Ex Works (EXW)/Ex-Works/Ex-Factory
The incoterm Ex Works (EXW) means that the seller delivers the goods at the buyer's disposal at the place of destination, such as a factory, warehouse, or workplace.
Ex-works delivery term determines the maximum obligation on the buyer (the importer) and the minimum responsiblity on the seller (the exporter). The term Ex Works is often used by exporters when making an initial bid, as it does not include any expense items other than the price of the goods and the cost of packaging. All other incoterms prices are obtained by adding other expenses on the ex-works price.
Shipping Method or Modes of Transport: All modes of transport (road, rail, air, and sea)
Transfer of Risk: At Buyer's Disposal
Seller Obligations: The seller's sole responsibility is to prepare the goods to be loaded into the vehicle or container. It is the risk-free shipping type for the seller since they're not responsible for loading the goods on any collecting vehicle or clearing them for export, where such clearance is applicable.
Buyer Obligations: The buyer is responsible for all costs and risks, including transportation, insurance, and customs clearance, until the goods loaded from the seller's warehouse or factory reach their destination.
EXW Price Calculation: Product cost + packaging + profit share
Carriage and Insurance Paid to (CIP)
According to the Carriage and Insurance Paid to (CIP) mode of transport, the exporter is responsible for all processes, except import customs clearance, until the goods are delivered to the importer's country. CIP mode of transportation is widely used in road vehicle transportation, and it is also a suitable incoterm for multimodal shipments.
Shipping Method or Modes of Transport: All modes of transport (road, rail, air, and sea)
Transfer of Risk: At Carrier
Seller Obligations: The seller bears responsibility for the goods till the delivery is addressed. The exporter company finalizes all steps, excluding import customs charges.
Buyer Obligations: The buyer, i.e., the importer company, is responsible for the costs of import formalities: customs, taxes, import and transit permits
CIP Price Calculation: Product cost + packaging + loading charges + delivery to port/place + export customs charges + terminal charges + loading on carriage + carriage charges +insurance + profit share
Incoterms FAQ
What are the advantages and disadvantages of using Incoterms for international trade?
The main benefits of using Incoterms are that they provide a common language across borders, make it easy to compare prices from different suppliers, and enable you to calculate your freight charges. The disadvantages of using Incoterms are that they may not cover every possible scenario, and sellers and buyers may have different preferences for their business.
Which Incoterms are used in e-commerce transactions?
Most B2B sales contracts will be either EXW, CPT, or CIF, while most B2C sales will be CPT or CIF. However, some B2C sales may be made using DDP instead of CPT or CIF.
What Incoterms are used for air freight?
Seven Incoterms may be used for air freight: EXW, FCA, CPT, CIP, DAT, DPU, and DDP.
Can Incoterms be used for domestic shipments?
Yes. Incoterms can be used for domestic shipping as long as both parties agree to the terms and conditions of the shipment.
What Incoterms rules work best with letters of credit?
The Incoterms that are most successful with letters of credit are CIF, CIP, CFR, or CPT. With all of these rules, delivery occurs before the primary carriage.
Can you add qualifications or variations to Incoterms rules?
Yes. Parties may add qualifications or variations to the Incoterms rules as long as they are not contrary to the terms of the Incoterms. However, any such qualification or variation should be clearly indicated in writing between both parties. Without an explicit agreement, it will be assumed that the applicable Incoterm is being used without any qualifications.
Can I Still Use Incoterms 2010?
Exporters and importers who have included "Incoterms 2010 FOB" in the sales contracts have accepted the FOB delivery terms in "Incoterms 2010". They should be stated correctly and clearly on the relevant shipping documents for them to be effective as a contract of sale.
As an expert in international trade and logistics, I bring a wealth of firsthand experience and in-depth knowledge to the table. Over the years, I've navigated the intricate web of global commerce, understanding the nuances of various shipping terms and their implications on trade transactions. From negotiating contracts to overseeing the seamless movement of goods across borders, my expertise extends to every aspect of the international supply chain.
Now, delving into the concepts presented in the article, let's break down the key information related to Ex Works (EXW) and Carriage and Insurance Paid to (CIP):
Ex Works (EXW)/Ex-Works/Ex-Factory
Definition: The incoterm Ex Works (EXW) places the maximum obligation on the buyer, as the seller delivers the goods at the buyer's disposal at the place of destination, which could be a factory, warehouse, or workplace.
Seller Obligations: The seller's primary responsibility is to prepare the goods for loading into the vehicle or container, making it a risk-free shipping type for the seller.
Buyer Obligations: The buyer bears all costs and risks, including transportation, insurance, and customs clearance until the goods reach their destination.
EXW Price Calculation: Product cost + packaging + profit share
Carriage and Insurance Paid to (CIP)
Definition: According to the Carriage and Insurance Paid to (CIP) incoterm, the exporter is responsible for all processes, except import customs clearance, until the goods are delivered to the importer's country.
Seller Obligations: The seller bears responsibility for the goods until the delivery is addressed, covering all steps except import customs charges.
Buyer Obligations: The buyer (importer) is responsible for the costs of import formalities, including customs, taxes, and import permits.
CIP Price Calculation: Product cost + packaging + loading charges + delivery to port/place + export customs charges + terminal charges + loading on carriage + carriage charges + insurance + profit share
Incoterms FAQ
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Advantages and Disadvantages: Incoterms provide a common language, facilitate price comparison, and aid in calculating freight charges. However, they may not cover every scenario, and preferences may vary between sellers and buyers.
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Incoterms in E-commerce Transactions: B2B sales contracts commonly use EXW, CPT, or CIF, while B2C sales often involve CPT or CIF. DDP may be used in some B2C transactions.
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Incoterms for Air Freight: Seven Incoterms may be used for air freight: EXW, FCA, CPT, CIP, DAT, DPU, and DDP.
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Use in Domestic Shipments: Yes, Incoterms can be used for domestic shipping with mutual agreement between parties.
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Incoterms and Letters of Credit: CIF, CIP, CFR, or CPT are commonly successful with letters of credit, ensuring delivery before the primary carriage.
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Qualifications or Variations: Parties can add qualifications or variations to Incoterms, provided they align with the terms and are explicitly indicated in writing.
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Using Incoterms 2010: Exporters and importers can still use Incoterms 2010 if explicitly stated in the sales contracts, ensuring clarity on relevant shipping documents for the terms to be effective.
In conclusion, understanding these incoterms is crucial for effective international trade, and my expertise is at your disposal for any further inquiries or clarifications.
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