Free Carrier (FCA)
What is the definition of the Free Carrier Incoterm?
The FCA incoterm, short for Free Carrier, deems the seller responsible for delivering the goods to a named place (e.g., seller's premises or an agreed location like a terminal or transport hub).
The risks transfer to the buyer once the goods arrive at the named place. After this point, the buyer assumes all costs associated with transporting the goods to their final destination.
What are the FCA responsibilities for a buyer?
FCA requires the buyer to undertake several responsibilities once their goods arrive at the named destination.
- Acceptance of goods
- Arranging and paying for shipping
- Handling import formalities
- Risk management
- Documentation and compliance
What are the FCA responsibilities for a seller?
Under the FCA freight terms, the seller has several critical duties to ensure the goods are properly delivered to the buyer's designated carrier.
- Delivery of goods
- Loading
- Export formalities
- Documentation and packaging
- Notification of delivery
When is a Free Carrier agreement used?
A Free Carrier (FCA) agreement is used in scenarios where flexibility in the transfer of responsibilities is crucial.
- Buyer prefers to handle logistics: FCA shipping is advantageous when the buyer has a strong logistical network and prefers to manage the main carriage of goods. Using the FCA incoterm can allow for greater control over transportation arrangements.
- Buyers have established relationships: FCA shipping is ideal for buyers who have established relationships with carriers and can negotiate better shipping rates.
What are benefits of Free Carrier terms?
Transportation flexibility
FCA can be applied to various modes of transportation, including air, sea, road, and rail. Its versatility makes FCA shipping suitable for different logistical arrangements, from small domestic shipments to large international transactions.
Clear risk and cost allocation
FCA freight terms clearly define the point at which risks transfer from the seller to the buyer (this occurs once the goods are delivered to the named place and loaded onto the buyer's chosen carrier).
The clarity of the FCA incoterm helps both parties understand their responsibilities and serves to minimise disputes.
Enhanced control for buyers
Under FCA terms, buyers have more control over the transportation of their goods. They can choose their preferred carrier and manage logistics from the point of delivery.
What are the drawbacks of Free Carrier terms?
Variability in local customs
The interpretation of FCA terms can vary widely due to differences in local practices. Interpretative variability can complicate international transactions, as parties from different regions might have different understandings of the same terms.
Such discrepancies can lead to inefficiencies in the shipping process.
Complex coordination of logistics for the seller
Under the FCA incoterm, the seller is responsible for delivering the goods to the named place, which can involve intricate logistical arrangements (especially when different modes of transport are involved).
For inexperienced sellers, coordinating transport logistics under FCA can be complex.
Potential for misunderstandings
If the details regarding the named place of delivery or the carrier are not clearly specified in an FCA agreement, it can lead to disputes between the buyer and seller. Ensuring both parties have a precise understanding of these points is crucial to avoiding confusion.
FCA FAQs
What is the difference between FCA and FOB?
FCA can be used for any mode of transport, including land, sea, air, and multimodal transport.
Under the FCA incoterm, the seller fulfils their obligation by delivering the goods to a carrier or another person nominated by the buyer at a specified location. Once the goods are delivered to the carrier and loaded, if required, the risk transfers to the buyer.
FOB, however, is used exclusively for sea or inland waterway transport. Under FOB, the seller's responsibility extends to loading the goods onto the vessel at the port of shipment. The risk and ownership transfer to the buyer once the goods are on board.
Who pays for FCA shipping?
Under the FCA Incoterm, the buyer is responsible for all freight costs once the seller has delivered the goods to the agreed-upon location.
Does FCA include insurance?
FCA terms do not make insurance a mandatory requirement for either buyer or seller.
Is FCA best for small or large shipments?
FCA freight terms can be suitable for both large and small shipments, however, its effectiveness largely depends on the specific circumstances and logistical capabilities of the buyer.