Two Best Incoterms To Use When Importing to Australia: FOB and EXW | Willship International

Summary

This video explains two common shipping terms used in international trade: FOB (Free On Board) and EXW (Ex Works). FOB includes the cost of goods and shipping up to the port of departure, while EXW means the buyer is responsible for organizing and paying for all shipping costs from the factory. The video advises Australian importers to prefer FOB or EXW terms, as they retain control over the shipping process and avoid potential issues with suppliers. The video also emphasizes the importance of working with a trusted freight forwarder to manage the logistics and avoid complications.

Takeaways

• 😀 X Works (EXW) and Free on Board (FOB) are common shipping terms, but they can be confusing for newcomers.
• 😀 FOB means the supplier covers shipping charges up to the port of departure, including pickup, loading, and documentation costs.
• 😀 When purchasing under FOB terms, buyers are responsible for all costs from the port onward, including freight to the destination, local handling, clearance, and delivery.
• 😀 EXW means the supplier's responsibility ends at their factory door, and the buyer must organize all shipping from that point onwards.
• 😀 With EXW, the buyer hires a freight forwarder to handle all logistics from the supplier's factory to their destination.
• 😀 Using a trusted freight forwarder for both EXW and FOB terms allows the buyer to retain control over the shipment throughout the process.
• 😀 It's recommended for Australian importers to buy under either FOB or EXW terms to avoid the supplier controlling the freight.
• 😀 Buying under FOB or EXW terms from China provides more control over the shipping process, which reduces potential issues.
• 😀 There’s no major cost difference between FOB and EXW terms, but the responsibility for handling the logistics changes.
• 😀 For FOB terms, instant quotes can be obtained via the freight forwarder's website, whereas for EXW terms, the supplier's address is needed to calculate the costs in China.
• 😀 For any questions or shipping requirements, buyers can contact the freight forwarder to discuss specific needs and get a tailored shipping plan.

Q & A

What does FOB stand for, and what does it mean for Australian importers?

FOB stands for 'Free on Board.' For Australian importers, it means that the supplier covers all the costs to get the goods to the port of departure. This includes picking up the goods, loading them onto the ship or plane, and handling the necessary documentation. The buyer is responsible for the shipping charges once the goods are on board.

What responsibilities does the supplier have under FOB terms?

Under FOB terms, the supplier is responsible for getting the goods from the factory to the port of departure. This includes organizing the pickup, loading the goods onto the ship or plane, and handling all associated documentation. The costs for these services are included in the cost of the goods or listed as a separate charge on the invoice.

How does EXW differ from FOB terms?

EXW (Ex Works) means that the supplier's responsibility ends at the factory door. The supplier only provides the goods, and the buyer must arrange and pay for all transportation, including pickup, shipping, clearance, and delivery. Unlike FOB, where the supplier manages part of the shipping process, EXW places the full responsibility on the buyer from the factory onwards.

Which shipping term is recommended for Australian importers, and why?

FOB is generally recommended for Australian importers because it allows them to retain control over the shipment process, including the choice of freight forwarder. This can help mitigate risks and ensure that any issues with the supplier can be handled by a trusted partner.

Can you explain the potential risks of using EXW terms?

The main risk with EXW terms is that the buyer is responsible for all aspects of shipping from the factory, which can create challenges if problems arise. If issues occur with the goods or the shipment, the buyer is fully responsible for resolving them, which might not be ideal for those unfamiliar with international shipping.

How do the costs compare between FOB and EXW terms for the buyer?

In terms of total costs, there is usually no major difference between FOB and EXW for the buyer. The difference lies in who charges for which parts of the shipping process. With FOB, the supplier includes shipping costs up to the port of departure, while under EXW, the buyer must handle and pay for all shipping from the factory onwards.

What role does a freight forwarder play in both FOB and EXW terms?

A freight forwarder plays a crucial role in both FOB and EXW terms. Under FOB, the freight forwarder handles the remaining charges after the goods are loaded onto the ship or plane, including shipping to Australia, customs clearance, and delivery. Under EXW, the freight forwarder is responsible for organizing and managing the entire shipment process from the supplier's factory to the buyer's door.

What does the term 'X Works' mean in shipping, and how does it affect the buyer's responsibilities?

EXW (Ex Works) means the seller's responsibility ends at their factory door. The buyer is responsible for everything from that point onwards, including arranging and paying for the shipment, customs clearance, and final delivery. The buyer essentially handles the entire logistics process.

How can an Australian importer get a quote for shipping under FOB terms?

An Australian importer can get an instant quote for shipping under FOB terms via a freight forwarder's website. The quote will include the costs for getting the goods from the supplier's location to the port of departure, with additional charges for the rest of the shipping process handled separately.

What is the advantage of retaining control of the shipment process as a buyer?

Retaining control of the shipment process allows the buyer to choose trusted partners, like freight forwarders, to manage the shipment. This can help avoid potential issues with the supplier and offer more flexibility in managing costs and solving problems that arise during the shipping process.