Note that neither party is obliged to insure under EXW ². If the buyer wants the goods covered from the moment of collection, the buyer must arrange it.

Export clearance under EXW

Under EXW, the seller has no obligation to organize export clearance ². The buyer must carry out and pay for all export, transit and import clearance formalities ². The seller's part is limited to assisting, at the buyer's request, risk and cost, in obtaining the documents and information the buyer needs ².

In practice, export formalities are handled by the buyer's forwarder, and the details depend on the export country's customs rules. Confirm the requirements for your shipment with your forwarder or customs adviser. For a buyer of parts manufactured in China, the practical step is straightforward. Before the order is ready, the buyer and its forwarder should confirm:

• who will lodge the export declaration, and in whose name;
• which documents and data the forwarder needs from the seller (commercial invoice, packing list, product descriptions, weights and dimensions);
• that the cost of those documents and of the seller's assistance is understood, since under EXW the buyer reimburses it ².

A practical EXW checklist for buyers

1. Name the place precisely. The ICC advises the parties to specify the precise point within the named place of delivery as clearly as possible ². Use the factory or warehouse address, not just the city.
2. Appoint a forwarder or courier early. Under EXW, the buyer arranges the carriage from the named place ². Give the forwarder the collection address, contact and expected ready date.
3. Agree on the notice. The seller must give notice that the goods are ready ², and the buyer must give sufficient notice of its collection time where it has a choice ². Agree how this is communicated.
4. Agree who loads. Loading is the buyer's risk under EXW ²⁴. If the factory loads, put the risk allocation in writing ².
5. Specify packaging. The seller must package the goods in a manner appropriate for their transport ². If the parts need specific protection, such as individual bags, foam inserts or moisture protection, state it on the purchase order.
6. Arrange insurance from collection. Neither party is obliged to insure ². A buyer who wants the goods covered from the factory must arrange it.
7. Settle export clearance. Agree with the forwarder who files the export declaration and what the seller must provide ², and confirm the formalities with your forwarder or customs adviser.
8. Complete inspection before collection. Once the goods are delivered, the risk is the buyer's ². Inspection reports and release should be complete before the forwarder arrives.

Why EXW suits buyers of manufactured parts

The same allocation of duties that places the transport tasks on the buyer also gives the buyer control over them:

• The price covers the parts. Under EXW the seller has no obligation to contract for carriage ², so the quoted price reflects the manufactured parts and their packaging, and the cost of transport is not built into it.
• The buyer chooses the forwarder, the route and the transport mode. The buyer contracts the carriage from the named place ². A buyer with an established forwarder can use its own rates, service level and routing, and can consolidate parts from several suppliers into one shipment.
• The buyer decides the insurance. Neither party is obliged to insure under EXW ², so the buyer arranges cover on its own terms, from the moment of collection.
• A clear point of transfer. Delivery and risk transfer take place when the goods are placed at the buyer's disposal at the named place ². When inspection and release are completed before collection, the buyer has the inspection records for the goods at that point.
• One import process under the buyer's control. Because the buyer's forwarder handles the formalities from origin ², the shipment, the documents and the import clearance stay in one set of hands.

How PAXIS handles EXW

PAXIS works on EXW terms only. When an order has passed inspection, it is ready at the factory, packed to the agreed requirements, and the customer's own forwarder or courier collects it. PAXIS helps the customer's forwarder arrange the collection. Before release, each order is inspected by the manufacturer to the drawing and verified independently by our own team in China at the factory, with photos taken before and after packing. Customers pay PAXIS in US dollars, with no payments to suppliers in China. To discuss a part, request a quote.

Note

This article is general information and is not legal or customs advice. The Incoterms® rules are protected by copyright owned by ICC. Further information on the Incoterms® rules may be obtained from the ICC website, iccwbo.org. Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC.