The factory quoted EXW. What costs are we still responsible for?

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Flat illustration of a factory, an inspection checklist and stacked cartons

The factory quoted EXW. What costs are we still responsible for?

Under EXW, the seller makes the goods available at its premises and the buyer handles almost everything else, including export clearance. Price the gap before comparing.

Sourcing & Supplier SelectionKnitwear Talk3 min readKnitwear Base Editorial Team
Flat illustration of a factory, an inspection checklist and stacked cartons
Buyer question

A new knitwear factory quoted Ex Works, while our current supplier quotes FOB Shanghai. The EXW price looks cheaper, but our forwarder warned us about hidden costs. What exactly would we be paying for?

Main answer
Knitwear Base Editorial Team
Main answer

EXW, or Ex Works, is the Incoterms rule where the seller does the least. Under the ICC Incoterms 2020 rules, the seller delivers when it places the goods at the buyer's disposal at its premises or another named place, not loaded on any collecting vehicle and not cleared for export. From that point, the buyer bears the costs and risks of loading, transport, export and import formalities and everything else needed to get the goods to their destination.

Costs that move to you

With an EXW quote, you or your forwarder typically pay for loading at the factory, inland transport to the port or airport, export customs clearance, terminal handling at origin, the main carriage, insurance if you want it, and all import costs. With an FOB quote, by contrast, the seller handles export clearance and delivers the goods on board the vessel at the named port of shipment. Ask your forwarder to quote the extra origin costs so you can compare like with like.

Export clearance can be a problem

Under EXW, the buyer is responsible for export clearance, but in many countries a foreign buyer cannot easily act as exporter. In practice, the factory often still handles the export paperwork. If that is the plan, the Incoterms rule does not match what is actually happening. The ICC notes on the rules suggest FCA where the seller loads the goods and clears them for export. Agree the rule that reflects what each side will really do.

Containers and FOB

If you change to FOB, note that the ICC explanatory notes say FOB may be unsuitable for goods handed to the carrier before they are on board, as typically happens with containers, and that FCA is usually the better choice there.

Inspect before risk passes

Under EXW, risk passes to you at the factory. Schedule the final inspection, sampled under a plan such as ISO 2859-1, before the goods are collected, and link the balance payment to it.

Write the chosen rule with the named place and the Incoterms 2020 version into the purchase order, for example FCA with the factory address, so both sides know exactly where delivery happens.

Sources and further reading

Standards and rules are summarised from their published scope or official guidance. Use the current edition and confirm requirements for your market.

Three perspectives on this question

Knitwear Base Editorial Team
Purchasing perspective

I'd ask the forwarder for a full landed-cost estimate for both the EXW and FOB quotes, then compare the totals rather than the factory prices.

Knitwear Base Editorial Team
Merchandising perspective

Landed cost decides the retail margin. I'd make sure the range costing uses the converted figure, not the EXW price from the quote sheet.

Knitwear Base Editorial Team
QC perspective

Under EXW there is no time to fix problems after collection. We'd book the final inspection a few days before the pickup date, with time for rework.

Working on a similar program?Send your tech pack, fabric references and test requirements. We reply with a quote and the questions we need answered.

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