Among the challenges of making transactions in the digital business is the shipment of bulk goods from the seller to your end. It is a huge challenge because of the cost involved and risks that potentially come along with the transaction. In addition, you have to take note that the shipment method is not that simple as well because of the several options available that could benefit both buyers and sellers. Two of the popular shipment methods are referred to as Ex Works (EXW) and Free On Board (FOB). If you have heard of them before but you are not sure of how they could benefit you, then you definitely have come to the right place! In this short but informative blog, I will share with you my thoughts on the prospect of FOB and EXW and help you identify which of them can greatly benefit you. So without any further ado, let’s get right into today’s discussion.
Specifications of Ex Works
Ex Works is a shipping agreement whereby the buyer and the seller agree on the location of where you are going to drop off the goods. At the beginning of the transaction or shipment process, the seller is the one who is expected to carry the cost involved and potential risks during the duration of the delivery. Under this setting, you have to bear in mind that the point of ownership will not pass from the buyer to the seller when the transaction has begun. The ownership of the goods shall be transferred from one party to another when the products reach the appointed or agreed destination of the parties involved. The point of destination could be the port near the warehouse or storage facility of the buyer or any location that is agreed upon by the buyer or seller or any parties involved in the transaction. Under the setting of ex works incoterms, once it reaches the point of destination, all of the responsibilities to the goods shall be assumed by the seller and they now have the duty to exercise due diligence to maintain the integrity of the goods until the delivery is fully consummated.
Free On Board
Other terms used for Incoterms Free On Board are “FOB Shipping Point” or “FOB Origin. Similar to Ex Works, Free On Board is also a shipping agreement or condition that is regulated by Incoterms. It is a term of agreement that specifies the condition of the shipment between the seller and buyer. It defines the part of the transaction where they cover the point of ownership, freight charges, and risks involved. What you have to bear in mind here is that FOB is the complete opposite of Ex Works whereby the seller assumes responsibility for the goods immediately after the transaction between the buyer and seller has been agreed upon. What this means is that the seller shall bear all the costs related to the shipment like customs fees and shipping expenses and retain the risks during the delivery of the goods to the port. It also indicates that the seller no longer has the responsibility and it is deemed that the transaction has already been fully consummated on his part.
Final Thoughts: Which of Them is Better Over the Other
I hope the blog I prepared has provided you with the valuable insights you need in distinguishing which is better between Free On Board and Ex Works. But the question of which of them best suits the current transaction between the parties relies on your agreement and the preferences of the parties involved. As explained in this short blog, each of the shipping agreements has its own specifications that could potentially one party over the other while the other one bears the burden of costs and risks. FOB releases the seller from all responsibilities after the goods have been shipped, while Ex Works only transfers ownership and all responsibilities to the buyer once it has reached the point of destination.