What Is the Incoterm FCA (Free Carrier)?

Definition of FCA (Free Carrier)

The FCA incoterm, short for Free Carrier, is a shipping arrangement defined by the International Chamber of Commerce (ICC). Under FCA, the seller is responsible for delivering the goods to the buyer at a designated location and undertaking all export clearance formalities.

The buyer typically chooses the destination where the seller has to transport the goods. This can be the seller’s premises, the port of origin, or any other named place.  

Key Features of FCA

Here are the critical aspects of the FCA incoterm:

Seller’s Obligations Under FCA

Under FCA, the seller delivers the goods to a named place specified by the buyer. They undertake all costs associated with the preparation and transport of goods to that location. Sellers are responsible for preparing the commercial invoice, export packaging and marking, as well as handling the export licensing, tax, customs costs, and documentation. The seller must provide proof of delivery to the buyer and cover any pre-shipment inspection charges.

Buyer’s Responsibilities Under FCA

The buyer’s responsibilities under FCA start from the point of handover to the carrier. Once the seller has provided the goods to the buyer’s carrier, the latter must assume liability and cover all costs thereon. This includes unloading the goods from the seller’s mode of transport, loading them onto the carrier, as well as managing import clearance, duties, and all transport and handling till the final destination. Additionally, the buyer must also pay for insurance if it applies.

Designated Place for Delivery and the Transfer of Risk

In the FCA incoterm, there is a slight difference in the roles of the buyer and seller depending on the initial delivery location. If the agreed-upon point is the seller’s premises, they are responsible for loading the goods onto the buyer’s carrier. The risk transfers to the buyer after the shipment is loaded.  

However, if the location is any other place, such as a port or a terminal, the seller is not obligated to unload the goods and load them onto the buyer’s carrier. Any risks and liabilities are transferred to the buyer once the goods are delivered.

Advantages of FCA

Here is a breakdown of the advantages of FCA to sellers and buyers:

For the Seller

• Facing no risks or liabilities as soon as the goods are handed over to the carrier

• Limited responsibility for shipping beyond the initial delivery

• More efficient export customs handling as the seller is more familiar with their country’s regulations compared to the buyer

• Retaining control of the goods until handover to the carrier, allowing them to verify payment beforehand

For the Buyer

• Flexibility in choosing the main carrier and negotiating transport costs

• Control over international transportation and logistics

• Not having to handle all the export formalities, as with the EXW incoterm

• Freedom to choose a reliable shipping service at the best price

• Better compliance and reduced delays due to the seller’s obligation to provide export documentation

Disadvantages of FCA

Here are the potential pitfalls of shipping under the FCA incoterm:

Challenges for the Seller

• Complications in coordinating with the buyer regarding delivery destination or their chosen carrier

• Additional cost and effort to deliver the goods to the buyer’s carrier

• Liability of damage while transporting the goods to the buyer’s chosen location

• Providing export clearance documentation, undertaking all tax and customs charges

Challenges for the Buyer

• Arranging international shipping and handling all related logistics

• Undertaking all risks and costs after handover to the carrier

• Complications in coordination if a shipment issue arises in the seller’s country after the handover

• Bearing all export formalities if the initial pickup point is the seller’s premises

• Delays caused by coordinating multiple aspects of the shipment, especially when multiple modes of transportation are involved

When to Use FCA

FCA is a favorable option for any form of transport, be it land, air, or sea. Sellers can use this option if they are well-versed in local customs clearance procedures.

Buyers often choose this incoterm when the shipment is containerized. This means that the initial point of delivery is the terminal and, under FCA, the risk transfer will occur once export formalities have been cleared by the seller.

Buyers should opt for FCA when they have specific carrier preferences, particularly a reliable shipping service provider with a better quote than the seller’s. FCA also proves beneficial in multimodal transportation arrangements due to its flexible delivery points.

FAQ

What is the difference between FOB and FCA?

Here are the key differences between FOB (Free On Board) and FCA:

• FCA works for all modes of transport while FOB is only suitable for sea shipments

• The risk transfers to the buyer after the initial delivery under FCA while, under FOB, the buyer assumes liability on the ship

• In FCA, the buyer must load the cargo onto the ship while under FOB, it is the seller’s responsibility

What is the difference between FCA and DDP?

Here are the primary differences between FCA and DDP (Delivered Duty Paid) incoterms:

• Under FCA, the seller must deliver the goods to an agreed-upon place while, in DDP, to the buyer’s premises

• In FCA, the seller handles only the export clearance procedures while, in DDP, they handle both export and import formalities

• In FCA, the seller assumes all responsibility until delivery to the carrier while, in DDP, this is until delivery to the buyer’s final destination

Who pays for FCA shipping?

In FCA, the buyer pays for the majority of the transportation as they choose the carrier. The seller only bears the cost of transporting the goods to the initial delivery point.

Are EXW and FCA the same?

EXW and FCA are two distinct incoterms. Under EXW, the seller’s responsibility ends when the goods are ready for pickup. They are not responsible for loading the goods onto the buyer’s carrier. The buyer assumes all costs and risks of transportation, export and import clearance, and handling of goods until the final delivery point.

In FCA, the seller has extended responsibilities. They bear liability until the goods are loaded onto the buyer’s carrier or delivered to the agreed-upon location. They handle all export clearance procedures, including documentation and costs. The buyer assumes all risks and costs after the handover and manages import clearance formalities.