Companies that ship domestically within the United States often use the trade term FOB—Free On Board. But FOB has a completely different meaning under the international trade terms, Incoterms 2020. Exporters who want to use the international equivalent to FOB often use the Incoterm FCA—Free Carrier At.
Like all 11 of the 2020 Incoterms rules, FCA identifies whether it is the seller or the buyer who pays the domestic, international and on-carriage freight charges. So, let’s compare the domestic use of FOB with the international use of FCA.
Transfer of Title versus Transfer of Risk
The domestic term FOB indicates where risk and title transfer from the seller to the buyer. If FOB origin is specified, it is at the seller’s facility.
The Incoterms 2020 rule FCA indicates where risk transfers from the seller to the buyer. If the location for delivery is at the seller’s facility, then risk transfers when the goods are loaded onto the first carrier. If the location for delivery is at another location, then risk transfers from the seller to the buyer at time of arrival, but before the goods have been off-loaded.
Incoterms 2020 rules do not specify when and where title transfers from one party to the other.
Who’s Paying the Freight?
The domestic term FOB does not identify who pays for the freight charges; it is necessary for the seller to state in the quote and subsequent documentation whether the freight charges are to be prepaid or collect. Sellers usually state “FOB Origin” or “FOB Destination” on their quotations and invoices.
The Incoterms 2020 rule FCA identifies who pays for the freight charges and clears the goods for export. FCA is used by the U.S.-based exporter to designate whether the goods will be available at their facility or at another place in the U.S. by the syntax appended to FCA:
- “FCA Seller’s facility, Minneapolis, MN USA” indicates that the seller will load the items on the buyer’s designated carrier, and the freight charges will be collect.
- “FCA Freight forwarder’s facility, Miami, FL USA” indicates that the seller will load the items on their designated carrier, deliver them to the forwarder’s facility to be unloaded by them and the freight charges to the forwarder’s facility are to be prepaid.
Each of the Incoterms 2020 rules designate 10 responsibilities for the seller and the buyer; one of those responsibilities is the payment of freight charges. The other nine responsibilities are specified by the International Chamber of Commerce, the author of the terms.
In their publications on Incoterms 2020, the ICC advises sellers and buyers to add to the selected term a place, city, state and country. With the addition of the location, the seller is advising the buyer the location where the goods will be delivered; it is also the place to which freight charges are prepaid.
Companies that export will benefit from the accurate use of an Incoterms rule in its quotations, commercial invoices and contracts, along with a named location.
For More Information about Incoterms
To learn more about FCA and all 11 of the Incoterms 2020 rules, check out these additional resources:
This article was first published in May 2017 and has been updated to include current information, links and formatting.
About the Author: Catherine J. Petersen
In 1992, Catherine Petersen founded C J Petersen & Associates, LLC, a research, instruction and consulting firm located in St. Paul, Minnesota, USA. She has designed documentation and procedure manuals for exporters and has authored/co-authored five books.
Ms. Petersen has had day-to-day practical experience at a freight forwarder, a trading company, and an ocean carrier; she has been active in international business since 1980. Her background led her to develop C J Petersen & Associates, LLC, which is a collaborative consultancy that works with clients to identify compliance gaps and to resolve them. Ms. Petersen retired in 2022.
FAQs
Companies that ship domestically within the United States often use the trade term FOB—Free On Board. But FOB has a completely different meaning under the international trade terms, Incoterms 2020. Exporters who want to use the international equivalent to FOB often use the Incoterm FCA—Free Carrier At.
What is the difference between FCA Incoterms 2020 and FOB? ›
What is the difference between FCA and FOB? FCA is an Incoterm which works for all modes of transport. FOB is only used in waterway shipments. Under FOB, the seller is responsible for loading the cargo onto the vessel, but with FCA, it is the buyer's responsibility.
What does FCA Incoterms 2020 mean? ›
Free Carrier Responsibilities and Risk
Under the Incoterms 2020 rules, FCA means the seller loads the goods on the buyer's transport at the seller's premises, or the seller delivers them to another named place. Most often, the buyer hires a transport that picks up the goods at the seller's warehouse.
Are Incoterms 2020 appropriate for domestic trade? ›
Since most businesses already refer to Incoterms when they do cross border trade, they also include them by default when doing domestic shipments. This is perfectly fine in most cases, however, both buyer and seller must be clear of their costs and obligations.
What does FOB and FCA mean in shipping? ›
FCA (Free Carrier) and FOB (Free On Board) are international commercial terms that define the responsibilities and obligations of buyers and sellers in international trade transactions.
What are the disadvantages of FCA Incoterm? ›
However, there are also some disadvantages to consider when using FCA. One potential drawback is that if goods are damaged during transport, it may be more challenging for buyers to hold sellers accountable since risk transfers at an earlier stage compared to other Incoterms like CIF or DAP.
Who pays freight with FCA terms? ›
Under the Free Carrier, or FCA Incoterms® rule, the buyer is responsible for all freight costs.
Who pays insurance in FCA Incoterms? ›
However, if the buyer chooses to buy insurance, it becomes their responsibility to pay for it. Destination terminal charges and delivery to destination: Upon arrival of cargo at the destination port, all the charges associated with the unloading, transferring, holding, etc., must be handled by the buyer.
Who is responsible for damage with FCA Incoterms? ›
– Buyer's Liability: From the moment the goods are delivered to the carrier, the risk transfers to the buyer. Therefore, the buyer becomes liable for any loss or damage to the goods during transit from the named place to the final destination.
Who pays for FOB shipping? ›
Who Pays Freight for FOB Origin? If the terms include the phrase "FOB Origin, freight collect," the buyer handles freight charges. If the terms include "FOB Origin, freight prepaid," the buyer assumes responsibility for goods at the point of origin, but the seller pays the cost of shipping.
Although the ICC recommends using Incoterms® 2020 beginning January 1, 2020, parties to a sales contract can agree to use any version of Incoterms after 2020. They need to clearly specify the chosen version of Incoterms being used (i.e., Incoterms® 2010, Incoterms® 2020, or any earlier version).
Is FCA a domestic shipping term? ›
FCA is used more so for international shipments, and it works for different modes of transport including LCL (less than container load), FCL (full container load), and air when shipping freight.
Does FCA mean Free Carrier? ›
Free carrier is a trade term requiring the seller of goods to deliver those goods to a named airport, shipping terminal, warehouse, or other carrier location specified by the buyer. The seller includes transportation costs in its price and assumes the risk of loss until the carrier receives the goods.
What is the FCA explained? ›
The Financial Conduct Authority (FCA) regulates the financial services industry in the UK. Its role includes protecting consumers, keeping the industry stable, and promoting healthy competition between financial service providers.
Is FCA the same as Ex Works? ›
FCA (Free Carrier):
Free Carrier, denoted as FCA, is slightly more comprehensive than EXW. Under the term, a seller is obligated to deliver the goods to a named location in the seller's country, such as a carrier or other place nominated by the buyer.
What is the difference between FAS and FOB Incoterms 2020? ›
In FOB, the risk transfers to the buyer once the goods are loaded on board the ship, while in FAS, the risk transfers when the goods are placed alongside the ship at the port of shipment.
What is the meaning of FOB Incoterms 2020? ›
Under Free on Board, the seller is responsible for delivering the goods to the port of departure, clearing it for export, and loading the goods on the vessel. Once the goods are on the vessel, the risk transfers from the seller to the buyer, who from that point is responsible for all costs thereafter.
What is the equivalent of FCA Incoterm? ›
What is the difference between FOB and EXW? ›
What Do EXW and FOB Stand for? EXW stands for Ex Works, an Incoterm whereby the buyer of a shipped product pays for the goods when they are delivered to a specified location. FOB, or Free on Board, instead shifts the responsibility of the goods to the buyer as soon as they are loaded onboard the ship.
International Sales & Marketing
Catherine J. Petersen | 3 min. read 
Companies that ship domestically within the United States often use the trade term FOB—Free On Board. But FOB has a completely different meaning under the international trade terms, Incoterms 2020. Exporters who want to use the international equivalent to FOB often use the Incoterm FCA—Free Carrier At.
