As an experienced international freight forwarder, I frequently encounter customers' confusion when choosing between trade terms, especially between EXW (Ex Works) and FOB (Free On Board). Understanding the differences between these terms is crucial for optimizing logistics costs and managing risks. Here's my comparative analysis of EXW and FOB from the perspective of a freight forwarder.
EXW (Ex Works): This is the most basic form of transaction. Under EXW, the seller only needs to make the goods available at their premises (like factory, warehouse, etc.). From that point, all transportation costs and risks are transferred to the buyer.
FOB (Free On Board): This is a more common international trade term. Under FOB, the seller is responsible for delivering the goods to a specified loading port and covering all local costs, including export customs clearance. Once the goods are over the ship's rail, the risks and costs are transferred to the buyer.
EXW: The buyer assumes all transportation costs and risks right from the seller's factory, including loading, transportation to the port, and export customs clearance.
FOB: The buyer begins to bear all the transportation risks and costs from the moment the goods pass the ship's rail at the loading port.
Under EXW, as the buyer's freight forwarder, we typically handle the complete logistics chain from the seller's factory to the final destination, including inland transportation, loading/unloading, export customs clearance, etc.
Under FOB, as the buyer's agent, we are mainly responsible for the logistics segment starting from the shipping port, including sea freight, customs clearance at the destination port, and subsequent delivery.
EXW: The buyer needs stronger logistics control and resources to manage the entire transportation process. Suitable for buyers who want more control over the logistics process.
FOB: More convenient for buyers who do not possess comprehensive logistics management capabilities. The seller takes care of all work up to the shipping port, and the buyer assumes responsibility from sea freight onwards.
Choosing between EXW and FOB depends on the needs, resources, and risk-bearing capabilities of both parties. EXW might be more suitable if the buyer wants complete control over the logistics process; FOB might be better if the buyer wants to reduce management burdens and risks.
In conclusion, as a freight forwarder, we advise our clients to consider their logistics capabilities and risk management strategies when choosing trade terms. Understanding the fundamental differences between these terms can help businesses make the best logistics decisions, optimize cost-effectiveness, and reduce potential risks.
Wing Shipping offers various logisticssolutions for Chinese exports, including air,sea, and rail freight. We promote tradebetween China and the world, contributingto the development of your business.
