3 Reasons Buyers Should Use FCA Instead of EXW

EXW Ex Works Incoterms 2020 is the most convenient Incoterm for the seller. In fact, the only obligation that the seller is required to perform is to place the goods at the disposal of the buyer for collection at the seller’s premises.

As such, EXW is very popular among micro and small businesses that do not have the means to arrange for transportation or simply do not want to get involved with logistics.

However, even in such cases when sellers are unwilling to provide for any form of transport, buyers should push for using FCA Free Carrier instead of EXW.

Here we provide the reasons why they should do so.

EXW Was Never Meant for International Deals

FCA instead of EXW
Does it make a difference if delivery takes place at a port or at the seller’s warehouse?

EXW is the only Incoterm whereby the place of delivery has nothing to do with international shipments. Not only delivery takes place at origin, but it occurs at the seller’s premises, away from any port, airport, train station, or any place of international departure.

In fact, EXW was not meant for international trade. It can well be suitable for domestic shipments, but that is where its use should end.

This point is particularly apparent when it comes to the place of delivery. EXW and FCA are the only Incoterms where the place of delivery may take place at origin other than a port.

The big difference between the two lies in the moment where delivery takes places:

  • EXW: when the seller makes the goods available for collection to the buyer
  • FCA: when the goods are loaded on the carrier sent by the buyer.

If the parties do not specify the point of delivery, then it will be the place that best suits the seller. Since under EXW the seller just has to place the goods at the buyer’s disposal, it is possible that he can choose a different point of delivery if something happens to the goods, i.e. if the goods are stolen or damaged.

EXW Leaves Loading Risk on the Buyer

Loading
What could possibly go wrong during loading?

Because of the different moments at which delivery takes place under EXW versus FCA, the risk that the goods are damaged during loading varies. According to EXW, such risk shifts to the buyer, whereas under FCA it remains with the seller.

Suppose that you bought machinery from a seller in Germany. If you trade under EXW, the risk that the machinery gets damaged while it is being loaded on the truck is on you.

If you use FCA instead, delivery occurs only after the goods have been loaded on the truck. As such, the German seller is responsible if something goes wrong during loading.

EXW Does Not Oblige the Seller to Provide for Export Clearance

Export clearance
Export clearance in a foreign country? No, thanks.

Another drawback of the fact that EXW is not meant for international trade is that under that Incoterm the seller is not obliged to provide export clearance.

That is not the case under FCA, whereby the seller is obliged to clear the goods for export. Note even under FCA the seller must provide export clearance only for his own country, and not for any third country that the goods are going to cross during transportation.

Under the previous example, if the machinery leaves from the port Hamburg directly to, let us say, the port of New York, the German seller is not obliged to clear it for exports in Germany, whereas under FCA it has to.

Globartis Research Center