What is Ex Factory Price?

Ex-Factory pricing is a term you might come across while doing business with overseas partners and customers. Ex-Works is also a term you might come across in a similar setting. Very often, industry players unknowingly use these terms interchangeably!

We will also look at the difference between Ex-Works and Ex-Factory.

Both of these terms refer to the price of the product from the factory. However, Ex-Works refers to an Incoterm, also known as EXW. When transacting on EXW terms, the price of the shipment would usually be Ex-Factory.

Ex-Factory price does not include the following costs

1. Pre-carriage
2. On-carriage
3. Customs clearance
4. Cost of loading on collecting vehicle
5. Export duties
6. Import duties

This basically means that the price of the product does not include any other cost element incurred after the product is ready for collection at the manufacturer’s site.

Example of Ex-Factory pricing:

A seller could be located in Singapore. The buyer is located in Malaysia. The seller has agreed to sell the goods to the buyer at a price of 300 SGD, on EXW terms. All the seller has to do is place the goods at his/her warehouse ready for collection by the buyer and inform the buyer to collect the goods. Of course, this would have to be done within a period already agreed upon between the buyer and the seller.

Packaging in EXW

When using EXW terms, the seller also has to pack the goods in usual export-ready packaging. However, if the sales contract does not specify that the deal is on EXW Incoterms, this cannot be assumed. For example, if the sales contract only mentions that the price is Ex-Factory, the buyer cannot assume that the seller will package the shipment ready for export.