Although the most common incoterms are FOB and EXW, you may not be clear about the differences between the two. In the following article we hope to clarify all your doubts, so you can avoid unexpected charges.

FOB or EXW: differences

To understand the differences between EXW and FOB, let’s look at what each of these abbreviations mean and what their choice implies.

What is FOB?

Starting with FOB, it is an abbreviation that stands for “Free On Board“.

When trading under FOB, local charges are borne by the supplier, i.e. transportation to the port, cargo handling and customs clearance at origin.

When the goods are on board, the transportation costs and responsibility pass from the supplier to the importer.

Therefore, a carrier will be needed to carry out the shipment and transport when on board the ship or aircraft. Of course, local expenses in the country of origin will be billed to the supplier.

What is EXW?

In the case of EXW, it stands for “Ex Works”;. If you trade under this term, the importer or purchaser of the goods becomes responsible for the entire transportation process, i.e. from the supplier’s door to your door.

In many cases, under EXW conditions the exporter performs and assumes the customs management directly.

What are the differences between the two?

When you use EXW (as an importer) you are responsible for the costs related to transportation from origin to destination.

Whereas with an FOB agreement you will be responsible for the costs after the goods are loaded on the plane or ship, as the supplier will be solely responsible for the costs in his country.

FOB or EXWWWhich is the best option?

Depends. It is best to research the pros and cons of both options before committing to EXW or FOB. So the first thing to do is to find out the total door-to-door cost (product cost, transportation, insurance, taxes and duties).

These elements are not always present, depending on the country of origin, so it is important to check before choosing an option.

Knowing the differences between FOB or EXW will allow you to always choose the right option when importing products. We hope this article has made it clearer for you.

Anyway in SpainSur Forwarders we can advise you to get your shipment at the best price. Contact us and we will inform you without obligation.