Incoterms® 2020: EXW and FOB explained for PPE buyers
The two terms most often quoted on a glove price, and the two most often quoted wrongly. What each actually obliges, and why an EXW price is not comparable to a delivered one.
EXW and FOB are the two terms most often quoted on a glove price, and the two most often quoted wrongly. Both push cost and risk onto the buyer early, which is why they produce the lowest headline price and the largest gap between that price and the landed cost.
EXW – Ex Works
Under EXW the seller's obligation is to make the goods available at their own premises, packaged and identified, on the agreed date. That is all.
The seller does not pay for transport. The seller does not arrange insurance. The seller does not clear the goods for export, and under a strict reading is not even obliged to load them onto the buyer's collecting vehicle – if the seller does load, they do so at the buyer's risk.
Everything from that point is the buyer's: loading, export clearance, inland carriage, main carriage, insurance, import clearance, duties and delivery.
Why this matters for institutional buyers. EXW is the minimum-obligation term for a seller, so it produces the lowest quoted unit price of any Incoterm. It is also the term least suited to a buyer who is not physically present in the country of origin. Export clearance in the seller's country is a formality the seller can complete easily and a foreign buyer often cannot complete at all, which is why the ICC's own guidance suggests FCA instead where the buyer wants minimal seller obligation but needs export clearance handled locally.
For a hospital or an agency procuring gloves from Asia, EXW means owning the goods on a factory floor in Malaysia. That is rarely what the buyer intended.
FOB – Free on Board
FOB is a sea and inland waterway term only. It should not be used for air freight or containerised road movements, though it frequently is.
Under FOB the seller delivers by placing the goods on board the vessel at the named port of shipment, having cleared them for export. Risk and cost pass to the buyer at that point – when the goods are on board, not when they arrive at the port and not when they leave the terminal.
The buyer arranges and pays for the main carriage, insurance, import clearance and onward delivery.
FOB is the most widely used term in glove supply because it splits responsibility at a clean, verifiable point: the bill of lading records when the goods went on board. It gives the buyer control of freight – useful for anyone with negotiated rates or consolidated volumes – while leaving origin-country formalities with the party best placed to handle them.
The containerisation caveat. Goods handed to a terminal days before loading are, under FOB, still at the seller's risk until they are actually on board, even though the seller no longer controls them. For containerised cargo the ICC recommends FCA for exactly this reason. In practice the trade continues to use FOB, and buyers should understand where the gap sits.
Which to use
For public procurement, quote comparison is the real issue. An EXW price and a CIF price for the same glove are not comparable, and a tender that allows suppliers to choose their own term is comparing quotes that mean different things. Name the term in the tender documents and require all bids on it.
Where the buyer wants a single delivered price with no logistics involvement, DAP or DDP is the other end of the range.
We quote on any Incoterms® 2020 rule for any product in our range. For framework deliveries to Danish and EU institutions we normally supply DAP, so the receiving hospital has one price and no customs exposure.
The eleven Incoterms® 2020 rules
Incoterms® is a registered trademark of the International Chamber of Commerce. The rules in force are Incoterms® 2020, published September 2019 and effective from 1 January 2020. A contract that does not name the edition is ambiguous, because the 2010 rules remain valid if the parties specify them – always write the rule, the named place and the edition: `FOB Port Klang, Incoterms® 2020`.
Related: EXW and FOB · CIF and CIP · DAP and DDP
Key takeaways
Seventeen years sourcing and supplying medical gloves and PPE to governments, UN agencies, NGOs and healthcare systems. Writes on glove standards, quality management and responsible sourcing for institutional buyers, working from the source standards rather than secondary summaries.
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