What is Free Carrier (FCA)? Definition, Key Points & Applications

FCA Definition: The Flexible Incoterm for Modern Global Trade

Free Carrier (FCA) is an international commercial term where the seller delivers goods to a carrier or another person nominated by the buyer at a named place, and risk transfers to the buyer at that moment. Under FCA terms, the seller handles export clearance and delivery to the agreed handover point, while the buyer assumes all costs and risks from that point forward.

Why FCA dominates modern trade: In 2026, FCA has become the most practical Incoterm for containerized shipments and multimodal transport. Unlike older terms like FOB that were designed for break-bulk cargo on ships, FCA adapts seamlessly to today's reality where goods move by truck to a container yard, then by rail to a port, then by ocean freight to another continent.

How FCA Works: The Handover Point That Defines Everything

The defining moment in FCA transactions is when goods physically transfer to the carrier at the named place. This could be the seller's warehouse, a logistics hub, a container freight station, or a port terminal. The specific location matters enormously because it determines exactly where risk shifts from seller to buyer.

FCA at Seller's Premises vs. FCA at Port Terminal

Scenario one: FCA Seller's Premises - A manufacturer in Shenzhen agrees to "FCA Factory, 123 Industrial Road, Shenzhen." The seller loads goods onto the buyer's nominated trucking company at their factory gate. The moment the truck departs, all risk transfers to the buyer. If the truck has an accident en route to the port, that's the buyer's problem.

Scenario two: FCA Port Terminal - The same manufacturer agrees to "FCA Yantian Port Container Yard." Now the seller must transport goods to the port and deliver them to the container terminal. Risk transfers when the terminal operator accepts the goods. The seller bears the risk and cost of getting goods from factory to port, but nothing beyond.

Why the Named Place Choice Affects Your Total Costs

The choice between these scenarios significantly affects pricing and responsibility. FCA seller's premises puts maximum transport burden on the buyer but typically means lower purchase price. FCA at destination port shifts more logistics work to the seller but simplifies the buyer's operations.

What the Seller Must Do Under FCA

Export Clearance and Documentation

Export clearance stands as the seller's critical obligation. When goods cross international borders, someone must handle customs documentation, obtain export licenses if required, and ensure compliance with export regulations. Under FCA, this responsibility always falls on the seller.

Practical export clearance tasks: Preparing commercial invoices, packing lists, certificates of origin, and any product-specific documentation like health certificates for food products or safety certificates for electronics. In countries with strict export controls like China or the United States, the seller must verify that goods don't require special export licenses or fall under restricted categories.

Packaging and Delivery Requirements

Packaging requirements deserve careful attention. The seller must pack goods appropriately for the intended transport mode and journey length. Container cargo crossing the ocean requires different packaging than air freight, and goods traveling through multiple climate zones need protection that short domestic journeys don't require.

Delivery to the named place represents the seller's final physical responsibility. If the agreement specifies FCA at a container yard, the seller must arrange and pay for transport from their facility to that yard. If FCA is at the seller's door, they only need to make goods available and assist with loading onto the buyer's carrier.

Loading Responsibilities Based on Location

Loading responsibilities vary based on the named place. At the seller's premises, the seller must load goods onto the carrier's vehicle. At a carrier's terminal or warehouse, the seller delivers goods to that facility but the terminal handles loading into containers or onto transport vehicles.

What the Buyer Must Do Under FCA

Arranging Main Carriage and Transport

Main carriage represents the buyer's biggest obligation and cost under FCA. This means arranging and paying for the primary transport—ocean freight from Shanghai to Los Angeles, air cargo from Frankfurt to Singapore, or rail transport from Poland to China. The buyer controls carrier selection, route choices, and shipping timing.

Insurance and Risk Management

Insurance decisions rest with the buyer. FCA includes no insurance obligation for either party, meaning the buyer must evaluate whether to purchase cargo insurance. Given that risk transfers at the handover point, buyers typically need insurance coverage from that moment through final delivery. A shipment worth $500,000 traveling 8,000 nautical miles faces significant exposure that most prudent businesses insure.

Import Clearance and Final Delivery

Import clearance mirrors the seller's export clearance responsibility but at the destination. The buyer must navigate the destination country's customs procedures, pay any import duties and taxes, obtain necessary import licenses, and ensure compliance with destination regulations. For a US buyer importing electronics from China, this includes ensuring FCC compliance, paying Section 301 tariffs if applicable, and managing any antidumping duty requirements.

Onward transport to final destination falls entirely to the buyer once goods clear customs. If a European retailer imports goods to Rotterdam but needs them delivered to stores in Germany and France, all that distribution is the buyer's cost and responsibility.

The 2020 Incoterms Update: On-Board Bills of Lading Solution

The Letter of Credit Problem FCA Used to Have

Incoterms 2020 introduced a critical update to FCA addressing a longstanding problem with letters of credit. Banks issuing letters of credit typically require an on-board bill of lading as proof that goods have been loaded onto a vessel. Under traditional FCA interpretation, the seller only delivers goods to a carrier at a terminal—they don't control vessel loading and can't obtain on-board bills of lading.

How the New Provision Works

The solution: Incoterms 2020 FCA now includes an option where the buyer can instruct their carrier to issue an on-board bill of lading to the seller after loading. The seller can then present this document to their bank to collect payment under the letter of credit.

This update makes FCA viable for transactions previously forced to use FOB solely because of documentary credit requirements. A Chinese exporter can now use FCA Shanghai Container Terminal, receive an on-board bill of lading after the carrier loads goods onto the vessel, and still comply with letter of credit terms requiring such documentation.

What You Need to Include in Your Contract

Implementation requires explicit agreement. This optional provision only applies if both parties agree to it in their sales contract. The buyer must specifically instruct their carrier to issue the bill of lading, and this instruction should be clearly stated in the purchase agreement to avoid disputes.

FCA vs. FOB: Which Term Should You Use?

Why FOB Doesn't Fit Modern Container Shipping

FOB (Free On Board) remains popular in international trade but increasingly appears outdated for containerized cargo. FOB was designed for break-bulk shipping where individual cargo pieces were loaded onto vessels using ship's gear. Modern container shipping operates completely differently—containers arrive at terminals pre-loaded and are lifted onto vessels by terminal equipment.

The container problem with FOB: Under FOB, risk transfers when goods cross the ship's rail. But containerized goods are stuffed into containers at inland facilities, trucked to ports already sealed, and loaded by terminal operators. The seller never actually delivers goods "on board" the vessel—they deliver containers to the terminal. This creates legal ambiguity about exactly when risk transfers.

How FCA Provides Better Legal Clarity

FCA eliminates this ambiguity. Risk clearly transfers when goods are handed over to the carrier at the named place, whether that's an inland container yard, a port terminal, or anywhere else. For containerized shipments, FCA provides legal clarity that FOB cannot match.

Cost Differences Between FCA and FOB

Cost implications differ between terms. Under FOB, the seller must cover costs until goods are loaded on the vessel, including terminal handling charges at the load port. Under FCA at port terminal, the seller's cost obligation ends when delivering to the terminal—terminal handling and vessel loading are the buyer's costs. This typically makes FCA pricing lower than FOB for the same transaction.

Transport Mode Limitations

Geographic limitations separate these terms decisively. FOB only applies to sea and inland waterway transport. You cannot use FOB for air freight, rail, road, or multimodal shipments. FCA works for any transport mode, making it universally applicable regardless of how goods ultimately travel.

FCA vs. EXW: Understanding the Export Clearance Difference

The Problem with Ex Works Terms

Ex Works (EXW) represents minimum seller obligation. Under EXW, the seller merely makes goods available at their premises. The buyer handles everything—loading at origin, export clearance, main carriage, import clearance, and delivery to final destination.

The export clearance problem with EXW: In many countries, only the seller can legally perform export clearance because they are the exporting entity in customs records. A foreign buyer cannot obtain export clearance in China for goods they're purchasing from a Chinese seller. This creates practical impossibility with EXW terms in many jurisdictions.

Why FCA Solves This Legal Problem

FCA solves this by explicitly making export clearance the seller's responsibility. The seller handles all documentation and procedures to legally export goods from their country, while the buyer manages everything from the handover point forward. This division of responsibilities matches legal reality in most countries.

Risk Transfer and Cost Timing Differences

Risk transfer timing differs significantly. Under EXW, risk transfers the moment goods are made available at the seller's premises, even before loading. If the buyer's carrier arrives to collect goods and damages them during loading, that's the buyer's problem. Under FCA at seller's premises, the seller loads goods onto the vehicle and risk only transfers once loading is complete.

Cost allocation shows similar patterns. EXW means lowest seller price but highest buyer total cost. The buyer must arrange and pay for everything from the seller's door to final destination. FCA balances responsibilities more evenly—seller handles export side, buyer handles main transport and import side.

How to Specify the Named Place Correctly

Why Precision Prevents Disputes

The named place under FCA requires precise specification to avoid disputes. "FCA Shanghai" is dangerously vague—Shanghai is a massive metropolitan area with multiple ports, countless warehouses, and hundreds of potential handover locations. Disputes about where delivery should occur become inevitable.

What to Include in Your FCA Contract

Proper specification includes: Complete street address for seller's premises, specific terminal name and location for port or airport handovers, or exact facility identification for logistics centers and freight stations. "FCA Yantian International Container Terminal, Gate 3, Shenzhen" provides actionable clarity that "FCA Shenzhen Port" does not.

Understanding Loading at Different Named Places

Loading responsibilities at the named place require explicit understanding. If FCA is at the seller's warehouse, the seller loads goods onto the carrier's truck. If FCA is at a commercial freight terminal, the seller delivers goods to the terminal but terminal staff handle loading. If FCA is at a port container yard, the seller delivers containers to the yard but the container operator loads them onto chassis or vessels.

Access Hours and Operational Constraints

Access and timing considerations: Some named places have restricted access hours, require advance appointments, or impose time limits on loading operations. A seller agreeing to FCA at a container terminal that only accepts deliveries between 9 AM and 3 PM must plan accordingly or risk delays that remain their responsibility until the carrier accepts the goods.

Documentation You Need for FCA Transactions

Proof of Delivery Documents

Commercial documentation under FCA follows standard international trade patterns but with specific emphasis on proof of delivery. The seller must provide documents proving they delivered goods to the carrier at the named place, typically including a carrier's receipt, forwarder's cargo receipt, or terminal operator's acknowledgment.

Transport Documents by Mode

Shipping documents vary by transport mode. Road transport uses CMR consignment notes, rail uses CIM consignment notes, air freight uses air waybills, and ocean freight uses bills of lading or sea waybills. Under FCA, these transport documents are typically issued to the buyer or "to order," reflecting that the buyer controls the main carriage.

Export Compliance Documentation

Export documentation remains the seller's responsibility. This includes export declarations filed with customs, any required licenses or permits, certificates of origin when needed for preferential tariff treatment, and product-specific certificates like phytosanitary certificates for agricultural products.

Letter of Credit Document Requirements

Letter of credit complications: When payment involves documentary credits, the seller must provide whatever documents the letter of credit specifies. If the credit requires an on-board bill of lading, the parties must implement the Incoterms 2020 FCA provision allowing the buyer to instruct the carrier to issue such documentation to the seller.

Using FCA for Different Transport Modes

Ocean Freight and Container Shipping

Ocean freight represents FCA's most common application, particularly for containerized cargo. A typical structure uses FCA at the load port's container terminal—the seller delivers containers to the terminal, and the buyer's shipping line handles everything from that point, including terminal operations, vessel loading, ocean transport, and destination port discharge.

Air Cargo Operations

Air cargo FCA usually specifies the cargo terminal at the departure airport. The seller delivers goods to the airline's cargo acceptance area, properly packaged for air transport and with all export clearance completed. The buyer's air freight contract covers transport from that airport to the destination.

Rail Freight Across Continents

Rail freight across Eurasia increasingly uses FCA terms. A Chinese exporter might agree to FCA Chongqing Railway Station for goods traveling via the China-Europe Railway Express to Germany. The seller delivers containers to the railway operator, and risk transfers as the train departs for its multi-week journey across Asia and Europe.

Multimodal Transport Coordination

Multimodal complexity shows FCA's strength. Goods might travel by truck, then rail, then ocean, then truck again to reach their final destination. Under FCA, the division is clean—the seller handles export clearance and delivery to the first carrier, the buyer arranges and coordinates the entire complex journey from that point forward.

Payment Timing and Cross-Border Settlement Under FCA

When Payment Typically Occurs

Payment timing in FCA transactions often links to delivery completion at the named place. Trade terms might specify payment upon proof of delivery to carrier, meaning the seller provides the carrier's receipt or similar documentation and triggers payment obligation.

Letter of Credit Payment Mechanics

Letter of credit mechanics: Banks releasing payment under letters of credit require documentary proof that the seller fulfilled their obligations. Under FCA, this typically means presenting the commercial invoice, proof of delivery to carrier, and any other documents the credit specifies. The 2020 provision for on-board bills of lading expands payment options when credits require such documentation.

Modern Payment Platform Integration

Modern B2B payment platforms like XTransfer facilitate FCA transactions by providing multi-currency accounts and fast settlement. An exporter can receive payment in multiple currencies, reducing conversion costs, while the importer benefits from transparent fee structures and compliance support. These platforms match well with FCA's flexibility—regardless of whether the handover point is in Guangzhou, Mumbai, or São Paulo, the payment mechanism remains consistent.

Managing Payment Risk

Payment risk consideration: Under FCA, the seller's obligations end at the handover point, but payment often occurs later—upon delivery to destination, after quality inspection, or per negotiated terms. Sellers using FCA should evaluate whether payment terms adequately protect them, particularly when risk transfers early but payment comes late.

Preventing Common FCA Disputes

Avoiding Ambiguous Location Specifications

Ambiguous named place specifications generate frequent disputes. When contracts say "FCA Shanghai" without further detail, sellers believe they've fulfilled obligations by delivering to one location while buyers expected delivery somewhere completely different. Resolution requires legal interpretation of trade customs and prior dealings, an expensive and uncertain process.

Prevention through precision: Every FCA contract should include the complete address or facility name for the handover point. "FCA 123 Industrial Road, Nanshan District, Shenzhen 518000, China" eliminates ambiguity that "FCA Shenzhen" creates.

Carrier Nomination Timing Issues

Carrier nomination timing creates another common issue. FCA obligates the buyer to nominate the carrier and provide adequate delivery instructions. When buyers delay this nomination, sellers cannot complete delivery and face storage costs and schedule disruption. Contracts should specify how many days before the planned delivery date the buyer must provide carrier details.

Loading Damage Documentation

Loading damage disputes: When FCA is at the seller's premises and the seller loads goods onto the carrier's vehicle, questions arise if damage occurs during loading. Did damage happen while goods were still the seller's responsibility (during loading) or after risk transferred (loading complete)? Clear documentation through photos, condition reports, or carrier inspection records prevents these disputes.

Risk Transfer Documentation

Risk transfer timing sometimes becomes contentious when goods are delivered to carrier but carrier delays acceptance. The seller delivers to the terminal, but the terminal doesn't formally accept goods into their system for several hours. During that gap, if goods are damaged, whose risk is it? The solution requires clear documentation of when the carrier actually accepted the goods into their custody.

FCA Applications in Different Industries

High-Value Electronics and Technology

Electronics and high-value goods often use FCA because buyers want control over carrier selection and transport security. A buyer of $5 million worth of semiconductors might prefer FCA seller's factory, allowing them to use specialized transport providers with security protocols appropriate for high-value cargo.

Perishable Agricultural Products

Agricultural products present unique considerations under FCA. Perishable goods require refrigerated transport from the moment risk transfers, making the named place choice critical. FCA at a refrigerated warehouse makes sense; FCA at a location without cold storage creates risk of cargo degradation in the gap between seller delivery and carrier pickup.

Bulk Commodities and Containerized Materials

Bulk commodities like minerals or grain typically don't use FCA, preferring terms like FOB or CFR that better suit bulk carrier logistics. However, when these products move in containers rather than bulk vessels, FCA becomes workable.

Heavy Equipment and Project Cargo

Manufacturing equipment and project cargo benefit from FCA's flexibility with heavy and oversized items. The seller can arrange specialized transport to get goods from their factory to a heavy-lift terminal, then the buyer's specialized freight forwarder takes over using equipment appropriate for international heavy transport.

Frequently Asked Questions About FCA

When should I choose FCA instead of FOB for ocean freight?

Use FCA for containerized ocean freight where goods are stuffed into containers at inland locations and trucked to port terminals. The legal clarity about risk transfer at terminal delivery makes FCA superior to FOB for modern container shipping. Reserve FOB for traditional break-bulk cargo where goods are actually loaded onto vessels piece by piece.

Does the seller need to buy insurance under FCA terms?

No, FCA includes no insurance obligation for either party. The buyer should evaluate whether to purchase cargo insurance since risk transfers to them at the handover point. However, the seller might choose to insure goods during their responsibility period from factory to handover point.

Can I use FCA for air freight shipments?

Yes, FCA works for all transport modes including air freight. Typically structured as FCA at the departure airport's cargo terminal, the seller delivers goods to the airline and risk transfers when the airline accepts the cargo.

What happens if the buyer doesn't nominate a carrier on time?

The seller should immediately notify the buyer in writing that they're ready to deliver but awaiting carrier nomination. If unreasonable delay continues, the seller may be entitled to store goods at the buyer's expense and risk. Contracts should specify deadlines for carrier nomination to prevent this situation.

How does FCA work with multiple carriers in multimodal transport?

The named place determines which carrier is relevant for risk transfer. If FCA is at an inland container depot, risk transfers when goods are handed to the inland carrier. The buyer then arranges and coordinates all subsequent carriers—rail, ocean, truck—as part of their main carriage responsibility.

Is export clearance always the seller's responsibility under FCA?

Yes, FCA explicitly makes export clearance the seller's obligation regardless of where the named place is located. This distinguishes FCA from EXW where the buyer handles export clearance. In jurisdictions where only the exporting entity can legally perform export clearance, this makes FCA much more practical than EXW.

Can FCA be used with letters of credit requiring on-board bills of lading?

Yes, under the Incoterms 2020 provision that allows buyers to instruct carriers to issue on-board bills of lading to sellers after vessel loading. This option must be explicitly agreed in the sales contract and the buyer must actually instruct their carrier accordingly.

Who pays terminal handling charges at the port under FCA?

This depends on the named place. If FCA is at the port terminal, the seller delivers to the terminal and their cost obligation ends—terminal handling and vessel loading costs are the buyer's responsibility. This differs from FOB where the seller typically covers these charges as part of delivering goods onto the vessel.

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