To buyers, the EXW agreement can also bring benefits. To sellers EXW’s advantage is obvious, that they only cover the minimum scope of responsibilities and costs. Sellers typically offer products at a lower price to buyers if they go for the EXW terms. However, FBO assigns responsibilities between the seller and buyer more evenly than EXW. Under the FOB origin or FOB shipping point terms, the buyer takes ownership of the products and bears the risks as long as the seller has shipped the products from the specified “shipping point.” Under the FOB designation terms, the risks and ownership remain at the seller’s side until the buyer has received the products.īoth FBO and EXW terms clarify the responsibilities and costs in a shipping process between sellers and buyers. Free-on-Board (FOB)įree-on-board (FOB) is another type of Incoterms, which is also the most commonly used one. The buyer can ask the seller to load the products at the designated location, but the seller is not obligated to do so since it is not within the seller’s scope of responsibility. Several risks exist in loading and unloading the products, passing the customs, and storing the products. After getting access to the products at a certain spot, the buyer bears the subsequent risks. The buyer is responsible for the transportation costs (including the cost of paperwork). There are more burdens on the buyer’s side. If there is paperwork required for shipment, such as export licenses, the seller also can facilitate the buyer to settle the paperwork. The seller only needs to package and label the products and make them ready for shipment at a predetermined location, which usually is a port nearby.
The EXW agreement is favorable to sellers with minimum obligations. At the same time, buyers must pay transportation costs and are responsible for the shipping risks.
According to the EXW terms, sellers are only responsible for making products available at designated locations. The diagram above shows the buyer’s scope of responsibility across a shipping process under the EXW terms or FOB terms.
They are published by the International Chamber of Commerce (ICC) to facilitate international trading. Incoterms refer to a set of globally recognized trade terms that clarify the obligations of buyers and sellers.
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