If you’re importing goods from overseas, you’ve probably encountered FOB and EXW shipping terms. While they might seem like industry jargon, choosing the wrong one can cost you thousands in unexpected fees and logistical headaches.

Let’s break down what these terms really mean for your bottom line.

The Core Difference: Who’s in Control?

EXW (Ex Works) is the seller’s dream and potentially the buyer’s nightmare. The supplier makes the goods available at their factory door. You handle everything else – loading, trucking, customs, and ocean freight.

FOB (Free On Board) represents a more balanced approach. Your supplier gets the goods loaded on the vessel and clears them for export. You take over from the port of origin onward.

The True Cost Comparison

Let’s track a standard shipment from Shenzhen to Los Angeles:

Under EXW Terms:

• Product cost: $10,000

• Hidden costs you’ll pay:

  • Local trucking in China: $200-400

  • Port fees & documentation: $150-300

  • Export customs clearance: $100-250

  • Total unexpected costs: $450-950

Under FOB Terms:

• Product cost: $10,000

• Your costs begin at the Chinese port

• Supplier handles and pays for:

  • All local transportation

  • Export licenses and paperwork

  • Port terminal charges

When EXW Actually Makes Sense

Choose EXW only if:

• You have a trusted logistics partner in the supplier’s country

• You’re shipping large volumes and can negotiate better local rates

• You want complete control over the entire shipping process

• Your supplier is inexperienced with international shipments

Why Most Importers Prefer FOB

FOB protects you from the most unpredictable part of international shipping: the export process. Your supplier deals with:

• Local trucking companies who might overcharge foreigners

• Complex export regulations in their native language

• Last-minute documentation issues that could delay your shipment

The 5 Hidden Dangers of EXW Pricing

1. Communication barriers with local trucking companies

2. Unfamiliarity with export regulations that change frequently

3. Difficulty tracking goods until they reach the port

4. Liability gaps if goods are damaged during local transport

5. Time zone challenges when coordinating multiple local vendors

Smart Strategy: Use FOB as Your Default

For most small to mid-sized importers, FOB provides the perfect balance of cost control and risk management. You avoid the complexities of the export process while maintaining control over the ocean freight, where volume discounts and carrier relationships really matter.

Negotiation Tip

When suppliers offer EXW pricing, ask for their FOB quote instead. Often, the price difference is minimal because they can leverage existing relationships with local truckers and customs brokers.

Still Unsure? Ask Your Supplier These Questions:

1. “Can you provide a detailed breakdown of local charges included in your FOB quote?”

2. “Do you have experience handling export documentation for [your destination country]?”

3. “What’s the price difference between your EXW and FOB offers?”

The answers will quickly reveal which option gives you better value and less risk.

Remember: The cheapest shipping term isn’t always the most cost-effective once you account for hidden fees, delays, and administrative burdens. Choose the option that matches your logistics capabilities and risk tolerance.

Need help determining the right Incoterms for your specific shipment? We provide free consultations to help you optimize your international shipping strategy.