In the field of international trade, there are numerous special terms that may be confusing for those not familiar with the intricate world of commerce. Of these terms, EXW (Ex Works) and FOB (Free On Board) are two key concepts that play an important function in defining the obligations as well as liabilities of both sellers and buyers in the process of shipping. Knowing the distinction of EXW as well as FOB is crucial for any business involved on international trading. The article below we'll examine the differences between EXW VS FOB and shed the light on the implications for sellers and buyers.
- The definition of EXW (Ex Works) ):
EXW also known as Ex Works, is a trade term that imposes the full obligation upon the purchaser. If a transaction is carried out in accordance with EXW conditions it is the responsibility of the seller to be completed when the product is delivered to their premises or a specific place. The seller's obligation expires when the goods are able to be delivered at the hands of the purchaser. Any subsequent costs and risks, including the cost of transportation, export clearance and insurance, are completely the liability of the buyer.
- The FOB Understanding (Free on Board ):
FOB, also known as Free On Board, is another popular trade term for international trade. As opposed to EXW, FOB places more the responsibility of the seller on the delivery of goods to the shipping port and the loading onto the vessel to take them. The seller takes on the cost and risk in delivering the items to the port of delivery, and the ownership of the items passes between the purchaser and the seller after the cargo has crossed the rail of the ship.
- Cost and Risk Allocation
One of the major differences among EXW and FOB is in the division of risks and costs. In EXW conditions buyers bear the bulk of the cost and risk associated with the transportation of the merchandise from the location of the seller to their final destination. However, FOB terms place a more responsibility for the vendor to guarantee products' safety and prompt delivery to the port where they are being shipped. After the goods have been placed aboard the vessel the buyer takes on the risk and cost of transport.
- Transportation and Logistics
The different responsibilities of EXW and FOB can have implications for logistical and transportation. In the case of an EXW transaction buyers have the option of choosing the mode of transport they prefer and the carrier of their choice, since they are responsible for the coordination of the transportation. In contrast, in FOB sellers, they are usually more involved in coordinating the transport to ports, and this could bring advantages in terms effectiveness and efficiency.
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- Export Compliance:
A further area that is distinct in EXW in comparison to FOB is the issue of export compliance. Because the seller has greater control over the transport process when dealing FOB and is more familiar with documents and regulations for exports. This is beneficial to buyers, since they can depend on the experience of the seller for ensuring a seamless exit process.
