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FOB vs FCA: Which One is Right for You?

Updated: Jul 25, 2023

The Ultimate Showdown


Incoterms are a set of international rules for the interpretation of trade terms in commercial contracts. They are used to clarify the responsibilities of the buyer and seller in an international trade (export or import) transaction.


FOB (Free on Board) and FCA (Free Carrier) are two of the most common Incoterms. FOB is used for sea and inland waterway transportation, while FCA can be used for any mode of transportation.


In this article, I will discuss the differences between FOB and FCA, and why you might want to choose FCA over FOB.


FOB vs FCA: Which One is Right for You?
Port of Shipment or Delivery Point



Index



 

What is FOB?


FOB stands for Free on Board. Under FOB, the seller is responsible for delivering the goods to the port of shipment and loading them onto the buyer's designated vessel. The buyer is responsible for all costs and risks associated with the goods once they are loaded onto the vessel.



What is FCA?


FCA stands for Free Carrier. Under FCA, the seller is responsible for delivering the goods to the carrier nominated by the buyer at the named place. The buyer is responsible for all costs and risks associated with the goods once they are handed over to the carrier.




Differences between FOB and FCA


The main difference between FOB and FCA is the point at which the risk of loss or damage to the goods transfers from the seller to the buyer. Under FOB, the risk of loss or damage to the goods transfers when the goods are loaded onto the buyer's vessel. Under FCA, the risk of loss or damage to the goods transfers when the goods are handed over to the carrier.


Another difference between FOB and FCA is the cost of transportation. Under FOB, the seller is responsible for the cost of transportation to the port of shipment. Under FCA, the seller is responsible to make delivery till named place as agreed between both the parties. This named place can be port of shipment too. In both the Incoterms, the buyer is responsible for the cost of transportation from the named place of delivery/port of shipment to the final destination.



Delivery Point under FOB


FOB vs FCA: Which One is Right for You?
Delivery Point under FOB

(Blue colour refers Seller's responsibilities & Gold colour refers Buyer's responsibilities)



Delivery Point under FCA


Under the "FCA" rule, the seller delivers the goods to the buyer in one of these two ways.


1) Delivery Point - If named place is seller's premises


FOB vs FCA: Which One is Right for You?
Delivery Point Under FCA (If Named Place is Seller's Premises)

(Blue colour refers Seller's responsibilities & Gold colour refers Buyer's responsibilities)



2) Delivery Point - If named place is another place


FOB vs FCA: Which One is Right for You?
Delivery Point Under FCA (If Named Place is Another Place)

(Blue colour refers Seller's responsibilities & Gold colour refers Buyer's responsibilities)




Why FCA is Winner Over FOB or Why Choose FCA Over FOB?


There are a few reasons why FCA is a clear winner over FOB and you might want to choose FCA over FOB.

  • Control: Under FCA, the buyer has more control over the transportation of the goods. The buyer can nominate the carrier and the named place, which gives the buyer more flexibility in terms of how the goods are transported.


  • Risk: Under FCA, the buyer assumes the risk of loss or damage to the goods at an earlier point in the transportation process. This means that the buyer is responsible for the goods if they are damaged or lost during transportation. However, the buyer may be able to obtain insurance to cover this risk.



  • Cost: Under FCA, the buyer is responsible for the cost of transportation from the named place of delivery to the final destination. Thus, the buyer may be able to negotiate a lower price for transportation if they are responsible for arranging the transportation.


  • The type of goods: The type of goods being transported can also affect the choice of Incoterm. For example, if the goods are fragile or valuable, then the buyer may want to choose FCA so that they have more control over the transportation process.


  • The location of the buyer and seller: The location of the buyer and seller can also affect the choice of Incoterm. For instance, if the seller is located in a country with a high risk of theft or pilferage, the buyer may choose the FOB Incoterm to ensure that the seller is responsible for the goods until they are loaded onto the vessel.



Conclusion


In conclusion, there are a few reasons why you might want to choose FCA over FOB. If you want more control over the transportation of the goods, if you want to assume the risk of loss or damage to the goods at an earlier point in the transportation process, or if you want to negotiate a lower price for transportation, then FCA may be the right Incoterm for you.


Ultimately, the best Incoterm for you will depend on the specific circumstances of your transaction. If you are unsure which Incoterm to choose, then you should consult with a freight forwarder or trade lawyer.






Disclaimer: This blog is for informational purposes only and should not be construed as legal or financial advice. The information contained in this blog is not intended to be a substitute for professional advice. You should always consult with a qualified professional before making any financial decisions. The author of this blog makes no representations as to the accuracy or completeness of the information contained herein. The information in this blog is subject to change without notice. The author of this blog is not liable for any losses or damages that may arise from the use of this blog.


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Invitado
02 jul 2023
Obtuvo 5 de 5 estrellas.

Great article

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Invitado
01 jul 2023
Obtuvo 5 de 5 estrellas.

Good!

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