FOB (Free On Board) is probably the most quoted trade term in the world, and one of the most misapplied. For containerised cargo, the rules published by the International Chamber of Commerce point elsewhere: to FCA (Free Carrier). Understanding why can prevent disputes over who bears loss at the terminal.
Where risk passes under each rule
Under Incoterms® 2020, FOB requires the seller to deliver the goods on board the vessel nominated by the buyer at the named port of shipment. Risk transfers once the goods are on board.
FCA requires the seller to deliver the goods to the carrier (or another person nominated by the buyer) at a named place. If that place is the seller's premises, delivery happens once the goods are loaded on the buyer's collecting vehicle; at any other place, once they are made available to the carrier, ready for unloading.
The container problem
A container is rarely delivered "on board" by the seller. It is packed at the seller's warehouse or a CFS, trucked to the terminal and handed over at the gate, often days before loading. From that moment the seller has no control over the box, yet under FOB they still carry the risk until it is lifted onto the ship.
If the container is damaged in the terminal yard, or the vessel is delayed and the cargo waits, FOB leaves the seller exposed to losses they cannot prevent or insure efficiently. FCA aligns risk with physical control: once the container is handed to the carrier at the named place, risk passes to the buyer. The ICC's introduction to the rules says as much: FOB is inappropriate where goods are handed to the carrier before they are on board, as is typical for containers.
| FOB | FCA | |
|---|---|---|
| Modes | Sea and inland waterway only | Any mode, including multimodal |
| Risk passes | Goods on board the vessel | Goods handed to the carrier at the named place |
| Export clearance | Seller | Seller |
| Main carriage contracted by | Buyer | Buyer |
| Fit for containers | Poor | Designed for it |
The 2020 change: FCA and on-board bills of lading
Sellers often resisted FCA because payment under a letter of credit typically requires an on-board bill of lading, which a seller who hands over at the terminal cannot obtain from the buyer's carrier.
Incoterms 2020 addressed this. Under FCA A6/B6, the parties may agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller after loading. The seller can then present it to the bank. The option has to be agreed explicitly in the contract, and the buyer's carrier is not itself bound by the Incoterms rules, so the instruction must be reflected in the booking.
If you sell against an L/C, our guide to letters of credit and shipping documents explains how UCP 600 examines transport documents.
Costs as well as risk
Incoterms rules allocate costs as well as risk. Terminal handling charges at origin are a frequent source of friction: under FOB they are usually for the seller's account up to loading, while under FCA the split depends on the named place. State the named place precisely (for example "FCA Jebel Ali Terminal 2, Incoterms® 2020") and, where needed, specify how origin THC is allocated in the contract.
When FOB still fits
FOB remains appropriate for bulk and break-bulk cargo loaded directly onto the vessel, such as grain, ores or steel loaded from the quay, where the seller genuinely controls the goods until they cross onto the ship. The same logic applies to CFR and CIF versus their multimodal counterparts CPT and CIP.
Our Incoterms 2020 overview summarises all eleven rules on one page.
Practical checklist
- Containerised cargo: prefer FCA, CPT, CIP, DAP, DPU or DDP over FOB, CFR and CIF.
- Name the place precisely, down to the terminal or warehouse.
- If an on-board B/L is needed for an L/C, write the FCA A6/B6 option into the contract and the booking.
- Align insurance with the risk transfer point; under CIP the seller must provide the higher ICC (A) level of cover.
- Make sure the sales contract, the L/C and the booking all use the same rule and place.
Frequently asked questions
Can FOB be used for container shipments?
It can be used, but the ICC advises against it where goods are handed to the carrier before loading, as with containers. FCA allocates risk more appropriately in that situation.
What is the main difference between FOB and FCA?
Under FOB, risk passes when goods are on board the vessel. Under FCA, risk passes when goods are handed to the carrier at the named place, which for containers is usually the terminal or the seller's premises.
How does a seller get an on-board bill of lading under FCA?
Incoterms 2020 lets the parties agree that the buyer will instruct its carrier to issue an on-board bill of lading to the seller after loading. This must be agreed in the contract and reflected in the booking.
References
- International Chamber of Commerce, Incoterms® rules, including the Incoterms® 2020 introduction and rule-by-rule guidance.
- International Chamber of Commerce, Uniform Customs and Practice for Documentary Credits (UCP 600).
- UNCITRAL, Texts on the carriage of goods (Hague-Visby context and the Rotterdam Rules).
Prepared by the Apex Ocean Lines industry experts and editorial team, checked against the sources cited. Short forms link to our shipping glossary.