EXW vs FCA: who controls freight

The short version

EXW and FCA both look like supplier door terms. The prices often differ by only a little, and buyers sometimes treat them as interchangeable. They are not. The difference is who loads the vehicle and who clears the goods for export.

Under EXW, Ex Works, the seller fulfils its obligation when it places the goods at the buyer's disposal at the named premises. The seller does not load them onto the collecting vehicle, and it does not clear them for export. Under FCA, Free Carrier, the seller loads the goods onto the buyer's nominated carrier and completes the export declaration, then delivery is complete.

On a domestic purchase the difference may not matter. On a cross-border purchase it decides who can legally export the goods and who carries the risk while they are being handled at the supplier's dock.

The loading problem

Loading sounds like a small task until something breaks. Under EXW the buyer's carrier arrives at the supplier, and the supplier has no obligation to help. If a forklift is needed and the supplier does not provide one, the carrier has to solve it. If the goods are damaged while being moved from the rack to the truck, risk has already passed to the buyer because delivery happened when the goods were made available.

Under FCA at the seller's premises, the seller loads. That means the seller controls the lifting equipment, the packing and the stow. If a crate is dropped during loading, the loss sits with the seller until loading is complete. That is a cleaner position for a buyer who is not standing at the dock.

The loading point also affects the freight quote. A forwarder pricing EXW has to include a collection service, waiting time and possibly a tail lift. The same forwarder pricing FCA at the same address can plan a straightforward loaded collection.

Export clearance is the real dividing line

Under EXW the buyer must carry out the export formalities. In practice, a buyer based in another country often cannot file an export declaration in the seller's country. It may have no tax registration there, no customs account and no legal standing to appear as exporter. Some markets allow an agent to act, but that adds a party and a fee.

Under FCA the seller exports. That matches how most suppliers already operate: they know their local customs broker, they hold the export licence if one is needed, and they can produce the export declaration and the certificate of origin. It also means the seller bears any delay caused by an incomplete export declaration.

This is the strongest practical argument for FCA on international purchases. EXW pushes a task onto the buyer that the buyer is often not equipped to perform.

FCA has two delivery points

FCA can be named at the seller's premises or at another place, such as a forwarder's warehouse or a container terminal. The delivery point changes the obligation. At the seller's premises, the seller loads. At any other place, the seller delivers the goods to the carrier or another person nominated by the buyer, ready for unloading from the seller's vehicle.

For containerised goods, Incoterms 2020 added an option to state that delivery is complete when the container is loaded on board. That closes a long standing gap. A seller can now give the buyer an on board bill of lading under FCA, which many letters of credit require, without pretending the term is FOB.

Write the exact address and, for containers, say whether the on board option applies. FCA Shanghai is not precise enough when the handover could happen at a factory, a depot or a terminal.

Documents and payment security

A letter of credit often asks for a bill of lading showing the goods on board. FOB naturally produces that document because delivery happens on board. EXW produces no transport document at all, because the seller never contracts carriage. FCA sits in between: at a terminal it can produce a received for shipment document, and with the on board option it can produce an on board bill.

If payment depends on documents, check the credit wording against the Incoterm before the order is placed. A credit that calls for an on board bill of lading under EXW is internally inconsistent, and the bank will reject the presentation even if the goods shipped perfectly.

The same review applies to certificates of origin. Under FCA the seller can usually provide the exporter declaration and any certificate. Under EXW the buyer may have to chase the supplier for information it is not obliged to supply.

Keep the chain of documents consistent. The invoice, the packing list, the transport document and the origin proof should all show the same parties and the same terms. A forwarder that receives an EXW instruction but a commercial invoice that says FOB will query it, and the query usually arrives when the container is already at the terminal.

When EXW still makes sense

EXW is not wrong. It is simple for a seller that does not want to handle transport or export paperwork, and it is common in domestic distribution and in sample shipments moved on a courier account. If the buyer has a subsidiary or a freight agent in the seller's country, the export task can be managed.

It can also suit a trial order where the buyer wants to use its own forwarder from the first day and the volumes are too small to justify a dedicated export process. In that case, confirm that the forwarder is willing to act as exporter and that the supplier will release the commercial invoice and packing list in time.

It also suits a buyer that is consolidating several suppliers into one export declaration. A local agent can collect from each supplier, clear the combined shipment and present one declaration. In that model the buyer genuinely controls the export and EXW is coherent.

The test is capability. If the buyer cannot file the export declaration, cannot provide the exporter details and cannot manage the loading risk, EXW is a false economy. The saving on the supplier's price is usually smaller than the cost of fixing the gap later.

There is also a documentary risk. An export declaration needs a value, a tariff code and an exporter identity. If the supplier will not share the commercial details, the buyer's agent has to build the declaration from the invoice and the packing list. That works for a simple shipment and becomes fragile when the order contains several part numbers and mixed materials.

A wording checklist

Before you accept either term, confirm four things in writing: who loads, who exports, where risk passes and which document the seller will provide. Then check that the freight quote and the letter of credit use the same term.

• Name the place: EXW Pune or FCA Pune, Incoterms 2020, not EXW India.
• State whether the FCA on board option applies to containerised goods.
• Confirm who appears as exporter on the declaration.
• Confirm who provides the certificate of origin and the export invoice.
• Check that the letter of credit accepts the document the term can produce.
• Include collection waiting time in the freight quote for EXW.