FCA, or “Free Carrier,” is one of the 11 Incoterms defined by the International Chamber of Commerce (ICC). It was introduced in 1980 to address the growing need for an Incoterm that supports containerized shipping and multimodal transportation. Often referred to as the Free Carrier 2020 Rule, FCA is versatile and applicable to all modes of transport, including air, sea, road, and rail.
Unsure of the FCA Incoterms meaning, how it works, or worried about using it? Contact Twings Supply — our experts are ready to help you tackle the complex world of FCA, shipping, and compliance.
What does FCA Mean?
Free Carrier (FCA) is an Incoterm that defines a clear division of responsibility between the seller and buyer. Under this term, the seller ensures the goods are cleared for export and delivered to a designated carrier or party chosen by the buyer, at a specified location. The seller handles all logistics and expenses up to that point, including export formalities. Once the goods are handed over and ready to be loaded onto the carrier, the buyer assumes full responsibility for the cargo, including all risks and costs from that moment forward.
FCA can be used for any form of transport, such as air freight, sea freight, road freight, and rail freight. The buyer can arrange carriage on their own, which is often at a better price than what their seller might quote.
What are Incoterms?
Incoterms, short for International Commercial Terms, are globally recognized rules established by the International Chamber of Commerce (ICC). They define the responsibilities of buyers and sellers in international trade, specifying who is responsible for tasks such as transportation, insurance, and customs clearance, as well as the point at which risk transfers from seller to buyer.
When is an FCA Incoterms Agreement Used?
The Free Carrier Incoterm is commonly used in international trade under the following circumstances:
- Containerized Shipments: FCA is recommended for containerized cargo, as it better addresses the complexities of modern shipping practices.
- Multimodal Transportation: FCA is suitable for various modes of transport, including sea, air, rail, and road, which makes it versatile for shipments involving multiple transportation methods.
- Buyer’s Control Over Main Carriage: When the buyer prefers to manage the main transportation leg, they can use FCA to select and contract their preferred carrier, providing greater control over shipping arrangements.
- Seller’s Limited Export Experience: If the seller lacks expertise in export procedures, FCA enables them to deliver goods to a named place within their country. This simplifies their responsibilities and avoids complex export logistics.
- Named Place Flexibility: The term allows parties to specify the exact point of delivery, whether at the seller’s premises or another agreed location, providing clarity and flexibility in the transfer of risk and responsibility.
FCA for Sellers
The FCA Incoterm provides sellers with a clearly defined set of responsibilities, ensuring they know exactly what tasks they need to complete in the transaction. FCA is particularly advantageous for sellers dealing with buyers who prefer managing their own shipping logistics or where containerized cargo is involved.
Responsibilities of the Seller
We’ve highlighted the seller’s responsibilities under FCA below:
| Responsibility | Description |
|---|---|
| Deliver Goods to the Named Place | The seller must make sure that goods are handed over at the agreed-upon location, such as the seller’s facility or a designated terminal |
| Provide Documentation | Supply a commercial invoice and all necessary documentation required for export clearance |
| Export Packaging and Marking | Prepare the goods with appropriate packaging and labeling suitable for international transportation |
| Obtain Export Licenses | Secure any required export licenses and complete customs formalities for outbound shipments |
| Cover Pre-Carriage Costs | Pay for the transportation of goods to the named terminal, if the agreed location is off-site |
| Cover Inspection Costs | Handle any pre-shipment inspections mandated by the buyer or local authorities |
| Provide Proof of Delivery | Offer verifiable evidence that the goods have been delivered as agreed |
FCA for Buyers
Under the FCA Incoterm, buyers assume liability for the goods once the seller delivers them to the agreed location. This arrangement provides the buyer with greater control over the main transportation and import processes, and it makes FCA ideal for buyers who prefer to manage their own shipping logistics.
Responsibilities of the Buyer
We’ve outlined the buyer’s responsibilities under FCA below:
| Responsibility | Description |
|---|---|
| Pay for Goods | Settle the agreed-upon price for the goods as per the sales contract |
| Arrange Main Carriage | Organize and pay for the primary transportation of goods from the place of delivery to the final destination |
| Handle Unloading | Ensure goods are unloaded from the arriving transport at the buyer’s facility or designated terminal |
| Cover Loading Charges | Pay for any loading costs at the named place, especially if the seller’s premises are not the specified location |
| Manage Onward Carriage | Coordinate and pay for further transportation after the initial unloading |
| Complete Import Formalities | Handle customs clearance and pay any applicable duties and taxes in the destination country |
| Pre-Shipment Inspection Costs | Bear the expense of any inspections required for import clearance |
FCA: Pros vs. Cons
We’ve summarized the pros and cons of FCA below:
| Pros | Cons | |
|---|---|---|
| Transport and Delivery | Flexible modes and locations enhance logistics | Ambiguity in “named place” may cause disputes |
| Responsibility and Risk | Clear transfer of risk reduces disputes | Local trade practices can cause misinterpretation |
| Trade Negotiations | Defines export obligations, easing transactions | Complex for inexperienced exporters |
| Shipping Costs | Buyer control can lower costs and improve efficiency | Limited seller involvement may reduce FCA’s benefits over EXW |
| Containerized Freight | Ideal for modern containerized shipping, per ICC | – |
What are the Advantages of FCA?
The Free Carrier Incoterm offers several benefits in international shipping and trade, providing clarity and flexibility for both sellers and buyers.
Flexible Transport and Delivery Options
FCA accommodates various modes of transport — road, rail, air, or sea — allowing parties to choose the most efficient method for their shipment. It also enables delivery at diverse locations, such as the seller’s premises or a designated terminal, enhancing logistical flexibility.
Clear Responsibilities and Risk Transfer
This term delineates the point at which risk transfers from seller to buyer — this is typically when the goods are handed over to the carrier at the named place. Such clarity helps prevent disputes related to damage or loss during transit.
Eases International Trade Negotiations
By specifying obligations for export duties, taxes, and customs clearance, FCA simplifies negotiations, ensures both parties understand their roles, and facilitates smoother transactions.
Simplifies Shipping Cost Management
Buyers can select and contract their preferred carriers, potentially securing better shipping rates and schedules. This results in cost savings and improved supply chain efficiency.
Ideal for Containerized Freight by ICC
The International Chamber of Commerce recommends FCA for containerized cargo, as it aligns with modern shipping practices and addresses complexities better than others, like Free on Board (FOB).
Are There Negatives to FCA?
While the Free Carrier Incoterm offers flexibility in international trade, it also presents certain challenges that both parties should consider.
Misunderstandings from Non-Specific Terms
Ambiguities in defining the “named place” for delivery can lead to confusion over responsibilities, causing disputes between buyers and sellers.
Complex Logistics for Inexperienced Exporters
Sellers new to exporting may find the obligations under FCA, such as handling export documentation and customs clearance, overwhelming. This can increase the risk of errors and delays.
Local Customs Create Interpretation Variances
Differences in local trade practices can result in varying interpretations of FCA terms. These differences can lead to misunderstandings and contractual disputes.
Minimal Advantage over EXW in Practice
In scenarios where the seller’s involvement is limited to making goods available at their premises, FCA may offer little benefit over Ex Works (EXW), as the buyer still assumes most responsibilities.
How is FCA Different from Other Incoterms?
The FCA Incoterm distinguishes itself by offering greater flexibility in delivery and transport arrangements, compared to other commonly used Incoterms.
FCA vs. FOB Incoterms
| Aspect | FCA | FOB |
|---|---|---|
| Delivery Point | Flexible, agreed-upon location (e.g., seller’s facility, terminal) | Limited to port of shipment for waterways |
| Mode of Transport | All transport modes, including multimodal | Restricted to sea and inland waterways |
| Loading Responsibility | Buyer responsible for loading onto the main carrier or vessel | Seller loads goods onto the vessel |
| Risk Transfer | Risk transfers when goods are handed over to the carrier | Risk transfers when goods are loaded onto the vessel |
FCA vs. EXW Incoterms
| Aspect | FCA | EXW |
|---|---|---|
| Export Clearance | Seller handles export clearance | Buyer responsible for export clearance |
| Seller’s Responsibility | – Balanced – Seller delivers goods to agreed location with export formalities completed | – Minimal – Seller provides goods at their premises. |
| Buyer’s Responsibility | Assumes responsibility after goods are delivered to the carrier. | Assumes responsibility from seller’s premises onward. |
What Must I Pay for FCA?
| Cost Components | Covered by Seller | Covered by Buyer |
|---|---|---|
| Goods | ✔️ | ❌ |
| Export Documentation | ✔️ | ❌ |
| Delivery to Named Place | ✔️ | ❌ |
| Main Transportation | ❌ | ✔️ |
| Insurance | ❌ (after risk transfer) | ✔️ |
| Import Duties and Taxes | ❌ | ✔️ |
Need help with FCA or other Incoterms? Get in touch with the freight forwarding experts at Twings Supply today. With more than 20 years in the industry, we’ll guide you through.
FCA Terms FAQs
Does FCA include customs clearance?
Yes, under FCA Incoterms the seller is responsible for handling export customs clearance, including any associated duties, taxes, and formalities. The buyer assumes responsibility for import customs clearance, along with duties and taxes at the destination.
How can a freight forwarder help?
Freight forwarders (like Twings Supply) act as intermediaries between buyers and sellers. In some cases, the named place is the freight forwarder’s warehouse, and the seller takes responsibility for the shipment once it arrives.
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