On containerized bookings our desk handles, the same trade-finance snag turns up again and again: the parties sell on FCA, the goods move by sea, then the bank refuses to pay because the letter of credit asks for an on-board bill of lading the seller cannot get its hands on. It is a documentary gap, not a physical one. The cargo is loaded and the money is waiting, yet a single missing notation stalls the deal. Incoterms 2020 added a specific fix, and it is worth knowing before your next FCA sale on a credit.
What FCA means under Incoterms 2020
FCA stands for Free Carrier. It is one of the eleven rules in the ICC Incoterms 2020 set, which came into effect on 1 January 2020 as the ninth revision since the terms were first published in 1936. Seven of those rules work for any mode of transport: EXW, FCA, CPT, CIP, DAP, DPU, and DDP. The other four are written for sea and inland waterway carriage only, and FOB sits in that group alongside FAS, CFR, and CIF.
Under FCA the seller delivers the goods to a carrier nominated by the buyer at a named place, and risk passes at that point. The ICC Incoterms 2020 rules describe two situations. If the named place is the seller's own premises, risk transfers once the goods are loaded onto the buyer's collecting vehicle. If it is somewhere else, say a container terminal at the port, the seller has delivered when the goods arrive ready for unloading from its own transport. Either way, the buyer arranges the main carriage. That feature makes FCA fit modern container logistics, and it is also the root of the paperwork problem.
Why a letter of credit demands an on-board bill of lading
A letter of credit is a bank's promise to pay the seller once specified documents are presented. Those documents are governed by UCP 600, the ICC Uniform Customs and Practice for Documentary Credits published in 2007 and still applied by most trade-finance banks. Article 20 of UCP 600 sets out what a bill of lading must show: that the goods have been shipped on board a named vessel at the credit's port of loading, either through pre-printed wording or an on-board notation carrying the shipment date.
Banks lean on that evidence for a reason. It proves the goods actually left, not merely that a carrier received them for future shipment. A "received for shipment" document does not clear that bar. So a credit calling for an on-board bill of lading forces the seller to present a document only the ocean carrier can stamp, and only after the box is loaded. Miss the notation and the bank flags a discrepancy.
The gap FCA created before 2020
Here is where FCA and the letter of credit used to collide. Under FCA the buyer contracts the ocean carrier, so the carrier's customer is the buyer, not the seller. When the container is loaded, the carrier issues the on-board bill of lading to whoever booked the space, usually the buyer or its freight agent. The seller, who needs that exact document to draw on the credit, has no direct claim to it.
So the seller was stuck. It had done everything FCA required, handing the cargo over at the terminal, yet could not obtain the document the bank wanted. Sellers used to work around this by falling back on FOB, or by routing the booking through their own forwarder so a bill of lading landed in their name. Both cost something, and the FOB route brings the container mismatch we cover below. The cleaner answer was to make FCA itself produce the right document.
What Incoterms 2020 changed for FCA
The ICC Incoterms 2020 rules added an optional provision inside FCA, in the A6/B6 transport-document articles, aimed squarely at the letter-of-credit case. The buyer and seller may agree in the sale contract that the buyer will instruct its carrier to issue an on-board bill of lading to the seller once the goods are loaded. The seller then presents that document to the bank and gets paid, while risk still transferred earlier at the named place.
Two things are worth stressing. The mechanism is optional, so it only works if you write it into the contract. And the carrier is not legally compelled to comply just because the buyer asks. When our team coordinates these bookings, we confirm the line will honor the on-board request before the seller commits, because a refusal after loading is the worst time to find out. Reputable carriers handle it routinely, but the confirmation belongs upfront.
FCA vs FOB: why FCA is the right term for containers
FOB is one of the oldest terms in the set, and its logic belongs to break-bulk cargo the seller could watch swing over the ship. Under FOB, risk stays with the seller until the goods are on board the vessel at the port of loading. The model assumes the seller controls the cargo right up to that moment.
Containers do not work that way. The shipper hands the box to the terminal days before the vessel arrives, and the terminal operator and the line control everything after that. During those days the container is out of the seller's hands, yet under FOB the seller still carries the risk. If a stack collapses or a fire hits the terminal before loading, that loss sits on the seller's account. FCA closes the window by passing risk at the terminal, where the seller's control actually ends.
One point worth correcting: the common belief that FOB is simply the "normal" term for any ocean shipment, containers included. It is not. The ICC states plainly that for containerized cargo the right choices are FCA, CPT, or CIP, and not FOB, CFR, or CIF. Choosing the term is a cost decision as much as a risk one, and it feeds into how logistics choices shape a product's landed cost. Picking FOB for a box because "everyone does" is how sellers end up insuring a risk they no longer control.
| Feature | FCA (Free Carrier) | FOB (Free On Board) |
|---|---|---|
| Applicable transport | Any mode, including multimodal and container | Sea and inland waterway only |
| Where risk transfers | At the named place: seller's premises on loading, or the terminal ready for unloading | When goods are on board the vessel at the port of loading |
| Right fit for containers | Yes, and the ICC-recommended choice | No, it leaves a terminal-yard gap |
| On-board bill of lading for a credit | Optional buyer instruction to the carrier (Incoterms 2020 A6/B6) | Built into the term, goods delivered on board |
How to set the on-board FCA arrangement up in practice
Getting this right is mostly about matching three documents so they do not fight each other. Start with the sale contract. Spell out the FCA named place, then add the express clause that the buyer must instruct its carrier to issue an on-board bill of lading to the seller after loading. Vague wording is what banks pick apart.
- In the sale contract, name the FCA delivery place precisely and state that the buyer will procure an on-board bill of lading for the seller.
- Have the buyer apply for the letter of credit so its terms mirror the contract, calling for the on-board bill of lading the carrier will actually issue.
- Confirm with the ocean carrier, before the cargo ships, that it will name the seller as shipper or consignor on the on-board document.
- Check the credit's presentation deadlines against realistic terminal and vessel timing, so the on-board notation lands inside the window.
Timing is the part sellers underestimate. A container can wait days in the yard for its slot, and demurrage or storage can accrue while the documents catch up. Those pass-through fees are worth modelling early, and our guide to accessorial charges in freight breaks down where they come from. If your deal also touches duties, the trade-off between DDP and DAP and who pays the tariff follows the same discipline: match the term to who really controls each stage. When we book container freight through GetTransport.com, we line these three documents up first, because a credit rejected on a technicality costs more than any freight rate saved.
Frequently asked questions
What is FCA in Incoterms 2020?
FCA, or Free Carrier, is one of the eleven Incoterms 2020 rules and one of the seven that apply to any mode of transport. The seller delivers the goods to a carrier nominated by the buyer at a named place, and risk passes to the buyer at that point. The buyer arranges and pays for the main international carriage.
Why does a letter of credit need an on-board bill of lading?
Because the on-board document proves the goods were actually shipped, not just received for later shipment. Under UCP 600 Article 20, a bill of lading must show the goods loaded on board a named vessel at the credit's port of loading, either in pre-printed wording or an on-board notation with a date. Without it, the bank treats the presentation as discrepant.
What changed for FCA in Incoterms 2020?
Incoterms 2020 added an optional provision to FCA. If the parties agree in the sale contract, the buyer instructs its carrier to issue an on-board bill of lading to the seller after loading, which lets the seller satisfy a letter of credit. The provision is optional and does not force the carrier to comply, so it needs contract wording plus carrier confirmation.
Is FCA better than FOB for container shipments?
For containers, yes. FOB keeps risk with the seller until the goods are on board, but the seller hands the box to the terminal days earlier and no longer controls it. FCA transfers risk at the terminal, matching reality. The ICC recommends FCA, CPT, or CIP for containerized cargo rather than FOB, CFR, or CIF.
Can I still use FOB if my buyer insists?
You can, since FOB remains a valid Incoterms 2020 rule for sea transport. The catch is that it leaves the seller carrying risk during the yard period it cannot control. If the goal was simply an on-board bill of lading for a credit, the FCA provision achieves that without the terminal-gap exposure.