Incoterms® are internationally recognized trade rules that help buyers and sellers understand who arranges transport, who pays specified costs, who handles export and import formalities, and when the risk of loss or damage transfers. Choosing the wrong rule, or failing to state the delivery point clearly, can lead to unexpected costs, delays and disputes.
Two commonly confused rules are FCA and FOB. The buyer arranges the main carriage under both, but they apply to different types of shipment and transfer risk at different points.
What are Incoterms®?
Incoterms® are a standardized set of 11 trade rules published by the International Chamber of Commerce (ICC). The current version is Incoterms® 2020.
The sales contract should state the chosen rule, the precise named place or port, and the version of the rules, for example: FCA [named place], Incoterms® 2020. Incoterms® allocate contractual obligations between buyer and seller, but they do not determine ownership of the goods or override applicable customs laws.
What is FOB (Free on Board)?
Under FOB, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. The seller arranges and pays for transport to the port, completes export formalities and bears the risk until the goods are on board. At that point, the risk of loss or damage transfers to the buyer, who arranges and pays for the main carriage and handles import formalities.
For example, a manufacturer in China sells components to a buyer in Germany on FOB Shanghai, Incoterms® 2020. The seller delivers the goods on board the nominated vessel in Shanghai. From that point, the buyer, or its freight forwarder, manages the main sea transport and bears the risk.
Important: FOB is intended only for sea and inland waterway transport. It is generally not appropriate for containerized cargo when the seller hands the container to a carrier or terminal before it is loaded on board the vessel. FCA will often be more appropriate in that situation.
What is FCA (Free Carrier)?
Under FCA, the seller delivers the goods at an agreed named place to the carrier or another person nominated by the buyer. This may be the seller’s premises, a freight forwarder’s warehouse, a terminal or another agreed location. The seller completes export formalities, while the buyer arranges and pays for the main carriage from the agreed delivery point.
If delivery takes place at the seller’s premises, the seller loads the goods onto the buyer’s collecting vehicle. If delivery takes place elsewhere, the seller brings the goods to the named place, ready for unloading and at the disposal of the nominated carrier or person.
For example, a manufacturer in France sells machinery to a buyer in Singapore on FCA [named freight forwarder’s warehouse, Paris], Incoterms® 2020. The seller completes export formalities and delivers the goods to the agreed location. Once delivery occurs, the buyer bears the risk and its main transport arrangements take over.
FCA can be used for all modes of transport, including containerized sea freight, air, road, rail and multimodal shipments.
FCA vs FOB: key differences
| FCA | FOB | |
| Transport mode | All modes | Sea and inland waterway only |
| Risk Transfers | At delivery at the agreed named place | When the goods are on board the nominated vessel |
| Export formalities | Seller | Seller |
| Main carriage | Buyer | Buyer |
| Import formalities | Buyer | Buyer |
| Typically suited to | Containerized, air, road, rail and multimodal shipments | Traditional sea shipments, including certain bulk or breakbulk cargo |
Which should you use: FCA or FOB?
FOB may be appropriate for traditional sea shipments where the seller delivers the goods directly on board the nominated vessel, including certain bulk or breakbulk cargo. FCA will often be more appropriate for containerized, air or multimodal shipments where the goods are handed to a carrier before loading on board a vessel. The final choice should reflect the actual delivery arrangements agreed between buyer and seller.
Getting your Incoterms® right with DHL Express
Choosing the appropriate Incoterms® rule is only one part of preparing an international shipment. Commercial invoices and the information used for customs declarations, as well as proofs or certificates of origin where applicable, should be accurate, complete and consistent. Errors or missing details can cause customs delays, regardless of the rule selected.
The Incoterms® rule and named place shown on the commercial invoice can help identify which transport, insurance and related costs are included in the invoice price. However, customs value and customs treatment are determined under the applicable customs laws, not by the Incoterms® rule alone.
For businesses managing international shipments, DHL Express provides international shipping and customs support through its global network, helping customers navigate cross-border requirements and focus on their business.
For fast international shipping, open a DHL Express Business Account.
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