What does FCA (Free Carrier) Incoterms mean?
The FCA Incoterm is an agreement that means “Free Carrier.” The seller has to deliver the goods to a port that has been agreed upon, which is called the “Named Place.” The seller is in charge of exporting the shipment and taking care of all the steps that come before that. Once the goods are ready to be loaded on the carrier, the buyer is responsible for them.
FCA can be used for any kind of transportation, including air freight, sea freight, road freight, and rail freight. With this Incoterm, the buyer has a lot of freedom because they can arrange transportation, often at a better price than what the seller may quote. Even though the buyer takes on all risks and responsibilities once the goods reach the point of export, FCA allows the buyer to take over after the cargo has been exported. For some products, this can be a risky and time-consuming process.
FCA: An Example
Under FCA shipping terms, the buyer tells the seller where to send the goods, and the seller sends them there. When the goods get there, the person who sent them is responsible for them. The buyer would have to load the goods onto the truck or ship.
For example, under an FCA shipping term agreement, Jack Seller sends goods to Ben Buyer. Ben decides to use his shipper, who he has worked with before. Jack agrees, and now it is his job to get the goods to the shipper. At this point, Ben is fully responsible for everything.
FCA (Free Carrier) works with which shipping methods?
Under Incoterms 2020, FCA can be used for any kind of shipment, whether it is sent by air, courier, truck, rail, ship, or a combination of these.
quote has-black-color has-light-green-cyan-background-color has-text-color has-background is-layout-flow wp-block-quote-is-layout-flow" style="font-style:normal;font-weight:600">FCA gets around the problems of EXW, where the buyer is in a worse position than the seller when it comes to setting up local transport and customs.
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What are the advantages of FCA (Free Carrier)?
When buyers use FCA, they have more control over the process and don’t have to do as much paperwork. The buyer can choose the carrier or mode of transport they want. This could help avoid delays and save money at the same time. Also, the buyer doesn’t have to worry about export paperwork because, under the FCA agreement, that’s the seller’s job.
This kind of deal is also good for the seller. The seller is only responsible for getting the goods to the place the buyer has already picked out in his own country. Even in terms of cost, the seller has very little to do with what happens. He only has to pay the shipping costs to get the goods to the specified location, where they will be given to the forwarding shipper or carrier. And that’s the last thing he has to do or pay for.
Payment is another important part; in this case, it works out better for the seller. Once the goods are sent to the buyer’s chosen location, the payment schedule can begin right away. If not, the seller has to wait until the goods get to where they are going.
What are the disadvantages and risks of using FCA (Free Carrier) terms?
One of the biggest problems is that the buyer still has to do something at the port of origin. This means that the buyer has to pay for terminal and loading costs. Along with the costs, such a process could cause the shipment to be late if something goes wrong. In this case, the buyer might have to rely on the seller to solve the problem.
The International Chamber of Commerce (ICC), which is in charge of Incoterms, says that FCA should only be used for items that are shipped in containers. This is because the containerized shipment will go straight from where the seller is to the terminal. So, by default, the agreed-upon place is the terminal, and the risk moves to the buyer once the items have gone through all the export paperwork.
But if the agreed-upon place is not the terminal, the risk passes to the buyer only when the items reach that place. Now, the buyer would have to pay to unload the things where they are. Also, the buyer would now have to take care of the export paperwork, pay the carriage loading fees, and get it to the terminal.
When it comes to FCA, if the goods don’t go straight to the terminal, FCA becomes more like EXW (another Incoterm Ex-Works).
Another problem is that FCA isn’t used much in some places, like China, or the parties don’t know about it. So, if a foreign party insists on FCA and the other party doesn’t like it, it could cause confusion. So, it is always best to use the Incoterm that is most comfortable for both parties.
Who pays for freight when use FCA (Free Carrier)?
Under FCA shipping terms, the buyer usually pays for the shipping because they are the ones who choose the carrier.
When you should use “Free Carrier” (FCA)?
The FCA is best used in the following situations:
- If a buyer buys many things that come in containers and has a reliable logistics partner, FCA could be very helpful.
- If the buyer is sure that their logistics partner can offer a better price than what the seller would charge, they may choose to buy from someone else.
- Buyers can only use FCA if they know a lot about the process and paperwork in the seller’s country.
- If the seller prefers FCA over FOB or FAS, this shipping agreement is good for both parties.
FCA (Free Carrier) Incoterm responsibilities
Let’s look at what the buyer and the seller have to do under an FCA agreement.
Sellerβs responsibilities
Under FCA Incoterms, the person selling the goods must take care of the whole export process. Once the cargo is ready to be put on the ship, it is the buyer’s responsibility. Here are all of the things that the seller is responsible for.
Export Packaging of shipment
The cargo must be packed so it can be sent oversea. Some countries have unique requirements for how products must be exported. This can be done with certain markings or types of packaging. The person in charge of this must make sure that the packaging follows the rules for export.
Fees for loading
As the cargo leaves the seller’s location, these are any costs related to loading the cargo onto the first carrier that will take the goods to the export location.
Deliver to the Port/Place
Once the cargo is loaded onto the truck, these are the costs of getting the goods from where the seller is to the port or place where the goods will be exported. Most of the time, the port or place is an airport, seaport, or railport.
Export Duty, Taxes, and Clearing Customs
The costs and responsibilities of exporting the cargo from the country where it was made. This could include customs checks, pre-shipment checks, or any other special permissions needed to send the cargo overseas.
Buyerβs responsibilities
When the cargo passes through customs and gets to the Named Place, the buyer takes on the risk. Here are the things the buyer needs to do to finish the logistics process.
Origin-Terminal Fees
Any costs or requirements related to the shipping terminal, which is where the cargo is loaded onto the ship for the main part of the shipping process.
Loading on the Carriage
The shipping line needs to charge a loading fee before the cargo can be put on the carriage.
Shipping Fees
This is the freight charge from the port of origin to the port of destination.
Insurance
Even though insurance is not required, it is up to the buyer to decide if they want to get a policy.
Destination Terminal Fees
Once the cargo has arrived at the port of destination, any terminal charges for unloading, moving, and storing the load while the formal import process is going on will be added.
Delivery at Destination
Getting the cargo from the port of destination to the place where the buyer wants it delivered.
Unloading at the end point
Any costs that come with unloading the cargo at the place the buyer wants it sent.
Import duty, taxes, and customs clearance
The buyer is responsible for all the costs and work that come with bringing the goods into the country. If there are any inspections, duties, taxes, or other requests from customs officials, they must be met by the buyer or paid for by the buyer.
Conclusion
Free Carrier, or FCA, is a common hipofly.com/incoterms-guide/">Incoterms term that can be used for any type of shipping, even intermodal (air, ocean, and railway). Also, it is very flexible because it gives buyers more ways to arrange for shipping and, as a result, a better chance of getting a good deal on the shipping cost. Also, this works in all situations where the buyer is in charge of setting up the main transport.
The seller doesn’t have to spend more time and money making sure the goods get to the final destination of the buyer.
Still, if you have any questions about FCA (Free Carrier), you can ask the HipoFly sales team. We will tell you if FCA (Free Carrier) is good for you or not.
