Free on Board (FoB) and Ex Works (EXW) are the two common trading terms used when importing from Hong Kong. In FoB trading terms, your supplier covers the local costs of transporting the shipment to your freight forwarder’s warehouse. When importing on Ex Works trading terms, you are responsible for the entire transport process.
Importing on FoB terms is often cheaper than EXW because the supplier can handle the local costs at a more affordable price than your freight forwarder. However, you can only benefit from reasonable local transportation costs for LCL shipments and not FCL shipments. Additionally, you do not have to deal with any documentation in Hong Kong. However, with FoB, you risk having your supplier suddenly refuse to pay the local charges or charge you extra to cover the local costs, which increases your overall trading costs.
When importing from Hong Kong on EXW terms, you have the benefit of being in complete control over the entire shipping process. This means that you will get your products at a slightly lower price since the supplier won’t include local shipping costs with the invoice. However, in the long run, EXW is more expensive since the supplier does not share the transportation costs.
When trading on EXW terms, ensure that your supplier provides you with their export license as you will need it for clearance. Also, ensure that your selected freight forwarder can provide a door to door service and handle customs clearance.
Before choosing which trade terms to use, assess your options and select the terms that will be most beneficial to you. Most importantly, get the agreement with your supplier in writing.