Understanding the Key Differences Between Incoterms® FCA and FOB

Incoterms® (International Commercial Terms) are rules of the International Chamber of Commerce (ICC) defining buyer and seller responsibilities in international trade, covering such areas as shipping, insurance, and taxes.

The Incoterms FCA (Free Carrier) and FOB (Free On Board) are closely related, but have important differences.

𝗗𝗲𝗳𝗶𝗻𝗶𝘁𝗶𝗼𝗻 𝗼𝗳 𝗙𝗖𝗔 (𝗙𝗿𝗲𝗲 𝗖𝗮𝗿𝗿𝗶𝗲𝗿)

FCA means that the seller delivers goods to a specified location agreed upon by both buyer and seller. Responsibility and risk transfer to the buyer upon delivery to that location. The seller covers all costs and risks until then, including export packaging and customs clearance.

𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝘀 𝗼𝗳 𝗙𝗖𝗔 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗦𝗲𝗹𝗹𝗲𝗿

- The seller is responsible until the goods reach the agreed-upon location.

- The seller handles export formalities and documentation, ensuring compliance with applicable local law.

𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝘀 𝗼𝗳 𝗙𝗖𝗔 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗕𝘂𝘆𝗲𝗿

- The buyer can select cost-effective and dependable shipping, overseeing transportation from the agreed-upon point.

- The buyer has control over the loading process.

- The buyer manages substantial logistics after the goods are loaded, minimizing reliance on the seller.

𝗗𝗲𝗳𝗶𝗻𝗶𝘁𝗶𝗼𝗻 𝗼𝗳 𝗙𝗢𝗕 (𝗙𝗿𝗲𝗲 𝗼𝗻 𝗕𝗼𝗮𝗿𝗱)

FOB denotes when the buyer takes ownership and assumes the risk for goods in transit. With FOB, the seller covers the costs and logistics until the goods are loaded onto the shipping vessel at the port of shipment. This encompasses export packaging, documentation and customs clearance. Once the goods are on the vessel, the buyer takes on all subsequent costs and risks related to the shipment.

𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝘀 𝗼𝗳 𝗙𝗢𝗕 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗦𝗲𝗹𝗹𝗲𝗿

- Responsibility ends once goods loaded onto vessel, establishing a clear risk transfer.

- The seller oversees export process, ensuring adherence to applicable regulations.

𝗔𝗱𝘃𝗮𝗻𝘁𝗮𝗴𝗲𝘀 𝗼𝗳 𝗙𝗢𝗕 𝗳𝗼𝗿 𝘁𝗵𝗲 𝗕𝘂𝘆𝗲𝗿

- The buyer assumes control once the goods are loaded onto the vessel, allowing for the selection of carriers and routes.

- FOB provides flexibility in overseeing the primary shipping leg, resulting in potential reduction of costs and improved logistical arrangements.

𝗗𝗶𝗳𝗳𝗲𝗿𝗲𝗻𝗰𝗲𝘀 𝗕𝗲𝘁𝘄𝗲𝗲𝗻 𝗙𝗖𝗔 𝗮𝗻𝗱 𝗙𝗢𝗕

𝗣𝗼𝗶𝗻𝘁 𝗼𝗳 𝗗𝗲𝗹𝗶𝘃𝗲𝗿𝘆

FCA - Named place (e.g. port or warehouse)

FOB - Port of origin (loaded onto vessel)

𝗦𝗲𝗹𝗹𝗲𝗿’𝘀 𝗥𝗲𝘀𝗽𝗼𝗻𝘀𝗶𝗯𝗶𝗹𝗶𝘁𝘆 𝗘𝗻𝗱𝘀 𝗮𝗻𝗱 𝗕𝘂𝘆𝗲𝗿’𝘀 𝗥𝗲𝘀𝗽𝗼𝗻𝘀𝗶𝗯𝗶𝗹𝗶𝘁𝘆 𝗕𝗲𝗴𝗶𝗻𝘀

FCA - Upon delivery to determined place

FOB - Upon loading of cargo onto vessel

𝗦𝗲𝗹𝗹𝗲𝗿 𝗧𝗮𝗸𝗲𝘀 𝗖𝗮𝗿𝗲 𝗼𝗳

FCA - Export packaging, documentation, customs clearance

FOB - Export packaging, documentation, customs clearance

𝗕𝘂𝘆𝗲𝗿 𝗧𝗮𝗸𝗲𝘀 𝗖𝗮𝗿𝗲 𝗼𝗳

FCA - Transportation, import duties, customs clearance

FOB - Insurance, ocean freight, further transportation