/ By TJ China Freight / China Freight News • Logistic

How Does EXW China Work? What Are Pros of Cons of EXW Shipping

EXW (Ex Works) is a trade term used in international trade to describe a shipment arrangement where the seller makes the goods available at their premises, and the buyer is responsible for all transportation costs, customs clearance, and any other charges involved in getting the goods from the seller’s premises to their final destination. EXW China is a trade term where the seller makes the goods available at their premises in China, and the buyer is responsible for all transportation costs and other charges involved in getting the goods to their final destination.

EXW works

When it comes to EXW China, the process works in the following way:

  1. The buyer and seller agree on the details of the sale, including the price, quantity, quality, and delivery terms.
  2. The seller prepares the goods at their premises, which could be a factory, warehouse, or other location in China.
  3. Once the goods are ready, the seller informs the buyer, who arranges for a freight forwarder or shipping agent to collect the goods from the seller’s premises.
  4. The buyer is responsible for all costs involved in transporting the goods from the seller’s premises to the final destination, including transportation costs, customs clearance, and any other charges.
  5. The buyer assumes all risk and liability for the goods once they leave the seller’s premises.
  6. EXW China is a trade term where the seller makes the goods available at their premises in China, and the buyer is responsible for all transportation costs and other charges involved in getting the goods to their final destination.

EXW China shipping has its advantages and disadvantages. Here are some of the pros and cons:

Pros:

  • Cost-effective: Since the buyer is responsible for arranging transportation, customs clearance, and other charges, the seller’s cost is lower, which can translate into a lower purchase price for the buyer.
  • Control: The buyer has more control over the shipment, including choosing the freight forwarder, the shipping method, and the timing of the shipment.
  • Flexibility: The buyer can choose the most cost-effective shipping option and negotiate better rates with the freight forwarder.
  • Transparency: The buyer knows exactly how much they are paying for transportation and customs clearance, so there are no hidden costs.

Cons:

  • Risk: The buyer assumes all risks associated with the shipment, including loss, damage, or theft of the goods during transportation.
  • Responsibility: The buyer is responsible for arranging transportation, customs clearance, and other charges, which can be complicated and time-consuming.
  • Limited options: The seller may not have access to the same range of transportation options as a freight forwarder or shipping agent, which could limit the buyer’s options.
  • Communication: There may be language barriers or cultural differences between the buyer and the seller, which could make communication challenging.

EXW China shipping can be cost-effective and flexible, but it also requires the buyer to assume more responsibility and risk. Buyers should carefully consider their options and assess the potential risks before choosing this shipping method.

china freight

What role do China freight forwarders play in EXW China shipping?

Communication: The buyer and the seller agree on the terms of the sale, including the price, quantity, quality, and delivery terms. Once the seller has prepared the goods, they notify the buyer, who then contacts a freight forwarder.

Transportation: The freight forwarder arranges for the transportation of the goods from the seller’s premises to the buyer’s destination. They work with a network of carriers, including air, sea, or land transport providers, to find the most efficient and cost-effective shipping option.

Documentation: The freight forwarder helps the buyer with the necessary documentation required for customs clearance, including bills of lading, commercial invoices, and packing lists. They also provide guidance on import regulations and compliance requirements.

Customs clearance: The freight forwarder works with customs officials to ensure that the goods comply with all import regulations and clear customs smoothly. They handle all necessary paperwork and payments on behalf of the buyer.

Delivery: Once the goods have cleared customs, the freight forwarder arranges for the final delivery to the buyer’s destination, which may include trucking, rail, or other transportation options.

Freight forwarders act as intermediaries between the buyer and the seller, helping to coordinate the transportation, documentation, and customs clearance process in EXW China shipping. They provide expertise and guidance, which can help to simplify the process and reduce the risk of delays or errors.

/ By tjchinafreight ivy / Shipping

6 common Incoterms mistakes to avoid

6 common Incoterms mistakes to avoid
6 common Incoterms mistakes to avoid

Incoterms are an essential part of any international ocean cargo. It is established by the International Chamber of Commerce or the ICC and sets out clear guidelines that buyers and sellers must execute transactions according to the parts of the transaction identified by each Incoterm.

Incoterms establish rules and responsibilities for both parties that can be used to resolve differences in the event of a dispute. The choice of Incoterm is determined and agreed upon by the buyer and the seller, who not only understand the responsibilities involved with each Incoterm, but also ensure that he/she is able to meet them.

Despite its importance and the potential consequences of misuse, many buyers and sellers are still unaware of some of the key responsibilities of every Incoterm.

In this article, we'll cover the six most common mistakes in Incoterms listed in Incoterms 2010.

1. Containerized goods use FOB

Despite common belief and practice, FOB Incoterm should only be used for non-contained ocean freight. This error is so common that it becomes a misunderstanding that is deeply ingrained in the minds of importers and exporters.

The main risk involved is the port of origin. Under FOB, the risk is formally transferred when the cargo is loaded on board. However, it is common practice for the shipper to hand over the cargo to the carrier at the terminal awaiting loading.

Since the cargo is at the dock, it has not yet been considered on board. Any damage sustained during this period is still technically the shipper's responsibility and the shipper's insurance should cover this part of the process as well.

However, when disputes arise, the shipper can and does often argue that he has done his part. So, in order to avoid hassle, delays and, more importantly, disputes that can lead to a deterioration in the relationship with the supplier, often the result is that the consignee has to bear the cost.

Apart from FOB, FAS, CFR and CIF are also not suitable for containerized cargo due to the above reasons.

2. Do not specify a location

Many people are unaware that Incoterms rules allow specifying locations. In fact, the failure to specify the full address may be controversial, as the ambiguity allows the seller to choose any delivery point he wishes within the general location provided.

This may be inconvenient for the buyer at all, especially if he has to spend extra time and money to transfer the goods to the final location he originally booked.

3. Seller commits to DDP or DAP without checking if he/she can handle import responsibility in buyer country

Under DDP and DAP, the seller is responsible for paying all arrival charges at the destination. With DDP, this includes paying local taxes (eg GST, VAT, etc.) and handling customs clearance at the destination. Note that unlike DDP, DAP does not require upfront customs clearance fees.

The latter requires him to register as an overseas importer in the destination country, a country-dependent process that can require a lengthy and lengthy program.

4. Buyer uses EXW regardless of his/her influence in the export process

This is similar to the role-reversal point of view mentioned earlier. Under EXW, the seller's responsibility is minimal and ultimately ends with the correct packaging of the item.

From then on, the buyer is responsible for export procedures from the country of origin and any necessary communication with the exporting authorities. For the buyer, it may not be that simple, especially if he/she is not familiar with the export process in the country of origin. In some cases, the seller may be required to participate.

5. Using CIP or CIF without checking that insurance coverage is adequate and complies with commercial contract requirements

According to CIP and CIF Incoterms, sellers are obliged to insure the goods. According to Incoterms rules, only minimum coverage (110% of contract value) is required.

However, depending on the conditions of the contract of sale, this may be insufficient and insufficient for the item being shipped. This amount needs to be met if the commercial contract requires more coverage.

6. Failure to align Incoterm with the bank's payment security requirements

This applies to international payment methods, such as letters of credit, whose secure and reliable nature suggests a lack of complete trust between buyers and sellers.

For letters of credit, payment can only be made after submitting the required documents to the bank to demonstrate that the trading conditions have been met.

/ By tjchinafreight ivy / Shipping

Import from China: FOB, CIF or EXW Incoterm?

Import from China: FOB, CIF or EXW Incoterm?
Import from China: FOB, CIF or EXW Incoterm?

FOB, CIF or EXW? The Incoterm you choose to import from China can greatly affect your overall cost. But oddly, it's rarely the focus of your import activity.

Most importers tend to put the lowest possible sales price as a higher priority, ignoring other details. This could end up being a costly mistake. Given their direct impact on import costs, now is the time to start taking a closer look at Incoterms.

Product prices vary by Incoterm

The price of your purchase will vary depending on whether you imported using FOB Incoterm, CIF Incoterm or EXW Incoterm. Many Chinese suppliers include shipping costs directly into the product price, which is why they usually have different price lists depending on the Incoterms used.

Be very careful when negotiating with Chinese suppliers here, as the price difference does not always correspond to the price of sea freight. Suppliers have been known to use this to manipulate buyers into choosing a specific Incoterm that is more beneficial to the supplier. This will be explained further when we discuss the CIF Incoterm.

Incoterms determine the control you have

The Incoterm you choose will define your control over your shipment at every stage of the shipping process. Whoever controls ocean shipping has control over costs and greater bargaining power.

If you let the supplier manage the ocean freight, you must accept the price and conditions he sets with the freight forwarder.

Import from China with FOB Incoterm

FOB Incoterms are probably the favorite - and in some cases only - Incoterms of experienced importers. We are talking about countless imported products with different characteristics, each with their own unique needs.

In my opinion, if you can only choose one Incoterm to import from China, FOB Incoterm will be your best choice. Why? FOB Incoterm gives you more control over your imported ocean cargo without the responsibilities that come with it.

Import FOB and EXW from China

As mentioned, the biggest advantage of using FOB to import from China is the control you have. You also have less responsibility than EXW.

For FOB, your responsibility as the importer is freight, cost of arrival and delivery. This means that any problems at the origin will be the responsibility of your supplier in China. However, with EXW, you are responsible for any problems and unexpected expenses - both at the origin and destination.

In short, while both FOB and EXW Incoterms are considered safe options for importers, there are significant differences in how responsibility is allocated.

Import from China using CIF Incoterm

Buyer's responsibility: payment of goods, arrival fee, customs clearance at destination, inland transportation at destination from port to warehouse, and corresponding import duties.

Responsibilities of the seller: deliver the goods according to the conditions agreed with the buyer, obtain the necessary documents for export, manage the inland transportation in China, manage the customs clearance and pay the corresponding customs fees in China, rent and pay the sea freight, insurance, and original Origin port charges.

For a novice importer, a CIF Incoterm may look very tempting: no need to pay for shipping, no need to choose or negotiate with a freight forwarder, no need to organize shipments, and most importantly, the item is actually cheaper than buying under another Incoterm they.

Import from China using EXW Incoterm

Buyer's Responsibilities: Pay for the goods, manage inland transportation at origin and destination, pay origin, ocean freight, insurance, manage customs clearance at origin and destination and pay appropriate fees, and pay appropriate customs duties.

Seller's Responsibilities: Deliver on the terms agreed with Buyer, provide all required documents and proofs.

What is the best Incoterm when importing from China?

In theory, FOB, CIF and EXW are your viable options for importing from China. Each involves a different amount of risk, liability, cost, and safety.

My advice

Choose the safest Incoterms that give you maximum control over your ocean freight.