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FCA (Free Carrier) and All the Aspects It Encompasses

This article provides an in-depth look at the Free Carrier (FCA) Incoterm, which is pivotal in international trade. It covers the roles and responsibilities assigned to both sellers and buyers under FCA, explains the point of delivery, risk transfer, and cost implications.
Free Carrier (FCA) Definition

Table of Contents

FCA is now one of the most popular incoterm especially among first-time exporters who do not have the capability to go through all the stages of shipping especially when the goods are transported by ship.

For those of you who don’t quite understand what FCA is, reading this article to the end is highly recommended.

Meaning of FCA in Shipping

What does FCA Free Carrier mean?

FCA or Free Carrier, under the terms of the FCA incoterm, is a condition under which the seller must comply with the buyer in certain aspects, such as shipping using the services of a certain company, collecting the goods at a certain place, whether that place belongs to the buyer or to the designated shipping company. This type of shipping is very commonly used in container shipping. 

Incoterms General Table,DDP, FOB, DAP, EXW, CIF, FCA, FAS,CFR, CTP, CIP, DAT

What exactly is FCA?

The term “Free” refers to the absence of costs charged (directly) to the buyer until the goods arrive in good condition at the buyer’s specified location.

But of course, the cost required to transport the goods to the designated location has been “included” in the price of the goods. Broadly speaking, the seller’s responsibility is from the time the goods are delivered from the seller’s location to the buyer’s designated location, usually the buyer’s shipping port or warehouse.

In rare cases, that location is the seller’s own location or in other words the initial location of the goods when they are ready for shipment. 

When does responsibility or risk transfer from the seller to the buyer?

In practice, the transfer of responsibility occurs when the goods are confirmed (in good condition) and handled by the carrier.

Seller's Obligations under FCA

Under the FCA shipping scheme, the seller is responsible for:

  1. Packaging.
  2. Transportation from point of origin to collection location.
  3. Collection of the goods at a specific location designated by the buyer, whether it is a private location or a location owned by the designated shipping company.
  4. Customs fees and risks assuming the goods have not arrived in good condition at the buyer’s designated location.

The process of handing goods over to the carrier:

This process begins with loading the goods onto the carrier’s vehicle and ends with submitting all requirements for export (delivery of the goods).

Buyer's Obligations under FCA

The buyer’s obligations can be described in the following points:

  1. Payment of the goods at the agreed value.
  2. International transportation (by sea).
  3. Customs duties in the destination country.
  4. Transportation from the port of destination to the buyer’s location.
  5. All kinds of taxes and duties after the goods arrive at the port of destination.

The buyer’s role in the shipping process after the handover:

Once the goods have been loaded onto the carrier and handled by the person responsible for the carrier, the responsibility officially passes to the buyer. The buyer must then ensure that all transportation costs to the destination location are paid including relevant taxes and duties (duties levied at the destination location/country).

Pros and Cons of Using FCA

What are the benefits of using the FCA shipping scheme for sellers and buyers?

In international trade, FCA offers several benefits to both sellers and buyers, mainly as follows:

  • Flexibility of delivery as FCA is independent of the type of carrier. So both the seller and the buyer can agree that the carrier of the goods is an airplane or an ocean liner for example and all aspects of the FCA can be fulfilled.
  •  Clear division of responsibilities because it is organized in a clear location and time format. In FCA, when the goods have arrived at the destination and are transported to the carrier, that is when the responsibility passes from the seller to the buyer.
  • With FCA, both sellers and buyers can more easily control all the costs required for delivery, even unexpected costs. Shipping carriers can be freely selected to keep costs down without compromising the quality of the shipment itself.
  • It is possible to involve third parties for delivery flexibility. Not all buyers have the capacity/ability to control the delivery of goods from when the goods are loaded in the carrier to the destination location. In many cases, the involvement of a professional third party can be of great help and in FCA schemes, the transfer of responsibility from the seller to the third party representing the buyer is possible.

Some potential drawbacks and situations where FCA might not be the best option?

There are always situations where opting for FCA does not bring any advantages as well as disadvantages to this shipping scheme:

  • In some cases, FCA can “result” in complicated shipping regulations especially if the delivery location is far away from the transport vehicle and therefore, the domestic transportation costs and risks remain with the seller one hundred percent.
  • The loading of certain goods is prone to risk and unfortunately, it is borne entirely by the seller. However, sometimes the buyer also has to handle insurance claims and that is often complicated.
  • The flexibility in choosing a third-party carrier sometimes implies “unprofessionalism” if the buyer makes the wrong choice. The FCA scheme unofficially requires buyers to have sufficient knowledge of all third-party operators that may be involved in the shipping process.
  • Complicated export formalities often impose a burden on sellers as not all sellers have experience and knowledge of the mechanics of loading onto a carrier and its requirements.

Tips for Implementing FCA in Shipping Contracts

How to clearly define FCA terms within sales contracts

There are many aspects that the FCA scheme covers but the transportation costs from the initial location of the goods to the appointment location, how long the goods travel to the appointment point, the loading mechanism, and the costs before the goods are taken over by the buyer or third party.

Best practices for communication between seller and buyer to avoid disputes

Best practices for two-way communication are negotiating price increases due to the inclusion of transportation costs before loading, loading mechanisms to prevent damage, and determining who should bear all loading and export costs within a clear FCA framework.

Comparison of FCA with other incoterms

 FCA and FOB: While FCA focuses on the delivery of goods at a designated point/location (can be outside the ship), FOB emphasizes delivery of goods right on board the carrier.

FCA and DAP: DAP emphasizes the seller’s greater responsibility as it includes the transport and unloading of goods.

Conclusion

There is no single shipping scheme that suits all situations and conditions, but FCA offers something simpler for novice exporters.

It is important to choose the incoterm that best suits the exporter-importer’s capabilities and the situation at hand.

More information about Incoterms

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