Under the ICC Incoterms 2020 rules, the Free Carrier (FCA) rule requires the seller to deliver export-cleared goods to the buyer’s nominated carrier at a specified named place. Risk and cost transfer either when goods are loaded onto the collecting truck at the seller’s facility, or when delivered ready for unloading at an agreed transport terminal. The buyer arranges main carriage, transit insurance, and import clearance. Using the fca incoterms rule gives buyers direct supply chain visibility while eliminating exporter liability risks common in ocean container shipping.
Key takeaways
- FCA is a multimodal Incoterms rule suitable for road, rail, air freight, and containerised maritime transport.
- Delivery and risk transfer occur at the seller’s premises once loaded, or at another named terminal once the arriving vehicle is ready for unloading.
- Unlike Ex Works (EXW), the seller is legally responsible for export customs clearance, export licences, and origin documentation under FCA.
- The International Chamber of Commerce (ICC) recommends replacing Free on Board (FOB) with FCA for containerised cargo to prevent uncovered risk during container yard storage.
- Incoterms 2020 enables buyers to instruct ocean carriers to issue an on-board bill of lading to the seller to satisfy letter of credit payment requirements.
Where Do Delivery and Risk Transfer Occur Under the FCA Incoterms Rule?
Under FCA, risk and cost transfer from seller to buyer at one of two distinct operational points depending on the agreed named place in the sales contract. Article A2 and B2 of the ICC Incoterms 2020 rules divide delivery into shipments collected directly from the seller’s facility and shipments dropped off by the seller at an external transport hub.
Understanding which option applies to your shipment is vital because it dictates who pays for local trucking and who is liable if cargo is damaged during loading or unloading. You can review how FCA compares to all eleven commercial trade terms in our Incoterms 2020 guide.
Option 1: Delivery at the Seller’s Premises
When the named place in the contract is the seller’s own factory, warehouse, or distribution centre, the seller must load the goods onto the collecting vehicle arranged by the buyer. For example, if a Canadian manufacturer sells machinery under “FCA 2446 Cawthra Road, Mississauga, ON, Incoterms 2020,” the buyer sends a 53-foot dry van or flatbed trailer to that address.
Delivery is complete—and risk transfers to the buyer—the exact moment the seller finishes loading the cargo onto the buyer’s truck. If a forklift drops a pallet inside the seller’s warehouse before it rests on the trailer bed, the seller bears the loss. Once the cargo is safely aboard the trailer, the buyer assumes all physical risk for the remainder of the journey.
Option 2: Delivery at Another Named Place
When the named place is an external facility—such as a freight forwarder’s cross-dock, an airport cargo terminal, a rail ramp, or an ocean Container Freight Station (CFS)—the seller arranges and pays for local pre-carriage to reach that site. The seller loads their own delivery truck at the factory and drives the goods to the agreed terminal.
Under this second option, delivery occurs when the seller’s vehicle arrives at the named facility and the goods are placed at the disposal of the buyer’s carrier, ready for unloading. Crucially, the seller is not responsible for unloading the truck at the terminal. The receiving carrier or terminal operator unloads the vehicle at the buyer’s risk and expense.
Why You Must Specify an Exact Street Address
A common mistake in international sales contracts is writing a broad city name, such as “FCA Toronto” or “FCA Ho Chi Minh City.” Major metropolitan areas cover hundreds of square kilometres and contain dozens of terminals, rail yards, and warehouses.
If a contract does not name a precise street address or terminal facility, the rules permit the seller to select the delivery point within that city that best suits their convenience. That location might be far from your freight forwarder’s consolidation hub, resulting in unexpected local cartage fees and transfer delays. Always write the full facility name, street address, postal code, and “Incoterms 2020” directly on the commercial invoice and purchase order.
FCA vs FOB Terms: Why Should Shippers Use Free Carrier for Containerised Freight?
The ICC strongly advises using FCA instead of FOB for containerised ocean shipments because FOB leaves exporters legally liable for cargo sitting in port terminals before vessel loading. While FOB remains widely used out of habit, it was designed for non-containerised break bulk and bulk cargo loaded directly from the quay onto a ship.
When evaluating fca vs fob terms, the core issue is the gap between physical custody and legal risk transfer. In modern ocean freight operations, shippers rarely hand containers directly across a ship’s rail.
The Container Yard Liability Gap Under FOB
Under FOB, risk transfers from the seller to the buyer only when the goods are physically placed on board the vessel at the port of export. However, when shipping Full Container Load (FCL) or Less than Container Load (LCL) freight, the exporter delivers the cargo to a Container Yard (CY), an Inland Container Depot (ICD), or a CFS several days before the vessel arrives.
During those days in the terminal, the seller has zero physical control over the 40-foot high cube (40HC) or 20-foot container, which is now in the custody of the buyer’s nominated carrier or port authority. Yet under FOB terms, the seller remains 100% financially responsible if the container is damaged by terminal handling equipment, flooded, stolen, or caught in a port fire prior to being hoisted onto the ship.
How FCA Aligns Risk With Operational Reality
Switching container contracts from FOB to FCA closes this liability gap. Under FCA, risk transfers as soon as the container is gated into the terminal (or loaded at the seller’s warehouse for FCL door pickups), matching the exact moment the seller hands over operational control.
| Comparison Criteria | FCA (Seller’s Premises) | FCA (Named Terminal / CY) | FOB (Named Port of Shipment) |
|---|---|---|---|
| Permitted Transport Modes | Multimodal (Road, Rail, Air, Ocean) | Multimodal (Road, Rail, Air, Ocean) | Waterway and Ocean Only |
| Recommended Cargo Type | Containerised (FCL/LCL), Pallets, Air Cargo | Containerised (FCL/LCL), Pallets, Air Cargo | Bulk Cargo, Break Bulk, Non-Containerised |
| Origin Loading / Drayage | Seller loads buyer’s truck at facility | Seller pays drayage to named terminal | Seller pays drayage and terminal handling |
| Point of Risk Transfer | Loaded on buyer’s collecting vehicle | Arriving vehicle ready for unloading at terminal | Placed on board the vessel at export port |
| Terminal Storage Exposure | Buyer bears terminal risk | Buyer bears terminal risk | Seller bears risk until loaded on vessel |
| Export Customs Clearance | Seller’s responsibility | Seller’s responsibility | Seller’s responsibility |
For LCL shippers delivering palletised goods to a forwarder’s warehouse, FCA is even more practical. Once the seller’s truck arrives at the forwarder’s CFS ready for unloading, the seller’s delivery obligation is complete.
Who Manages Customs Clearance and Regulatory Filing Under FCA?
The seller is responsible for export customs clearance and origin formalities, while the buyer handles import clearance, tariffs, and destination duties. Under Article A7 of Incoterms 2020, the seller must obtain any required export licences, security clearances, or pre-shipment inspections at origin.
This export obligation is the primary reason experienced importers prefer FCA over EXW. Under EXW, the foreign buyer must arrange export clearance in the seller’s country, where the buyer often lacks a registered tax number or legal standing to act as the exporter of record. With FCA, each party manages the customs authority in their own jurisdiction, streamlining customs clearance and brokerage.
U.S. Routed Export Transactions (15 CFR § 30.3)
When a business in the United States sells goods on FCA terms to a foreign buyer, the transaction typically qualifies as a routed export transaction under the U.S. Census Bureau’s Foreign Trade Regulations (FTR) (15 CFR § 30.3). In a routed export transaction, the foreign buyer—known as the Foreign Principal Party in Interest (FPPI)—authorizes a U.S. freight forwarder to facilitate the export and file the Electronic Export Information (EEI) through the Automated Export System (AES).
EEI filing in AES is mandatory for shipments where commodities classified under a single Schedule B or Harmonized Tariff Schedule code exceed US$2,500 in value, or whenever an export licence applies. Many U.S. sellers—the U.S. Principal Party in Interest (USPPI)—mistakenly believe that because the buyer arranges the carrier under FCA, the seller has no regulatory exposure.
Under 15 CFR § 30.3, the USPPI remains legally accountable for supplying accurate data elements to the buyer’s forwarder, including the Schedule B classification, domestic/foreign origin indicator, value, and Export Control Classification Number (ECCN). U.S. exporters should always obtain a written authorization statement from the buyer’s agent and request a copy of the AES filing extract for their audit records. Because the U.S. Census Bureau and Bureau of Industry and Security periodically review routed export regulations, exporters should verify current compliance rules before signing a power of attorney.
Canadian Export Reporting (CBSA Memorandum D20-1-1)
For Canadian exporters selling under FCA to destinations outside the United States, the Canada Border Services Agency (CBSA) requires electronic export declarations for goods valued at CAD$2,000 or more, or for any controlled, regulated, or prohibited goods regardless of value. As detailed in CBSA Memorandum D20-1-1, these declarations must be submitted through the Canadian Export Reporting System (CERS) within mandated statutory timeframes before the cargo leaves Canada.
Under FCA, the Canadian seller is the exporter of record and bears legal responsibility for submitting the CERS declaration and obtaining any necessary export permits from Global Affairs Canada. Even if the buyer’s freight forwarder arranges the international vessel or aircraft, the seller must share the Proof of Report (POR) number with the carrier before loading.
Canadian Import Valuation and the Place of Direct Shipment
If you are a Canadian importer buying goods from Asia or Europe under FCA terms, how you structure the delivery point directly affects your Value for Duty (VFD) under Section 48 of the Canadian Customs Act. CBSA calculates duties on an FOB Place of Direct Shipment (PODS) basis—the location where the goods begin their continuous, uninterrupted journey to Canada.
- FCA Seller’s Factory (Inland): If goods start their continuous journey to Canada from the seller’s factory (for example, loaded into a container at an inland factory on a through bill of lading), that factory can qualify as the PODS. Freight charges incurred after that point may be deductible from the value for duty if properly itemized.
- FCA Consolidation Hub / Port: If the goods are first trucked domestically to a consolidation warehouse before being booked for export to Canada, the consolidation hub is generally treated as the PODS. Any origin inland trucking costs up to the PODS must be included in the dutiable value.
Because customs valuation depends on transport documentation and commercial invoices, importers should confirm their specific lane structure with a licensed customs broker before finalizing high-volume contracts.
How Does the Incoterms 2020 On-Board Bill of Lading Provision Work?
Article A6/B6 of Incoterms 2020 introduces a mechanism permitting the seller to obtain an on-board ocean bill of lading even though the buyer contracts the ocean carrier. This rule was specifically created to resolve a long-standing conflict between FCA container shipping and international bank Letters of Credit (L/C).
Solving the Letter of Credit Catch-22
In trades financed by a letter of credit, the issuing bank typically requires the seller to present an on-board ocean bill of lading (B/L) to prove the cargo has been loaded onto a vessel before the bank releases payment. Historically, this forced sellers to insist on FOB terms, because under FCA delivery is completed on land before the ship is loaded, meaning the seller only received a warehouse receipt, a Forwarder’s Cargo Receipt (FCR), or a “received for shipment” document.
Under Incoterms 2020 Article A6/B6, the buyer and seller can explicitly agree in their sales contract that the buyer will instruct its nominated ocean carrier to issue a bill of lading with an “on-board” notation directly to the seller once the container is loaded on the vessel. The seller then tenders that original bill of lading to the bank to collect payment under the L/C.
Practical Hurdles With Ocean Carriers
While the Article A6/B6 provision is helpful on paper, shippers must manage two practical commercial realities:
- Carrier refusal: An ocean carrier’s legal contract of carriage is with the party booking the freight (the buyer or the buyer’s forwarder), not the seller. Steamship lines are under no statutory obligation under maritime law to issue original bills of lading to a non-contracting party unless arranged through an NVOCC or freight forwarder acting as an intermediary.
- Delayed payment risk: Even with an A6/B6 agreement, the carrier cannot legally stamp a bill of lading “on board” until the container is physically lifted onto the ship. If port congestion causes the vessel to roll the container to next week’s sailing, the seller’s L/C payment is delayed, or the L/C presentation window may expire, even though the seller fulfilled their FCA delivery obligation on time.
To avoid banking disputes, work with a freight forwarder that operates at both origin and destination so the house bill of lading (HBL) and L/C wording align from day one.
What Are the Cost and Insurance Responsibilities Under Free Carrier Shipping?
Under free carrier shipping, the seller absorbs export preparation and origin transit costs, while the buyer pays for main international freight, transit insurance, and destination unloading. Clarifying these line items before signing a purchase order prevents surprise invoices at the port of loading.
Breakdown of Seller Expenses
The seller is financially responsible for all costs up to the agreed delivery point, including:
- Commercial invoice generation, packing lists, and certificates of origin.
- Export-grade packaging, crating, palletisation, and ISPM 15 heat-treatment markings for wood packaging.
- Loading labour and equipment (when delivery takes place at the seller’s facility).
- Local pre-carriage / drayage (only when the named place is an external terminal, port, or forwarder warehouse).
- Export customs brokerage fees, export duties, and regulatory filing charges.
Breakdown of Buyer Expenses
Once delivery occurs at the named place, the buyer pays for every subsequent step in the supply chain:
- Unloading the seller’s arriving vehicle (if delivered to an external terminal).
- Origin Terminal Handling Charges (OTHC), wharfage, and container stuffing fees at the consolidation hub.
- Main international carriage (ocean freight, air freight, or cross-border trucking) and fuel or peak season surcharges.
- Destination Terminal Handling Charges (DTHC), port storage, demurrage, and detention.
- Import customs brokerage fees, import tariffs, excise taxes, and Goods and Services Tax (GST) or Harmonized Sales Tax (HST).
- Final mile delivery and unloading at the buyer’s destination warehouse.
Cargo Insurance Responsibilities
Under the FCA rule, neither the seller nor the buyer is contractually obligated to purchase cargo insurance for the other party’s benefit. However, because the buyer assumes all physical risk from the origin handover point onward, the buyer carries the entire financial exposure during international transit.
Standard carrier liability under international conventions (such as Hague-Visby for ocean or the Montreal Convention for air) is strictly limited by cargo weight and never covers the full commercial value of most manufactured goods, nor does it protect against General Average maritime claims. Importers buying on FCA terms should arrange comprehensive all-risk cargo insurance that attaches from the exact moment cargo is loaded onto the collecting truck at origin.
Frequently asked questions
Does FCA require the seller or buyer to load the cargo?
Loading responsibility depends entirely on the named delivery place. If delivery occurs at the seller’s premises, the seller must load the cargo onto the buyer’s collecting vehicle at the seller’s risk and cost. If delivery is agreed at an off-site terminal, depot, or forwarder warehouse, the seller is only responsible for arriving at that location with the goods, and the buyer or its carrier handles unloading.
Can the FCA Incoterms rule be used for air and road transport?
Yes. FCA is a multimodal rule designed for any single mode or combination of transport modes, including air cargo, cross-border road freight, rail, and containerised ocean shipping. Unlike maritime-only terms such as FOB, FAS, or CIF, FCA fits factory truck pickups and airport cargo terminal drop-offs without creating contractual contradictions.
What happens if the buyer’s carrier arrives late or fails to collect the shipment?
Under Article B3 of Incoterms 2020, if the buyer’s nominated carrier fails to arrive at the agreed time, fails to take charge of the goods, or if the buyer fails to give proper notice of the carrier’s details, risk of loss or damage passes to the buyer prematurely on the agreed delivery date. This premature risk transfer applies only if the seller has clearly identified the goods as the contract merchandise—such as setting the pallets aside with specific shipping marks and invoice numbers.
Does “Free Carrier” mean the buyer receives free freight transport?
No. In international commercial terminology, the word “Free” indicates that the seller is freed from further risk and freight obligations once the goods are handed over to the nominated carrier at the named place. The buyer remains responsible for contracting and paying for the main international carriage and all subsequent transport legs.
Navigating handover points, regulatory filings, and container handoffs under the fca incoterms rule requires an experienced freight partner. As an FMC-registered NVOCC (FMC Org. No. 031607), Soleil Global Transportation Inc. coordinates multimodal routing, export documentation, and customs clearance across Canada, the USA, Vietnam, and global trade corridors. For guidance on your shipping contracts or freight bookings, call our team at +1 888-998-5199, email info@soleiltransportation.com, or request a quote on our contact page.