This is the second article in a four-part series on Incoterms 2020, the universal trade terms used in sales contracts worldwide to prevent misunderstandings between buyers and sellers. Today, we take a closer look at the free carrier, free on board and free alongside ship rules.

It’s a simple case of how, when, where.

Like all of the 11 Incoterms drafted by the International Chamber of Commerce (ICC), the free carrier, or FCA rule, was designed to eliminate confusion in global sales contracts and clearly define the roles and responsibilities of buyers and sellers of export goods.

“It’s important to understand how Incoterms work to ensure the right process is in place when negotiating shipping contracts,” says Greg Henderson, a registered Incoterms trainer with the ICC and founder of Exportspark Services, a Canadian consulting company that develops and delivers export training.

“The easiest way to do this is to work with a trusted shipping partner that understands the rules, or have your logistics or supply chain teams trained and updated regularly on the latest terms because they change every 10 years,” says Henderson, who has helped more than 400 companies develop export plans and understand Incoterms and logistics.

With FCA, it’s all in the details: Exporters must identify how, when and where they’ll make their goods available to buyers. For example, goods will be delivered by air on a specific date to a loading dock at the buyer’s warehouse, or a third-party facility.

Under FCA, when the place of delivery is the seller’s premises, the seller is responsible for loading the goods onto a truck or other transport vehicle. This is one of the key differences between Ex Works (EXW) and FCA when it comes to loading goods. Often, exporters default to EXW (specifically factories in Europe), but if they’re loading the goods, the correct term should be FCA.

When the place of delivery is elsewhere, delivery is completed when the goods, which have been loaded on the seller’s means of transportation, arrive at the named location and are ready to be unloaded by the carrier or other person identified by the buyer.

In either case, once the goods have been delivered by the seller, the buyer is responsible for all the risk of loss or damage to the goods. The key to the FCA rule is to specify the delivery point in the sales contract, which is where the Incoterms must be refined if needed.

For the buyer 

• Provide the seller with the name of the carrier (or other specified person) to deliver the goods
• Designate the time when the carrier will receive the goods
• Identify the mode of transport to be used and the location where the goods will be received
• Perform freight and international transport arrangements. In Canada, an exporter must file an export declaration via the Canadian Export Reporting System (CERS) if goods are valued at $2,000, or more, and they’re destined to any country other than the United States.

For the seller

• Package and mark the goods for transport and cover any associated costs
• Inform the buyer when the goods have been delivered
• Notify the buyer if the carrier, or another person specified by the buyer, has failed to pick up the goods within the agreed time period
• Clearing customs for exports if required by the export country

Free carrier is used when goods are shipped by sea and either the buyer or seller wants a detailed list of a shipment—called a bill of lading—to confirm the goods are onboard. Article A6/B6, the delivery/transport document, allows the buyer to tell the carrier to give this receipt to the seller once the goods are loaded. The seller can then give this document to the buyer, so that the goods can be released to them at the time of importation

Example

A Canadian auto parts manufacturer in Toronto sells goods to an Italian buyer under FCA at the seller’s premises. The shipment is scheduled for airfreight on Jan. 17, 2026, at 9 p.m., with arrival in Italy on Sunday morning. The goods will be released from customs for early Monday, so production can begin at 10 a.m. on Jan. 19. To meet airline requirements, the cargo must reach Toronto Pearson Airport by the strict 4:45 p.m. cutoff, a feasible timeline given the warehouse is only 25 minutes from the airport.

The goods are set for pickup at the exporter’s warehouse—equipped with only one loading bay—between 10 a.m. and 4 p.m. on Jan. 17. Although the seller places the goods at the bay two days early, a broken bay door delays loading until 4:30 p.m., causing the flight to be missed. Under FCA, delivery isn’t complete until the seller loads the goods onto the buyer’s vehicle, meaning risk never transferred. As a result, the seller is responsible for the higher last-minute freight costs, the €4,000 production delay penalty and all downstream consequences.

With FCA, delivery happens only when the seller loads the goods onto the buyer’s vehicle. The seller must make sure their facilities and equipment allow loading to occur on time. If something on the seller’s side prevents loading—even briefly—the seller is responsible for the resulting delays, higher freight costs and any penalties the buyer faces. This is why some sellers prefer EXW instead of FCA, since Ex Works removes the loading responsibility from the seller.

Free on board (FOB) is one of only four Incoterms that applies when you’re shipping your products by sea or inland waterway. If you’re using other means of transport for your products, the FOB rule doesn’t apply to your export contract.

As the exporter, your responsibilities under FOB include:

• delivering the goods by placing them onboard the ship chosen by the buyer at the port agreed to with the buyer at a specific date and time;
• clearing the goods for export; and
• helping the buyer obtain any documents or information they need for import clearance.

As the exporter, you’re responsible for paying all costs related to the goods until they’ve been loaded onto the ship, which means the cost of the crane, moving the container from the truck bed onto the vessel. It’s at this point that the risk of loss or damage to the goods passes from the seller to the buyer.

Never use FOB:

• If shipping involves a truck-only route;
• Port of arrival is required; or

As a replacement for “freight on board” since this term isn’t an Incoterm.

“I have seen many mistakes because Incoterms may be copied from one contract of sale to another. The most common mistake is using FOB for an inland point of delivery (not a maritime port). FOB should only be used for delivery of goods by sea or inland waterway,” says Rigutto Vigliatore, an  Incoterms coach with the Forum for International Training (FITT).

Like FOB, free alongside ship (FAS) only applies when goods are transported by sea or inland waterway.

Exporters responsibilities under FAS include:

• delivering the goods by placing them alongside the vessel (for example, on a quay or barge) chosen by the buyer at the agreed port of shipment, on the agreed date or within the agreed period;
• clearing the goods for export; and
• assisting the buyer, if requested, with information or documents needed for import clearance.

As the exporter, you’re responsible for all costs and risks related to the until they’re placed alongside the ship, which is usually the port of departure. At that point, the risk of loss or damage transfers to the buyer and the buyer is responsible for loading the goods onto the ship and all subsequent costs and risks of bringing the goods to the port of arrival, unloading at the terminal and delivering to the final destination.

Because delivery happens before the goods are loaded, FAS can be particularly useful for bulk or heavy cargo.

For more information about free carrier and the other 10 Incoterms, see the official Incoterms rule book, or visit EDC’s Export Help Hub. The ICC has also created an Incoterms 2020 app, which gives you easy access to a wealth of practical information on your mobile device. The Forum for International Trade Training (FITT) also offers online courses and many Chambers of Commerce or trade organizations in Canada host training sessions every year.