Difference between ex works and FOB

 The information provided here is part of Import Export Training online


 

How to distinguish FOB and ex works. Let us find what is ex-works and what is FOB terms. 


In this article, I would like to explain about ex works and FOB.
 

What does Ex-works mean?  

Ex-factory price means, the selling cost of goods at seller's factory. All other expenses from the factory of seller to buyer's place have to be borne by the buyer. So the responsibility of getting goods from the seller’s factory is with the buyer. Here the buyer appoints a shipping and freight forwarding company to collect goods from the seller’s factory to the buyers place including insurance of goods.


Difference between ex works and FOB copy How Ex factory terms works.


I will explain Ex-factory terms of delivery with a simple example. You are a Machinery seller situated in a place near Mumbai, India. The buyer is situated in New York. You are the seller of goods and you have contracted with the buyer and agreed to sell the goods on ex-factory price of USD 5000. Here the selling cost of goods is USD 5000 ex-factory. As I have explained, all further cost to reach the goods to the buyers place has to be met by the buyer. As per the instruction given by the buyer, freight forwarder contact his counterpart in Mumbai and arranges to pick up goods from seller’s factory. Seller delivers goods to freight forwarder after confirming the authenticity of the freight forwarder through his buyer. All expenses of freight forwarder will be paid by the buyer. Buyer arrange to insure the goods and pay the cost of insurance.

 

 

What is FOB price and how FOB terms works? FOB means Freight on Board or Free On Board. If terms of delivery of a transaction is on FOB, the cost of movement of goods on board of Airlines or on board of ship is borne by the seller.


How FOB works.


I will explain FOB terms of delivery with a simple example. You are a Machinery seller situated near Mumbai, India. The buyer is situated in a place near New York. You are the seller of goods and you have contracted with the buyer and agreed to sell the goods on FOB, Mumbai price of USD 5300. Here the selling cost of goods is USD 5300 FOB Mumbai. So the seller meets all expenses to carry the goods to Mumbai port and meet all expenses including customs clearance in Mumbai to get the goods on board of Airlines or Ship. As I have explained, all further cost up to buyer's place has to be met by the buyer. The buyer nominates shipping company or airlines and seller ship the goods as per buyer's advice. The buyer pays the cost of freight to the shipping company or airlines. Buyer arrange to insure the goods and pay the cost of insurance.

Detailed articles about Inco Terms of Delivery under export and import of International business  have been mentioned in  separate category – INCO TERMS – in this web site.  You can click here to read.

 
In this article, I have explained about the  EX FACTORY price and FOB price in Import Export trade of International business.  I hope you could make clear about the difference between FOB price and EX FACTORY PRICE in export improt trade.  Do you wish to add more information about the difference between FOB and EX  WORKS of delivery terms in International trade?  Share below your  knowledge and experience below about EX WORKS and FOB in international business.

Comment below your thoughts and discuss about FOB and EX WORKS terms of delivery used in export import.

 


The above information is a part of Export Import Training online


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Comments


Mohamed Bakr- Egypt: Thank you very much. Very good Article, which rich with important information for me.

vijay: very useful information

jon: Dear sir, My name is jon and your website is very helpful to many students. As a beginner in study "HOW TO EXPORT AND IMPORT PROCEDURE" , please tell me who decide or determine the freight charges terms (freight collect or prepaid) in MBL and HBL in case of export and import awaiting for you reply with thanks in advance Rgds jon

MOHAMMED INAYATH: Dear sir, this is very help full for us, I want some clarification for tomato export from icd Bangalore, what documents riqvd to tomato export from icd Bangalore, we have 1 tomato shipment, so please you conform me, regards inayath

Den Hamuntanga: Very useful imformation.and i would like to learn more as a student in Clearing and Forwarding.

David Obaseki: Very insightful and simple in explanation. Thanks

Jalal Jafri : Your site is well done and has been very helpful. Appreciate it very much. I will recommend it to my associates. Thanks.

Rajab F. Haji: very useful site

muhammed kaleemullah: This site is knowledge provider and helpful very integently

Edward O.: This is very useful. I liked the simple example used to explain FOB. Thanks

Surendran Kollerath: Hi Mohammed Inayath, You can contact a consultant specialized in Agricultural Perishable goods, if you would like to export raw tomato. If processed tomato, you can approach APEDA office also.

Baliarsingh Ayodhyanath: A nice website ,It just works as a knowledge health capsul for each new entreprinuer/student /professional .I have sugested most of coligues to get a bussiness term daily early morning mail. Thanks the site .

R.Yakoob Ahmed: Your site is well done and has been very helpful.Thanks the site .

J.NAGARAJAN: Dear Sir, I have a question to ask. In the case of Ex Mill export in Foreign Currency when the sale is accounted for and against which document we can treat the sale of goods as completed. Please reply asap Thanks,

David: Hello, thank you for the very useful article. I am reviewing an interesting case. I have some sales that are nominally (written on the paper) under EX Works terms. The freight company BILLS to the CUSTOMER. However the freight company is actually APPOINTED and RECEIVES INSTRUCTIONS FROM THE SELLER (when, where to deliver and, in case the buyer does not pay even to ship back the goods to the seller). Is it an EX Work or something else?

Udaya: On ex-work basis if export duty is involved who will have to bear it. Theoretically the buyer will have to pay. Isn't it? But would there be a possibility or technical point to convince seller to bear export duties?

john moses: Could explain this FOB and EXW in swahili Language

fatima: Hello sir I am first time to import business. your article is best but I don't understand insurance pay to buyer. yesterday factory pi Bill. it's have title EX work,covered by the buyer. please explain me this line. thank you sir. reply me.. best regards..

Phan Nhat Quang: Thanks, I find your information very helful.

Mike: Very professional - excellent at par

Mukkesh: Since duty is levied on CIF (FOB+Freight+Insurance) In case of Ex-Works Invoice - do u need to add actual freight & insurance for calculating duty OR the transportation,loading/unloading, customs clearance charges... etc are also added to arrive at FOB Value.

Joseph: Very incisive, very helpful. Thank you.

Bow: we can identify the place to get the goods in term of ex work or have only ex work at factory of seller? example: Ex work at the airport

Mickey Tramo: For domestic US buyers, F.O.B. means the buyer will be paying for the full cost of delivery from the factory. This includes all relevant freight and insurance charges. Colloquially it's known as "Freight on Buyer" although that's not the literal meaning.

Virgie Canlapan: In inporting goods , what is the best to use in terms of payment , the FOB , CIF , or EXW. Please help me

Jessica Multiturbo : I would like to bring some of Holland products here in Brazil. What do I need to send so they can make the price of shipping? I'm having trouble to bring by airlines such as DHL, as the freight is absurdly high.

Yashesh Parekh: I am Yashesh Parekh If a physical broker is to assist in valuing product, what key information will they need in order to give you an indicative FOB number? Kindly help me with this question.

Abdu: Thank you a lot its enough to get better understand about Ex-work and FOB.

Nithya.A: Very Informative.

SHRUTHI: Thanks for your good Information

Ankita Abhilasha: My question is about import consignment If the term is ex-work mention on commercial invoice, do we need to mention FOB term on invoice? Coz there is no option like ex-work in software accept FOB , CIF, C&F ,C&I

Ankita Abhilasha: My question is about import consignment If the term is ex-work mention on commercial invoice, do we need to mention FOB term on invoice? Coz there is no option like ex-work in software accept FOB , CIF, C&F ,C&I

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