EXW, Disadvantages to Exporters
Is delivery under EXW is safe for exporter? What are the demerits for seller under EXW terms of delivery?
The following information explains 10 disadvantages for an exporter when contracting EXW as terms of delivery in international trade.
EXW, Disadvantages to Seller (Exporter)
01. One of the main demerits for exporter under EXW is that under Ex -works terms (EXW), minimum costs and minimum risks are only involved for movement of goods from Seller’s side. So minimum costs and risks means minimum profit in business. As you know, profit in a business is determined on the basis of risks undertaken by the seller also.
02. Under EXW, the exporter does not have any control over movement of goods, pre carriage, and Main carriage and on carriage. So the seller is weak in obtaining information about the shipping tracking of goods till arrival at importer’s final destination place. This is one of the disadvantages for seller under EXW delivery terms.
03. Another demerit for exporter under EXW is that all statutory obligations at exporter’s country and importer’s country are undertaken by the importer under EXW for movement of goods especially export documentation, export customs clearance, export taxes if any, import documentation, import customs clearance, import duties if any etc. The supplier (exporter) may lack such knowledge and experience in turn he may not be strength enough to offer other delivery rules with other buyers resulting losing such businesses. This can be treated as a disadvantage for seller under EXW terms.
04. Another disadvantage to exporter under EXW is that the seller does not want to know the export documentation, export clearance and other government rules on export taxes. So, such seller may lose business chances from those buyers who suggest other delivery rules such as FAS, FOB, FCA, CFR, CIP, and CIF, DAP, DPU OR DDP.
05. The Seller does not have any control over safety of goods he sold, as the buyer is responsible for movement of goods till to final destination under EXW. This is a demerit for exporter under EXW delivery rules.
06. Another disadvantages for seller is that under EXW, the seller is helpless to find the cost calculation at each point of movement of goods. This also is a disadvantage for exporter under EXW terms of delivery.
07. The goods are under buyer’s control under EXW and selection of a freight forwarder is done by the buyer and service of poor freight forwarders matters in safe delivery of goods by meeting assured delivery time. This is a demerit for exporter under EXW. This is a demerit for exporter under EXW.
08. Another drawback for seller under EXW is that, since most of the risks and costs are borne by the importer under EXW, the selling price of goods would be comparatively less, in turn the invoice value of goods. Under an export import trade, the distance between buyer’s place and seller’s place could be far and cost of movement of goods also could be very high, say 150% to 200% of product cost. So, foreign inward remittance to the exporter’s country also may be comparatively less. The turnover of business sales of an exporter also counts for obtaining various export finances and incentives.
09. The control over releasing Bill of Lading / Airway Bill is with the importer. The shipping documents may be required for an exporter for accounting and various statutory obligations, export incentives and other export financial purpose. This also is another demerit for exporter under EXW terms of delivery.
10. Another disadvantage to exporter is that under EXW, the seller holds only minimum control over movement of goods.
The above information is about disadvantages for exporter when contracting delivery rules as EXW.
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