Incoterms 2020 – FCA and the on-board bill of lading

Incoterms 2020 – FCA and the on-board bill of lading

The Incoterms 2020 revision contains this further optional provision for Free Carrier (FCA).

The parties can agree that the buyer – at their own cost and risk – will instruct the carrier to issue a transport document to the seller, stating that the goods have been loaded on-board.

The context of this provision is the letter of credit, and the firmly entrenched habit of banks who issue letters of credit to call for an on-board bill of lading – evidence that the goods are loaded on board a ship.  This document may be called for, even where the carrier has taken charge of the goods by loading onto a truck at the seller’s inland depot.

There is in fact nothing new here – buyers and sellers have used this mechanism for many years.

The notes in Incoterms 2020 point out that the carrier is not compelled to comply with this request, and that a better solution is for the bank to call for a “received for shipment” bill of lading instead of an “on board” document.

However the reluctance of banks to do this is not  unreasonable, given that they may be relying on the goods as security for issuing the letter of credit.   A “received for shipment” bill of lading may indicate that a container is sitting on a stack awaiting loading, or that the goods are at some inland groupage depot, and so nowhere near being despatched by sea.

A further warning – where there is a road journey preceding the sea voyage, there will now be a bill of lading with a “received for shipment” date and a later “on board” date – and these dates must match the requirements of a the letter of credit

None of the above deals with the more fundamental problem with FCA and the letter of credit.

One basic function of the letter of credit is that it allows buyer and seller to deal with each other where there is limited trust.   But an uncooperative buyer who has the contractual relationship with the carrier is still able to frustrate the transaction in various ways.



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