Free Carrier (FCA) vs Free On Board (FOB) Incoterms Comparison

What is the difference between FOB and FCA?

Free Carrier (FCA) and Free on Board (FOB) are part of the Incoterms 2020 established by the ICC to standardise international cargo transport. This article will cover the differences between FOB and FCA to help you decide which Incoterm is better for your operations.

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Differences between FCA and FOB Incoterms

The main difference between FCA and FOB Incoterms is the point of risk transfer from the seller to the buyer. Under FCA, the seller must make the goods available at the agreed location, which can be at the seller’s premises or the port of origin. The moment the goods are delivered and available, the risk transfers to the buyer, which means he is then liable for loading the goods into the vessel.

When shipping under FOB, the seller’s responsibility goes one step further since he must load the goods on the vessel selected by the buyer. In this case, the risk is transferred from the seller to the buyer at the moment when the goods are loaded.

The biggest consequence of this difference in responsibilities when comparing FCA and FOB is the implication that FOB is not suitable for containerised cargo and FCA is. In fact, FCA is the Incoterm the ICC recommends using for container shipping. Continue reading to dive deeper into this topic.

Read more about each Incoterm:

FOB or FCA Incoterms for containerised cargo

One of the main questions traders have when comparing FCA and FOB differences is their use for container cargo.

The reason the ICC recommends using FCA instead of FOB for containerised cargo is that under FOB shipping terms, the seller is normally not able to leave the goods on board the selected vessel because container loading requires specific port infrastructure. This means the seller cannot be liable for loading the goods on the vessel, as they should under this Incoterm.

When shipping containers, the seller is forced to leave the cargo at a port terminal, so they can then be loaded using the port loading equipment. That is why the FCA Incoterm is more suitable in this situation. FCA Incoterm rules establish that the seller should deliver the containers at a location (in this case, the port terminal), and this is when the risk transfers to the buyer, who is responsible for arranging the loading.

FOB vs FCA: Pros and cons of each Incoterm

Advantages and disadvantages of FOB

For the buyer:

FOB is one of the most commonly used Incoterms, and it is often a preferred choice for buyers importing goods from China, for instance. The main advantage of shipping under FOB is that the buyer has fewer responsibilities as the seller is the one that loads the goods on the vessel. On the other hand, compared to FCA, FOB is more limiting since it should only be used for non-containerised sea freight, while FCA can be used for all modes of transport.

For the seller:

Sellers with the means and the network to arrange all the steps required until the loading of the goods tend to prefer shipping under FOB because it is a competitive advantage, being one of the most used Incoterms. However, compared to FCA, FOB gives more responsibility to the seller, so they are still liable if anything happens to the cargo while waiting for the vessel or during loading. For instance, if the buyer fails to arrange an appropriate vessel, this cost is borne by the seller.

Advantages and disadvantages of FCA

For the buyer:

Shipping under FCA is beneficial for buyers shipping container cargo, as previously explained. However, FCA gives more responsibilities to the buyer when compared to FOB, as the buyer is the one responsible and liable for the goods during loading.

For the seller:

The main advantage of shipping under FCA for the seller is that they have fewer responsibilities compared to FOB. In many cases, the seller is only responsible for making the goods available at their own premises, where they should be loaded onto the buyer’s vehicles. This means they also save the costs of domestic transport.

FOB vs FCA Incoterms: customs clearance procedures

When it comes to how customs clearance procedures work, both FCA and FOB have similar rules, as follows:

  • The seller is responsible for the export procedures in the country of origin, including any documentation and costs associated with it.
  • The buyer is responsible for the import procedures in the country of destination, including any documentation and costs associated with it.

Learn more about customs procedures

Differences between FCA or FOB: a summary

Type of transportAll types of transportSea freight
Export dutiesSellerSeller
Loading the goods on the selected vehicleAt the seller’s premises: seller

At a named location: buyer
Freight chargesBuyerBuyer
Import charges and clearanceBuyerBuyer
Import chargesBuyerBuyer
Unloading and handling at arrival at the port of destinationBuyerBuyer
Domestic transport to the named destinationBuyerBuyer
Risk transferAt the seller’s premises: when the goods are loaded on the vehicle.

At a named location: once the goods are made available.
When the goods are loaded onboard the selected vessel

Want more information about Incoterms?

As you can see, the differences between FCA and FOB can be crucial when choosing which Incoterm to use. Both the FCA and FOB have specific use cases that would add even more complexity to this comparison, which can make it hard for a shipper without experience to understand at first glance. To help you understand the Incoterm topic better, check our dedicated guides below:

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FAQ – Differences between FOB and FCA

What is cheaper for the seller, FCA or FOB?
The price of shipping under FCA or FOB depends on the total value and type of the goods, the distance between the seller’s premises and the named location and the experience and bargaining power the seller has with local carriers. Generally speaking, FCA tends to be cheaper than FOB because the seller has fewer responsibilities and, therefore, fewer costs. However, FOB prices may be lower if you are quoting with a seller that has a lot of experience shipping under this Incoterm and already has good connections and a network in place.
Sellers must be reminded that it is not possible to use FOB for container shipping and that the ICC recommends FCA terms in this case, even if FOB may seem more convenient.
Is insurance mandatory when using FOB or FCA Incoterms?
No, neither the seller nor the buyer is obligated to purchase insurance when shipping under FCA or FOB. However, it is always advised to purchase insurance coverage for the cargo when they bear the risk.
For example, an FCA seller may choose to add cargo insurance for the shipment until it reaches the named location. A similar case happens when shipping under FOB, where the seller is usually advised to have insurance until the point where the goods are loaded in the vessel. After the risk transfers to the buyer, they are the ones advised to have insurance instead. .
Who pays for export charges in FCA or FOB?
One of the similarities between FCA and FOB is that in both cases, the seller has to get the goods cleared for export and pay for duties, taxes and documentation in the country of origin. In both FCA and FOB Incoterms, the buyer has to get the goods cleared for import and cover all duties, including VAT, in the country of destination.