Case Background
- Seller: An electronic components manufacturer in Suzhou, China (Company A)
- Buyer: An importer in Hamburg, Germany (Company B)
- Goods: 3,000 precision electronic components (value: €500,000)
- Transportation: Road freight (Suzhou factory → Shanghai Port) + Sea freight (Shanghai Port → Hamburg Port)
- Trade Term: EXW Suzhou (applied under Incoterms® 2020)
Operational Process
1. Contractual Agreement
Under EXW, the seller delivers goods at its premises (factory), and the buyer assumes all responsibilities and costs from the delivery point:
- Seller (Company A) Responsibilities:
- Only required to prepare goods compliant with the contract at the factory and notify the buyer for pickup.
- Does not handle export clearance, transportation, insurance, or import procedures.
- Buyer (Company B) Responsibilities:
- Arranges all transportation (from factory pickup to Shanghai Port, then sea freight to Hamburg).
- Handles export customs clearance (China), import customs clearance (Germany), and pays all related fees.
- Bears all risks of goods after delivery (including damage or loss during transit).
2. Seller’s Responsibilities (Company A)
(1) Goods Preparation & Notification
- Produces and inspects 3,000 electronic components, packages them in shock-resistant wooden crates with packing lists and quality certificates.b
- Notifies the buyer that goods are ready, providing the factory address, pickup time, and contact details.
(2) Document Assistance (Non-mandatory, costs borne by the buyer)
- Provides commercial invoices as requested; may assist in applying for certificates of origin, but fees are paid by the buyer.
- Does not handle export declarations, licenses, or other customs documents (buyer must arrange these independently).
3. Buyer’s Responsibilities (Company B)
(1) Transportation Arrangement & Pickup
- Hires a Chinese logistics company to pick up goods from the Suzhou factory, paying road freight (€5,000) to Shanghai Port.
- Contracts with a shipping line for sea freight, paying ocean freight (€15,000) and insurance (€3,000, optional at the buyer’s discretion).
(2) Export & Import Customs Clearance
- Export Clearance (China):
- Declares goods to Chinese customs with commercial invoices and packing lists, pays export duties (if any), and obtains export licenses (cost: €2,000).
- Import Clearance (Germany):
- Upon arrival at Hamburg Port, declares goods to German customs, pays import duties (5% tariff: €25,000) and VAT (19%: €99,000), and covers port fees (€4,000).
(3) Risk Assumption
- Risk transfers to the buyer at factory delivery. Examples:
- If goods are damaged by fire before pickup, the seller bears the loss.
- If goods are damaged in a road accident during transit to Shanghai Port, the buyer bears the loss (must claim from its insurer).
4. Cost Allocation
| Expense Item | Responsible Party | Amount (EUR) |
| Production & packaging costs | Seller | 350,000 |
| Road freight (Suzhou→Shanghai) | Buyer | 5,000 |
| Export customs fees | Buyer | 2,000 |
| Ocean freight | Buyer | 15,000 |
| Marine insurance | Buyer | 3,000 |
| German import duties & VAT | Buyer | 124,000 |
| Hamburg port fees | Buyer | 4,000 |
Key Insights into EXW
- Minimum Seller Liability
- Only responsible for delivering goods at the factory, with no obligations for transportation, clearance, or insurance (“disclaimer upon factory delivery”).
- Suitable for sellers unfamiliar with international trade or buyers wanting full logistics control.
- Maximum Buyer Liability
- Must handle export/import clearance (may require local agents in the seller’s country).
- Bears all risks and costs from pickup to destination, ideal for buyers with mature logistics networks.
- Documents & Assistance
- Seller is not obligated to handle customs documents but must provide basic paperwork (e.g., invoices) at the buyer’s cost.
Risk Warnings
- Seller Risks
- If the buyer delays pickup, additional storage costs at the factory may need to be clarified in the contract (seller may need to advance payments).
- Risk of buyer rejection if goods do not meet contract requirements (risk remains with the seller before delivery).
- Buyer Risks
- Delays in export clearance may cause goods to be stuck (especially in countries with complex regulations).
- Multiple transport links (road + sea) spread risks; buyers should consider full-transit insurance (not mandatory under EXW but recommended).
Critical Considerations
- Clearly define delivery details (time, location, packaging) in the contract to avoid pickup disputes.
- Buyers must plan transportation and clearance in advance, allocating sufficient time and budget (especially across multiple jurisdictions).
- Consider specifying “cost-sharing for seller-assisted clearance” in EXW contracts to avoid operational gaps.
By clearly allocating responsibilities, EXW streamlines the seller’s process while challenging the buyer’s supply chain management— a textbook example of “clear-cut rights and obligations” in international trade.