Incoterms 2020 in practice: FOB vs EXW

Incoterms 2020 describe how costs, obligations and risk are allocated between seller and buyer. They do not define product price, payment method, transfer of ownership or responsibility for quality. The selected rule therefore needs an exact named place or port and must be used alongside a proper supply agreement.

EXW — collection from the seller's premises

Under EXW the seller makes the goods available at the agreed location, usually the factory. The buyer organises the remaining chain. For China imports, confirm who loads the collection vehicle, handles export formalities and pays local charges before the cargo leaves the country.

EXW can give the buyer logistics control, but it requires a capable local partner. If the buyer cannot practically complete export obligations, the apparently simple rule can create operational problems.

FOB — delivery on board at the port

Under FOB the seller delivers and loads the goods on board the vessel at the named port and completes export formalities. Risk transfers according to the rule when the goods are on board. The buyer arranges the main freight, optional insurance, import clearance and final delivery.

FOB is intended for sea and inland waterway transport. For containerised goods handed to a terminal before vessel loading, discuss with a professional forwarder whether another rule better reflects the actual handover point.

Practical differences

• EXW places more local coordination on the buyer
• FOB includes delivery to the named port and export clearance by the seller
• the buyer generally controls the main freight in both variants
• an FOB price should include the agreed origin and port costs
• the EXW place and FOB port must be named precisely

Comparing supplier quotations

Do not compare one supplier's EXW price with another supplier's FOB price before bringing both to the same cost point. Request package dimensions, weight, number of packages, pickup address, port, cargo-ready date and a breakdown of origin costs. A forwarder can then calculate comparable delivered options.

Questions before choosing a rule

• who loads the vehicle at the factory?
• who handles export clearance in China?
• where does risk of damage transfer?
• which origin charges are included?
• who selects the carrier and controls the transport document?
• will the cargo move as FCL, LCL or air freight?

Incoterms do not replace the contract

The agreement should separately cover specification, inspection, delivery dates, payment, documentation and non-conforming goods. Before accepting the quotation, share the cargo data with a forwarder and compare the total cost to the final warehouse rather than the ocean freight rate alone.