Trade Finance & Supply Chain
FCA, FOB, CIF or CIP: Align Delivery With Your LC
Agree both the delivery term and the document plan. The party paying freight to destination is not necessarily the party bearing transit risk until arrival.
Answer first
State the Incoterm, precise named place or port and edition. Map delivery, risk, carriage, insurance and documentary requirements separately before finalizing the LC.
Begin with the actual movement
ICC distinguishes rules for any mode of transport from rules for sea and inland-waterway transport. FCA and CIP belong to the former group; FOB and CIF belong to the latter. For container and multimodal movements, use the ICC checklist to evaluate whether the proposed term fits the actual delivery point.
Record where the seller hands over the goods, who contracts carriage, and which party can obtain each required document. A forwarder’s booking confirmation is not the same operational object as a document required by the credit.
Four separate planning questions
| Issue | Question for the transaction team |
|---|---|
| Delivery / risk | At which event and place does delivery occur under the agreed term? |
| Carriage | Who contracts and pays for each transport leg? |
| Insurance | Who arranges cover, for which journey, and to what agreed level? |
| Presentation | Who can provide the transport and insurance evidence required by the LC? |
FCA and an on-board bill of lading
Incoterms 2020 includes an FCA mechanism addressing an on-board bill of lading where the parties agree the relevant arrangement. It does not make the document appear automatically. Agree the carrier instruction, availability and delivery to the seller before shipment, and reconcile these with the credit’s deadlines.
If the document plan relies on a party outside the exporter’s control, record that dependency. Resolve it through practical carrier arrangements or the credit terms before the goods are dispatched.
CIF and CIP: do not assume identical insurance
ICC identifies different default insurance levels under CIF and CIP in Incoterms 2020. Review the agreed sale term and any variation, then compare the actual insurance with the LC. A credit may require particular risks or evidence that need to be arranged explicitly. Document acceptability and adequacy of commercial cover are not interchangeable.
Illustrative container export
A Bangladeshi exporter delivers containers to an inland terminal, while the credit calls for on-board ocean evidence. The commercial team should reconcile the named delivery point, the carrier’s document process and the presentation schedule before accepting the credit. Merely changing the three-letter term in the invoice does not repair an unworkable documentary arrangement.
Contract-to-LC alignment checklist
- Use a precise named place or port and the agreed Incoterms edition.
- Confirm the transport mode and handover point.
- Map who obtains the document, in what capacity and on which date.
- Reconcile insurance obligations with documentary requirements.
- Check shipment and presentation timing against operational lead times.
- Review Bangladesh import/export conditions independently; Incoterms do not grant regulatory permission.
Try the document alignment lookup to compare modes and terms. Use the output as a preparation checklist, not an automated determination of compliance.
Sources and further examination
- ICC Incoterms 2020 overview
- ICC Incoterms 2020 checklist and flowcharts
- ICC UCP 600: documentary-credit context
These are original educational explanations. ICC rules apply according to incorporation in the instrument; use the applicable authorized publication for detailed examination. Bangladesh requirements must be read with effective amendments and transaction-specific conditions.