FCA vs. FOB

Attribute	FCA	FOB
Definition	Free Carrier	Free On Board
Responsibility for Delivery	The seller is responsible for delivering the goods to the carrier or another person nominated by the buyer at the agreed-upon place.	The seller is responsible for delivering the goods on board the vessel or another mode of transport at the agreed-upon port or point of shipment.
Transportation Costs	The buyer is responsible for transportation costs from the agreed-upon place of delivery.	The seller is responsible for transportation costs to the agreed-upon port or point of shipment.
Delivery Point	The agreed-upon place of delivery, which can be a terminal, warehouse, or other specified location.	The agreed-upon port or point of shipment where the goods are placed on board the vessel or other mode of transport.
Transfer of Risk	The risk of loss or damage to the goods transfers from the seller to the buyer at the agreed-upon place of delivery.	The risk of loss or damage to the goods transfers from the seller to the buyer once the goods are on board the vessel or other mode of transport.
Insurance	The buyer is responsible for insurance coverage.	The seller is responsible for insurance coverage.
Export Clearance	The seller is responsible for export clearance procedures.	The seller is responsible for export clearance procedures.
Import Clearance	The buyer is responsible for import clearance procedures.	The buyer is responsible for import clearance procedures.

Introduction

When engaging in international trade, it is crucial to understand the various terms and conditions associated with shipping and delivery. Two commonly used terms in this context are Free Carrier (FCA) and Free On Board (FOB). These terms define the point at which the seller's responsibility ends and the buyer's responsibility begins. In this article, we will delve into the attributes of FCA and FOB, highlighting their differences and similarities to help businesses make informed decisions.

Definition and Scope

FCA, or Free Carrier, is an International Commercial Term (Incoterm) that indicates the seller's responsibility for delivering the goods to a specific location, typically the carrier's premises or another named place. On the other hand, FOB, or Free On Board, signifies that the seller is responsible for delivering the goods to the port of shipment, where the risk and ownership transfer to the buyer. While both terms involve the seller's responsibility for delivery, they differ in the location where this responsibility ends.

Delivery and Transport

Under FCA, the seller is responsible for delivering the goods to the carrier's premises or another named place. This means that the seller arranges and pays for the transportation of the goods to the specified location. In contrast, FOB requires the seller to deliver the goods to the port of shipment, where the buyer takes over the responsibility for transportation and associated costs. Therefore, the key distinction lies in the point at which the buyer assumes control over the goods and bears the risk of loss or damage during transportation.

Transfer of Risk and Ownership

With FCA, the risk and ownership of the goods transfer from the seller to the buyer at the agreed delivery point. Once the goods are delivered to the carrier's premises or another named place, the buyer assumes the risk and becomes the owner of the goods. On the other hand, FOB transfers the risk and ownership from the seller to the buyer when the goods are loaded onto the vessel at the port of shipment. This means that any loss or damage occurring during transit after the goods are loaded becomes the buyer's responsibility.

Cost Allocation

When it comes to cost allocation, FCA and FOB also differ in their approach. Under FCA, the seller is responsible for the costs up to the agreed delivery point, including transportation, export clearance, and loading charges. From that point onwards, the buyer bears all the costs associated with transportation, import clearance, and any subsequent charges. In contrast, FOB places the responsibility for costs on the seller until the goods are loaded onto the vessel at the port of shipment. Once loaded, the buyer assumes all costs and risks associated with transportation, import clearance, and any additional charges.

Documentation and Insurance

Another aspect to consider is the documentation and insurance requirements under FCA and FOB. With FCA, the seller is responsible for providing the necessary export documentation and arranging export clearance. However, the buyer is responsible for obtaining insurance coverage for the goods during transportation. On the other hand, FOB requires the seller to provide export documentation, arrange export clearance, and also covers the cost of loading the goods onto the vessel. However, it is the buyer's responsibility to arrange insurance coverage for the goods during transit.

Flexibility and Applicability

Both FCA and FOB offer flexibility in terms of their applicability to various modes of transport. FCA can be used for any mode of transportation, including road, rail, air, or sea. It allows the parties to specify a named place that suits their needs, making it adaptable to different scenarios. Similarly, FOB is primarily used for sea or inland waterway transport, but it can also be used for multimodal transport involving sea transport as the main leg. This flexibility allows businesses to choose the most suitable term based on their specific shipping requirements.

Conclusion

In conclusion, understanding the attributes of FCA and FOB is essential for businesses engaged in international trade. While both terms involve the seller's responsibility for delivery, they differ in the location where this responsibility ends, the transfer of risk and ownership, cost allocation, documentation, and insurance requirements. FCA places the responsibility on the seller until the goods are delivered to the carrier's premises or another named place, while FOB transfers the responsibility to the buyer when the goods are loaded onto the vessel at the port of shipment. By considering these attributes, businesses can make informed decisions and choose the most suitable term for their specific trade transactions.