Of all possible Incoterms, the use of Free Carrier or FCA, is a top priority for shippers that want to place much of the liability in the hands of the seller. But what exactly does the FCA Incoterm mean, and how does using the FCA or Free Carrier meaning help each party meet their needs? The topic can be especially confusing as there are standards that would seem to indicate this is the ideal Incoterm to use, but it may not carry liability fully to what the buyer needs.
Let’s take a closer look at the basic definition, its risks and impacts to both buyers and sellers, a few of its practical applications, and its comparison to some of the more extensive Incoterms.
With the FCA or Free Carrier Incoterm, the seller is responsible for delivery to the named place. Usually, the named place is the terminal or warehouse before an intermodal leg of transportation or a movement that goes beyond the origin country.
Under the Free Carrier (FCA) Incoterm, the seller's responsibilities are pivotal in ensuring that the transaction proceeds smoothly up to the point where the buyer takes over. The seller's obligations can be categorized into several key areas:
The seller is tasked with providing all the necessary documentation, including the bills of lading and trade terms necessary to facilitate the export of goods. This includes obtaining and preparing a commercial invoice that reflects the agreement between the buyer and seller. The commercial invoice serves as a critical document for both customs clearance and payment processes. It must accurately detail the goods sold, terms of sale, and other agreements pertinent to the transaction.
The seller must ensure that goods are properly packed for export. This involves selecting appropriate packaging that can withstand the rigors of transportation and protect the goods from damage. The packing should also comply with the buyer's specifications and any legal requirements of the exporting country.
One of the most significant responsibilities of the seller under FCA terms is managing export customs clearance. This means that the seller must handle all the bureaucratic requirements to legally export the goods from the country of origin, including obtaining any export licenses or permits.
The seller is responsible for delivering the goods to the named place agreed upon with the buyer. This location is typically a terminal or warehouse but can be any place where the carrier operates. The delivery is deemed complete when the goods are handed over to the carrier or another person nominated by the buyer at the named place. This named place could also be the seller’s premises at an export terminal or another destination.
Regardless, FCA means the seller delivers the load to a place prior to export, and it’s at that point that the liability will technically transfer from the seller to the buyer. But there can be a bit of confusion and contention as shifting between modes, provided it occurs within the same country, can still involve FCA. But how?
Using the shipping term Free Carrier (FCA), the seller must take responsibility for the export clearance. In addition, using the FCA shipping term, the seller is also responsible for delivery to the carrier at the named place, and this is where the liability and risk begin to impact the conversation.
The buyer under the FCA shipping term is responsible for several core charges and responsibilities or liabilities:
There is no hard-and-fast rule for the use of FCA Incoterm. It can be used across all modes provided it governs moves that occur within an origin country. But of all moves, it’s most commonly applied in containerized ocean freight.
Did you know? Using the FCA shipping term, the seller, in addition to export customs formalities, is responsible for loading the goods when the seller’s place of business is the named place of delivery, unless a different decision has been agreed upon.
This is a loaded question, pardon the pun. Let’s contrast two examples to better show how liability can shift further toward the seller across a greater distance when using a different Incoterm, Carriage Paid To (CPT).
Under the CPT Incoterm, the seller pays for the carriage to bring the goods to the destination. However, the risk transfers to the buyer once the goods are handed over to the first carrier. This term might be more suitable for buyers who prefer the seller to manage the complexities of transportation, especially in unfamiliar routes or markets. Further, this Incoterm can span countries and may not involve a movement to the “first carrier” until the middle or even last mile for goods headed to a distribution center in a destination country.
For instance, a small business importing goods might choose CPT to simplify their involvement in the shipping process, relying on the seller's expertise to manage the transportation to the destination. Unlike FCA, the named place is much farther away than a named destination prior to export, so the buyer has less risk. But if the buyer would like to take on the responsibility of managing the import processes and intermodal transport management, using CPT may be more appropriate than FCA.
With all Incoterms, it is important to understand the obligations of both the buyer and seller. There are eleven incoterms covering international shipments, are you aware of all the different terms?
FREE DOWNLOAD: You can download our free Incoterms chart which provides simple explanations of all eleven incoterms here
Click below for more information on shipping terms:
FCA (Free Carrier)
CPT (Carriage Paid To)
CIP (Carriage and Insurance Paid To)
DAP (Delivered at Place)
DPU (Delivered at Place Unloaded)
DDP (Delivered Duty Paid)
FAS (Free Alongside Ship)
FOB (Free On Board)
CFR (Cost And Freight)
CIF (Cost, Insurance And Freight)