Why EXW is not the best option

EXW (Ex Works) One of the most commonly used Incoterms terms for international supplies from China. However, for most recipients, especially newcomers to logistics, this option can prove to be a real trap. In this article, we will discuss why EXW is not always profitable, and what should be considered before choosing this delivery condition.

What is EXW?

EXW (Ex Works) means that vendor fulfills its obligations at the moment when it provides the buyer with goods on its territory (factory, warehouse, factory).
All other responsibilities and costs are borne by the buyer.

Example:

You ordered 100 thermal mugs for 1688. The terms of EXW mean that the supplier will simply hand over your item in its warehouse in Shenzhen. Everything else is your concern.

Why EXW is inconvenient for the recipient

1. Problems at the start - you are not in place

• The factory is in China, you are in Russia, Kazakhstan, Ukraine, etc.
• You cannot physically pick up the goods. Need a representative or logistician who speaks Chinese.
• The supplier may not help with loading, paperwork, packaging.

2. All costs and risks are yours.

• You're responsible for:

Cargo collection

Internal delivery to the border

Customs clearance in China

Freight to your country

Customs clearance for importation

Delivery to your door

• Any mistake is your loss. Even if the goods were damaged on the way to the border of China, The supplier's problem.

3. Difficulties with logistics control

• You need to know the local realities and intricacies of Chinese logistics.
• Without experience, it is difficult to find a carrier, customs clearance and transfer across the border.
• You may need an intermediary or logistics company.

4. Documents: It's not that simple

• Often at EXW seller does not submit an export declaration (unprofitable to him).
• This can make it more difficult or expensive to get official customs clearance in your country.
• If there is no export declaration, your company cannot use the documents for VAT deduction or other purposes.

5. Invisible costs

• Cheap EXW seems profitable - but only before calculating the real logistics.
• The price of delivery, consolidation, registration and insurance can be 2-3 times higher than the savings on the goods.
• Some logisticians overstate the cost of “delivery with EXW” knowing that the customer has no choice.

When EXW can be justified

• You-- seasoned importerYou have your own logistician in China.
• You already have. warehouse in the same region.
• It’s not the first time you’ve worked with a vendor, it helps with documents.
• The order is large, and the savings are significant even with additional costs.

Alternative: Which conditions are better to choose?

1. FOB (Free On Board)

• The seller delivers the goods to the port and arranges the export.
• You control delivery from the Chinese port.
• Transparent costs, the supplier is responsible before loading.

2. CIF/CFR

• The seller arranges delivery to your port.
• You only have customs and internal logistics.

3. DAP/DDP (if you want minimum hassle)

• DAP: the goods are delivered to your address, you pay duties.
• DDP: the seller takes over everything up to customs clearance - you receive the goods as "internal delivery".

Practical advice

If you are not a professional foreign trader, Choose the terms of delivery where the supplier is responsible at least to the Chinese port. (FOB and higher).

EXW may look cheap on offer, but as soon as you start organizing logistics, you will quickly realize that it is unprofitable, inconvenient and risky.

EXW is not saving, but transferring all responsibility to the buyer.
If you are not a logistician, are not in China and do not want an unnecessary headache – feel free to refuse EXW and discuss other terms of delivery.