What Is the Meaning of Ex-Factory Price?
Ex-factory price refers to the cost a manufacturer charges for a distributor or other buyer to purchase products directly from the source. This is a quote for the goods alone. It does not include shipping, handling or taxes. This practice is common when working with raw materials for secondary manufacturing.
Ex-factory pricing is the exact amount a manufacturer charges for the products as they leave the production line. Often distributors and wholesale companies purchase these goods directly from the factory floor or loading docks, providing their own shipping. This practice helps sellers regulate their prices when working with a third party.
The ex-factory figure is determined solely by the manufacturer. The price does not include taxes, surcharges or shipping and handling fees. It is often a lower price than a buyer can receive when dealing with a secondary shipping service as a go-between and therefore is preferred by major retailers trying to keep price margins within a certain range.
Exporting and importing services use ex-factory pricing on a regular basis. These prices allow companies to purchase products from loading docks and shipping yards without paying additional transit prices. The practice also allows for the regulation of the passage of goods between countries by necessitating a changing of hands between manufacturers, distributors and shipping agencies.