EXW delivery terms are among the simplest and most widely used bases in international trade. The application of Incoterms in Ukraine is based on the Commercial Code of Ukraine (Part 4, Article 265) and the Law of Ukraine “On Foreign Economic Activity,” so the parties independently fix the required edition of the rules in the contract text. If you are planning a foreign economic deal and want to clearly understand who is responsible for what, this article will help you understand the EXW mechanism without unnecessary theory. Below we look at the obligations of the parties, the distribution of costs and risks, common mistakes, and practical tips for choosing a delivery basis.
What Are EXW Delivery Terms
EXW (Ex Works) literally translates as “from the plant” or “from the factory.” What EXW means in practical terms: the seller is only obliged to prepare the goods and make them available to the buyer at its warehouse or production site. All further actions, from loading to final delivery, fall on the buyer.
EXW delivery terms mean minimal obligations on the part of the seller and maximum responsibility for the buyer. That is why this basis is often chosen by suppliers who do not want to deal with logistics and customs clearance. The buyer, in turn, gets full control over the supply chain but takes on all the costs and risks.
Decoding the Term Ex Works and Its Place in Incoterms
Incoterms EXW is part of the international trade terms Incoterms developed by the International Chamber of Commerce. The current edition, Incoterms 2020, contains 11 bases, and EXW is listed first as the term with the smallest scope of seller obligations.
In Ukraine, the application of Incoterms rules is based on the Commercial Code of Ukraine (Part 4, Article 265), which defines the basic delivery terms in accordance with international rules for interpreting commercial terms, as well as on the Law of Ukraine “On Foreign Economic Activity.” The parties independently choose the required edition of the rules and fix it in the text of the foreign economic contract, so it is important to clearly indicate the exact version of Incoterms under which the delivery terms are agreed.
Incoterms divides all bases into groups depending on the distribution of costs and risks. EXW belongs to group E, which provides for shipment directly from the seller’s premises. Unlike bases in groups F or C, where the seller takes part in organizing transportation, ex works requires only one thing from the seller: to make the goods available at a specified place. All other costs and responsibility pass to the buyer the moment the goods are ready for release at the warehouse.
Seller’s Obligations Under EXW Terms
Under EXW terms, the list of seller’s obligations is minimal. The seller is obliged to:
- prepare the goods and provide them to the buyer at the agreed place (warehouse, plant, production site);
- pack the goods in accordance with the requirements of the contract or trade customs;
- notify the buyer in a timely manner of the readiness of the goods for shipment;
- provide commercial documents: invoice, packing list, quality certificates (if provided for by the contract).
The seller is not obliged to load the goods onto the buyer’s vehicle, even if it has the equipment to do so. Organizing and paying for loading, export customs clearance, and transportation are not part of the seller’s obligations under EXW.
Buyer’s Obligations Under EXW Terms
Under EXW delivery, the buyer takes on the full scope of logistics and customs functions. Their obligations include:
- organizing and paying for the loading of goods at the seller’s warehouse;
- export customs clearance in the seller’s country, usually through a local agent: this stage includes engaging bonded warehouses, preparing the export declaration, and obtaining a EUR.1 certificate of origin;
- organizing international transportation to the final destination;
- filing the import customs declaration in the buyer’s country;
- paying customs duties, VAT, and other charges;
- insuring the cargo throughout the entire route (if the buyer considers it necessary).
It’s worth dwelling separately on the EUR.1 certificate, since this is where buyers most often lose money and time. EUR.1 confirms the Ukrainian origin of the goods and grants the right to preferential (reduced or zero) duty rates when importing into countries with which Ukraine has free trade agreements, including the EU. If the certificate is not issued during export, the buyer loses the right to the tariff preference and pays the full duty rate under general terms, which significantly increases the cost of delivery. EUR.1 is issued by the customs authorities of the exporting country based on documents confirming the origin of the goods, so this step needs to be built into the logistics chain at the planning stage rather than decided at the last moment. If the buyer is not a resident of the seller’s country, obtaining the certificate is usually entrusted to a customs agent or logistics operator acting in that country.
In effect, the buyer manages the entire supply chain: from receiving the goods at the seller’s warehouse to delivering them to their own warehouse. This provides flexibility in choosing the carrier and route but requires experience in organizing international logistics and customs clearance. This is especially important when working with a logistics operator: it is the operator who must anticipate in advance in which country and at what stage to obtain the certificate of origin and other permits in order to avoid delays at the border and additional costs.
Distribution of Risks and the Moment of Transfer of Responsibility
The moment of risk transfer under EXW delivery terms is clearly defined: risks pass from the seller to the buyer the moment the goods are placed at the buyer’s disposal at the seller’s warehouse. After that, the seller bears no further responsibility for the safety of the cargo.
If the goods are damaged during loading at the warehouse or during transportation to the border, the buyer bears all the losses. That is why cargo insurance is critically important when working under ex works. The buyer should take this into account during negotiations and include insurance costs in the total delivery price.
Distribution of Costs Between the Parties
Under EXW, the distribution of costs is completely unambiguous. The seller bears costs only for preparing and packing the goods. All other costs fall on the buyer:
- the cost of loading at the seller’s warehouse;
- payment for export customs clearance;
- transportation costs from the seller’s warehouse to the destination point;
- payment for import customs clearance and customs charges;
- cargo insurance costs.
This distribution allows the seller to precisely plan its financial obligations under the contract, while the buyer gets the goods at the seller’s minimum price and independently manages logistics costs.
Zone of Responsibility
| Zone of Responsibility | Seller (EXW) | Buyer (EXW) |
| Preparation and packaging of goods | Yes | No |
| Loading at the warehouse | No | Yes |
| Export customs clearance | No | Yes |
| International transportation | No | Yes |
| Cargo insurance | No | Yes (if needed) |
| Import customs clearance | No | Yes |
| Payment of customs charges | No | Yes |
| Risks from the moment of transfer at the warehouse | No | Yes |
Customs Clearance Under EXW: Export and Import
Customs clearance is one of the most problematic aspects of working under ex works. Under this basis, the buyer is responsible for export customs clearance in the seller’s country. But in practice, this creates complications: a foreign buyer does not always have resident status in the seller’s country and cannot file the export customs declaration independently.
In such cases, two solutions are used: appointing a customs agent on behalf of a logistics operator (carrier, warehouse, etc.) in the seller’s country, or changing the basis to FCA, which is better suited for most international deals. The buyer usually arranges import customs clearance in their own country independently or through a customs clearance agent.
“In practice, EXW often becomes a source of conflict precisely because of export customs clearance. The buyer is not a resident of the seller’s country and therefore cannot file the customs declaration independently. We recommend either arranging in advance for a local customs clearance agent, or reconsidering the basis in favor of FCA at the negotiation stage. This saves both time and money for both parties.” — Maryna Ponomarenko, Head of Daleth Group
The Daleth Group team provides a full range of customs clearance agent services in Ukraine and Europe, including customs support when working under any Incoterms basis, and anticipates all possible risks in obtaining such documents, including the EUR.1 certificate.
Advantages and Disadvantages of EXW for Buyer and Seller
For the seller, the advantages are obvious: minimal obligations, no need to organize transportation or prepare export documents, and reduced administrative burden. After receiving full payment for the goods, the seller simply prepares the goods and waits for the buyer. There is one drawback for the seller: if the buyer does not show up on time or has problems organizing shipment, extra storage costs may arise.
For the buyer, the advantages are: full control over logistics, the ability to choose the carrier and route, and cost transparency. However, there are more drawbacks: high responsibility, the need to have resources to organize customs clearance in a foreign country, and the risk of additional costs in case of complications at customs.
When to Choose EXW and When Another Basis Is Better
EXW delivery terms are advisable to choose in the following situations:
- the buyer has its own transport department and experience organizing international shipments;
- the buyer wants to maximize control over logistics costs;
- the deal is concluded between companies within the same country or within the EU (where customs clearance is not required);
- the parties have agreed on additional service obligations for the seller under separate contract terms.
EXW is not suitable if the buyer is unable to independently organize customs clearance in the seller’s country. In such cases, it is better to consider the FCA basis: the seller hands over the goods to the buyer’s carrier after completing export customs clearance. Also, for multimodal delivery, bases with a clear distribution of responsibility among several carriers are more convenient.
Common Mistakes When Working With EXW
The most common mistake with EXW is misunderstanding who handles export customs clearance. Some buyers think the seller will automatically prepare all the documents, although in reality this is only possible when it is explicitly provided for in the purchase contract. Under Ex Works terms, this obligation lies with the buyer by default, and if they have not arranged a customs clearance agent in advance, shipment may be delayed, including due to the absence of a EUR.1 certificate.
The second common mistake is the lack of cargo insurance. Since risks pass to the buyer already at the seller’s warehouse, any damage during loading or transportation remains the buyer’s problem. Without an insurance policy, these risks turn into direct financial losses.
The third mistake is incorrectly defining the place of delivery in the contract. If the warehouse address is not stated clearly, disputes may arise regarding the moment responsibility and costs are transferred. The contract must specify the exact address and the terms of access to the warehouse.
Conclusion
EXW delivery terms are the most convenient basis for the seller and the most demanding for the buyer. They suit those who have experience organizing international logistics and understand the nuances of customs clearance in different countries. If you are planning a foreign economic deal and want to choose the optimal Incoterms basis or get help with customs clearance, contact the specialists at Daleth Group. We organize transportation, customs clearance, and the entire logistics support of cargo regardless of the chosen basis and direction.
FAQ
What does the EXW delivery term mean?
EXW (Ex Works) means that the seller is only obliged to prepare the goods at its warehouse or production site. The buyer independently organizes loading, customs clearance, and transportation to the final destination. This is the basis with the minimum obligations for the seller under Incoterms.
Who pays for delivery under EXW terms?
Under EXW delivery, the buyer bears all transportation costs. This includes the cost of loading at the warehouse, transportation to the border, international freight, customs clearance, and delivery to the final warehouse. The seller only pays for preparing and packing the goods.
Who bears the risks under EXW?
Risks pass from the seller to the buyer the moment the goods are handed over at the seller’s warehouse. From that moment, full responsibility for the safety of the cargo during shipment, transportation, and customs clearance lies with the buyer. That is why insurance is a mandatory step when working under ex works.
How does EXW differ from FCA?
The main difference: under FCA, the seller is obliged to hand over the goods to the buyer’s carrier after completing export customs clearance in its own country. Under EXW, the buyer independently arranges customs clearance in the seller’s country. FCA is more convenient for most international deals, especially when the buyer is not a resident of the seller’s country.
When is it beneficial to use EXW?
EXW is beneficial when the buyer wants to control the entire logistics process and has its own resources for organizing transportation and customs clearance. This basis is also suitable for deals within the EU, where customs clearance is not required. If the buyer lacks experience in organizing international deliveries, it is better to choose another Incoterms basis.