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.
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.
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