FCA vs FOB: Which Incoterm Should You Use for Container Shipments?

FCA (Free Carrier) and FOB (Free on Board) are the two Incoterms most often confused at the offer stage. Both look like "seller delivers to the port and the buyer takes over" - but the point at which risk actually passes, and the type of cargo each rule was designed for, are meaningfully different. The ICC has been unusually direct on this: for containerised cargo, use FCA. The rest of this guide explains why, and how to use FCA cleanly even when a letter of credit demands an on-board bill of lading.

Where risk actually passes

Under FOB, risk transfers when the goods are placed on board the nominated vessel at the named port of shipment. That definition was drafted for bulk and break-bulk cargo - grain, steel, machinery - where the seller's stevedores physically supervise the load. Under FCA, risk transfers at the named place: either the seller's premises loaded onto the buyer's collecting vehicle, or a container yard, inland terminal, or CFS where the goods are handed to the buyer's nominated carrier.

For a container moving through a modern port, the seller typically drops the box at the terminal gate a day or two before the vessel arrives. Under FOB the seller is still on risk during that gap even though the container is out of their physical control - a mismatch that has produced expensive disputes when boxes are damaged, mis-stowed, or rolled to a later sailing.

Why the ICC recommends FCA for containers

The ICC's 2020 revision guidance is explicit that FOB, CFR, and CIF were drafted for cargo the seller loads over the ship's rail. FCA, CPT, and CIP are the container-appropriate equivalents. Continuing to use FOB for containers creates three practical problems:

• Risk gap. Between terminal delivery and vessel loading the seller carries risk they cannot inspect or influence.
• Insurance ambiguity. Marine cover usually attaches from the warehouse or from the moment risk passes; disagreements over "when did the goods become the buyer's risk" delay claims.
• Terminal handling charges. FOB requires the seller to bear origin THC up to loading, but for containers those charges are levied by the carrier and often billed to the party holding the booking. That produces double-billing arguments the FCA rule sidesteps.

The FCA on-board bill of lading provision

The historic objection to FCA was that letters of credit almost always require an on-board bill of lading, which under UCP 600 Article 20 means a B/L bearing a dated on-board notation. FCA delivery happens at the terminal, before the vessel loads, so a straight FCA B/L would only show "received for shipment" - not compliant.

Incoterms 2020 added optional clauses A6/B6 allowing the parties to agree that the buyer will instruct the carrier to issue an on-board B/L to the seller once the goods are loaded. To use this cleanly, write it explicitly into the sales contract and mirror it in the LC application - do not rely on the default rule.

Cost allocation side by side

• Origin inland transport: FCA - seller pays only if delivering to a place other than their own premises; FOB - seller pays to the load port.
• Origin terminal handling (THC): FCA - buyer; FOB - seller (up to the moment goods are on board).
• Export clearance: Both - seller.
• Ocean freight: Both - buyer.
• Marine insurance: Both - not required by the rule, but the buyer typically arranges it because they bear the sea-leg risk.

When FOB is still the right choice

FOB is not obsolete. It remains the correct Incoterm for genuine bulk and break-bulk shipments loaded directly on board under the seller's supervision - dry-bulk grain and ore, project cargo lifted by ship's gear, tanker parcels of liquid product. In those cases the ship's rail is a meaningful physical boundary and FOB accurately describes the transfer.

Which should you use?

For containerised cargo, use FCA at the named container terminal or seller's premises, and add the on-board B/L clause if the sale is under an LC. Reserve FOBfor bulk and break-bulk shipments where the seller's people genuinely oversee vessel loading. Get this call right at the offer stage - re-writing an LC after issuance is expensive and slow.

Run your specific shipment through the Incoterms Selector Wizard for the ICC-recommended rule based on mode, LC status, and control preference, then cross-check obligations with the Incoterms Visualiser. If you are moving to an LC, price the confirmation and acceptance costs in the LC Cost Calculator.