Free Carrier (FCA) is an essential trade term requiring the seller to deliver goods to a specified destination as dictated by the buyer. In trade lingo, ‘free’ signifies the seller’s responsibility to transport goods to a named place for subsequent transfer to a carrier. This designated destination is often an airport, shipping terminal, warehouse, or any operational locality of the carrier, and occasionally, it could be the seller’s business premises.
The seller incorporates transportation costs into their pricing and bears the risk of loss until the goods are handed over to the carrier. Upon this transfer, the buyer assumes full responsibility for the goods.
Key Takeaways
- Seller Responsibilities: Under FCA, the seller delivers goods to a named location such as an airport, terminal, or warehouse specified by the buyer, covering all transportation costs and risk of loss until the carrier takes possession.
- Buyer Responsibilities: Once the goods are delivered to the carrier, the buyer assumes responsibility without further obligations for departure logistics by the seller.
- Liability and Transportation: The International Chamber of Commerce (ICC) updated Incoterms to include FCA in 1980 and simplified it in 1990. Sellers deliver to a specified carrier location but are not mandated to unload the goods.
How Free Carrier (FCA) Works
In economic trade involving goods transportation, FCA terms specify the transportation point within the seller’s nation, irrespective of the transport modes involved. The seller’s task is to ensure safe delivery to the predetermined facility, which could be serviced by a truck, train, boat, or airplane.
Liability for the goods switches to the carrier or buyer upon delivery at the agreed location. Although unloading is not mandatory for the seller, it must manage clearance for exporting the goods if the destination is the seller’s premises. Under FCA terms, export details remain with the seller, simplifying procedures for the buyer, who handles transport arrangements. Once the goods and title transfer to the buyer, they become the buyer’s asset.
Expert Tip: Engaging a legal trade professional, such as a trade attorney, is highly recommended when using trade terms in contracts.
FCA Incoterms
International trade contracts encompass concise trade terms detailing shipment specifics like delivery time and location, payment terms, freight charges, risk commencement, and insurance costs responsibility. Incoterms, established by the ICC, provide standardized instructions for international commerce and are akin yet divergent from domestic terms like the Uniform Commercial Code (UCC).
FCA is a prominent Incoterm that charts critical delivery terms recognized worldwide since its 1980 inclusion, with updates every decade. The rules, purchasable via the ICC’s website, streamline contract compatibility across various international jurisdictions.
FCA Example
Scenario:
Joe Seller ships goods to Bob Buyer under FCA terms. Bob selects his preferred shipper, transferring the risk and remaining tasks to him once Joe delivers the goods to the shipper. From that point, Bob assumes all liability for the freight.
FCA vs. FOB
- FOB (Free on Board): Applies to sea shipments where the seller is responsible for loading goods onto the ship. Liability transfers on loading completion.
- FCA: Applicable for various transport modes, with loading responsibility resting on the buyer after seller delivers to carrier.
FCA vs. DDP
- DDP (Delivered Duty Paid): Seller bears all costs and risks till goods reach the buyer’s location, including transport and import duties.
- FCA: Buyer controls carrier choices, offers arrangement keeping majority responsibility for transport inception.
Financial Responsibilities Under FCA
In FCA terms, the buyer usually bears the transportation costs, being in charge of selecting the carrier. The seller manages export duties, taxes, and clearances, leaving the buyer to handle import formalities.
The Bottom Line
Using FCA terms involves delineated roles where sellers manage initial transport and compliance activities, ensuring delivery to an agreed location, with buyers managing subsequent transport, costs, and import duties. This mutual arrangement works towards reducing logistics confusions and streamlining international transportation processes.
Related Terms: FOB, DDP, Incoterms, liability transfer, export duties, import responsibilities
References
- International Chamber of Commerce. “Incoterms Rules History”.
