The price quoted “ex works” represents the cost of goods at the seller’s premises. It’s the base price before any transportation, insurance, or other export-related costs are added. Determining this price involves summing all direct costs associated with producing the goods, including raw materials, labor, and manufacturing overhead. For example, if a manufacturer spends $10 on materials, $5 on labor, and $2 on overhead to produce a product, the ex works price, before any profit margin, would be $17.
This pricing method is significant because it clarifies the seller’s responsibility and allows the buyer to manage all subsequent logistics and associated expenses. This arrangement offers buyers greater control over their supply chain, enabling them to optimize shipping routes and potentially negotiate better rates with their preferred carriers. Historically, this term provides a clear starting point for international trade negotiations, ensuring both parties understand their obligations from the outset.
