Well, if you are into shipping or your business is related to import exports, then it is good to pick up some shipping and payment terms that will help you get an idea of what your customer or supplier is saying. Now today Uncle DP is going to hand you the meaning of EXW or Ex Works in a silver platter. So if you are new to your job related to import export, or intending to be in business doing what Uncle DP does, then listen up.
When I was new in the job, I don’t know nothing about payment terms or shipping terms, much less what Ex Works or EXW means and it was really not easy to guess. But now hey hey. Me oh now oh experto eh? Come to teach younglings already nyehe! Ok, down to business.
Ex Works simply means this:
You decide to buy 10 million dollars worth of plastic widget from Uncle DP, and Uncle DP is too busy to arrange any transportation to deliver the goods to you. But heck, 10 million dollars worth of plastic widgets! Uncle DP wants the business! So Uncle DP went ahead and fulfilled the order and quoted you EX WORKS. So the price you get from Uncle DP does not include any transportation or delivery charges, just the product price itself! Hassle free! Score 1 for Uncle DP!
When the full quantity of plastic widgets are completed, then you just simply arrange your own transportation and have the goods delivered from Uncle DP’s factory, or warehouse, or site.
Simple isn’t it?! Sometimes, when a buyer is hurrying you for a price estimation, quoting EX WORKS will help to give them an estimated price and costing reference for their projects. You should always let them know that your price is EX Works and not Delivered, FOB or CNF which I will go through with you later on.
Ex Works pricing is also more accurate as an indicator of the product’s price in any region as your perception of the local price of that product is not affected by the transportation cost. This will let you know what are the prices the locals are buying and selling. It may mean an opportunity for you to import or export to that region as long as the import duties and taxes do not make it unprofitable for you to deal.
In some cases, customers want you to quote Ex Works because they are not so sure about the status of their projects yet. By the time they want to buy, the transportation costs may have fluctuated beyond their current estimation. So Ex Works is a more controllable cost as the price level and movement depends only on one source, which is the manufacturer.
If you do not mention properly in your quote, then you are in deep shit. Why? That’s because you will need to honor your quote and sell at the price you have quoted. If transportation is expensive, for example from Malaysia to Canada, hohoho, then the rest of your year’s work is as profitable as community service!
So always be very clear in your terms and conditions when quoting your customer or buying from a vendor. Don’t surprise your customer later with a much higher price when you factor in the transport. If transportation is going to cost a bomb, be sure to let the customer know in advanced. Don’t ever surprise them especially if the goods being dealt actually command very little margin. Also, as a buyer, it is your responsibility to find out what are the potential transportation charges that are likely incurred so you need not be surprised or get a heart attack when you find out that transportation just inflated 60% to your total cost. Don’t take my word for it… try it to believe it hehhehheh…
Ok kids, remember, EX WORKS or EXW is buying based on a price quoted to you without transportation or delivery to your site. It just means you buy at a price where the manufacturer has the limited duty for producing and placing the finished goods at his factory or warehouse, then you collect it with your own transporter.