FOB vs FCA
In international trade, buyers and sellers enter into agreement beforehand so as to avoid any confusion once the process of transportation of goods has started. The agreements or contracts are of several types that are given a generic name Incoterms, which are applicable on all international trade. These acronyms define terms of trade including shipping and freight details to prevent any dispute later on. Two of these contracts, namely FOB and FCA, are confusing for both buyers as well as sellers because of their similarities. To remove all confusion, this article attempts to highlight the differences between FOB and FCA.
FOB that stands for Free on Board is a very popular mode of contract between buyers and sellers. The main provision of FOB pertains to seller taking the responsibility of loading the goods on to the vessel that has been chosen by the buyer. However, this responsibility ceases as soon as goods have been loaded on to the vessel, and all the risk is transferred on to the buyer. FOB applies only to maritime trade and should not be misconstrued to FCA, which is applicable to trade by road, rail, air, as well as sea. FCA stands for Free Carrier, and in this contract the seller is responsible for the goods only up to the time that he loads the goods to the cargo (often at his own premise), but the carrier is chosen by the buyer.
From above description, it is clear that there are many similarities between FOB and FCA, but their differences do not come out. Let us create imaginary spillage to see how these contracts have different ramifications for suppliers and buyers.
Assuming that the responsibility of the seller in FOB is up to the time goods are loaded on to the carrier, what happens if the goods are damaged in this process? If goods fall outside the ship during loading and get damaged, responsibility lies with the seller. However, if the goods fall inside the vessel, the responsibility of damage passes on to the buyer (funny, but this is the fact). The buyer is saved only if he has insurance of the goods. In the case of FCA, supplier is not responsible for loading of the cargo whether it is being transported through rail, road, or air. He hands over the goods to the trucks that come to take the goods, and his responsibility ceases after this.