EXW, FCA and FOB: what to agree with your supplier

“FOB China” or “EXW factory” is not enough to compare prices and arrange collection. You need a precise place, an agreed Incoterms® rule and edition, and an operating plan consistent with them. This article helps buyers agree the handover with suppliers; it is not a complete interpretation of a sale contract.

Incoterms® 2020 rules are published by the International Chamber of Commerce, or ICC. They address delivery, risk and specified costs, among other matters. They do not replace agreements on ownership, payment, product quality or dispute resolution. The invoice wording should match the contract and shipment instructions.

Compare the same handover point

Ask for the full factory address or an unambiguous terminal and port. Identify the collection point, gate and party arranging loading. Otherwise, two “FCA” prices may cover different legs and activities.

Fictional example: supplier A offers collection at its warehouse; B offers handover at a terminal away from the factory. A's lower goods price does not establish the better total offer. Add the missing collection and handling under the agreed scope before comparing.

Differences that change the operation

EXW, or Ex Works, makes goods available at the named place without requiring the seller to load the collecting vehicle or clear export. FCA, Free Carrier, includes loading at the seller's premises; at another named place, delivery is from the seller's vehicle, ready for unloading. Applicable export clearance is the seller's task under FCA.

FOB, Free On Board, links delivery and risk transfer to goods being aboard the vessel at the named shipment port. It is a sea and inland-waterway rule. For a container handed to a terminal earlier, consider FCA because it usually better matches that handover. The chosen rule must fit the actual transaction.

EXW: check who can perform collection

Do not assume that a driver has the equipment and authority to load at the factory. Confirm access, forklift operation, opening hours and responsibility for damage during handling. If the supplier says “we load free of charge,” also record the risk arrangement. A free service does not answer that question.

Have export formalities checked in the shipment country. A foreign buyer may not be able to perform them as assumed in the costing. A forwarder's collection offer does not establish who will appear in the required documents or on what basis. If the operating plan does not fit EXW, discuss FCA instead of distributing unclear exceptions across several emails.

FCA: align the address and the operation

Specify whether delivery is at the supplier's premises, a consolidation warehouse or a terminal. Agree who orders the collecting vehicle, what information reaches the warehouse and what document records handover. At another named place, distinguish readiness for unloading from completed unloading.

Agree timing as well. “Ready on Friday” may mean factory readiness while the booking requires terminal arrival that day. The rule does not create a workable schedule. Record date, time, time zone and an operational contact.

FOB: terminal entry is not vessel loading

A container gate receipt may precede actual loading aboard the vessel. Ask the supplier and forwarder how both events will be documented and how they will handle a schedule mismatch. Do not redefine FOB as “all costs to the port.”

Ask about local items too: empty equipment collection, positioning, documents and terminal handling. Request a clear included/excluded breakdown. An extra service needs an explicit agreement; a charge's name alone does not identify its payer.

Questions before placing the order

Explain it to a customer

We need the precise cargo handover point, not only the letters EXW, FCA or FOB. That point affects collection, the division of tasks and risk. Once it is agreed, the offers can be compared on the same scope and the remaining actions assigned.

Send the agreed arrangements to both parties handling transport before confirming the purchase. Resolve any conflict between warehouse instructions and the contract before dispatching a vehicle.