Free carrier (FCA)

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Free carrier (FCA) is a type of incoterm related to transfer of goods between seller and buyer using carrier as intermediate. The seller's responsibilities are:

  • obtain clearance for export,
  • transport goods to named place or point,
  • hand over goods to named carrier.

The seller is obliged to deliver the goods to the carrier (or other person, e.g. a forwarder), designated by the buyer. Delivery costs, on the main transport route, are not paid by the seller. After the delivery of the goods to the carrier, the risk on the part of the buyer. In INCOTERMS 2000, the detailed determination, separately for individual modes of transport, of the place and manner of handing over the goods to the carrier, as it was In INCOTERMS 1990. Sometimes it is necessary for seller to assist in making contract with the carrier (often in rail or air transport). In such case seller may act at the buyer's risk and expense [J. Ramberg, 2011].

Buyer responsibilities

The buyer responsibilities are:

  • payment of the price,
  • obtain clearance for import,
  • choose a carrier and contract him,
  • bear all the risks since the carrier got the goods,
  • pay all the costs after time of delivery do carrier by seller [J. Ramberg, 2006].

Seller costs

The seller bears:

  • costs of delivering and entrusting the goods to the carrier designated by the buyer in the designated place,
  • costs of preparing and sending a commercial invoice or electronic transfer being its equivalent,
  • costs of obtaining export licenses or other authorizations,
  • costs of tax,
  • customs and other official fees related to export,
  • costs export customs formalities,
  • costs of notifying the buyer that the goods have been delivered and entrusted to the carrier or not accepted by him within the agreed time,
  • delivery costs of the usual delivery document or equivalent electronic transfer,
  • costs of quality control, measurement, weighing, counting, which are necessary to deliver the goods to the carrier,
  • the costs of packaging and its marking required for transport, unless the goods are customarily transported without packaging.

Buyer costs

The buyer bears:

  • the cost of purchasing the goods,
  • the costs of unloading the delivered goods from the means of transport at the terminal of the carrier designated by the buyer,
  • freight costs resulting from the contract of carriage concluded by the buyer,
  • costs of notifying the seller of the date and place where the goods are to be delivered to the carrier,
  • all costs associated with the goods from the moment of placing it at the disposal of the carrier designated by the buyer, including costs of duty and tax and other official fees as well as costs of customs formalities related to import and transit,
  • all additional costs resulting from not appointing the carrier or from the fact that the carrier indicated by the buyer did not accept the goods at the agreed time or the buyer did not notify the seller the name of the carrier and the date on which the goods are to be delivered to the carrier (subject to its proper separation as the subject of the contract),
  • costs of preshipment inspection of the goods, unless it is required by the authorities of the exporting country,
  • costs incurred a documents or equivalent electronic transfers (except for the usual delivery document), issued in the country of dispatch and / or country of origin, needed by the buyer on import or transit of the goods [J. Malfliet, 2011]

Risk

The risk of loss or damage of the goods passes from the seller to the buyer when the goods are delivered to the carrier. In INCOTERMS 2000 the detailed determination, separately for individual modes of transport, the place and manner of handing over the goods to the carrier, as it was in INCOTERMS 1990, has been abandoned. Currently, this meaning has been simplified, leaving only two variants of delivery, depending on the place where it is made, namely:

  • if this place is a seller's premises, the delivery is considered to have been made when the goods have been loaded onto the means of transport substituted by the carrier,
  • if it is a place other than the seller's establishment / warehouse (e.g. terminal, port) delivery it is considered to have been made after the goods have been handed over to the carrier, on the means of transport sent by the seller; unloading the goods from the means of transport is not the responsibility of the seller.

If the buyer has not provided the seller with the name of the place where the goods were delivered or the carrier to whom the goods are to be delivered or the date of handing over the goods, or if the carrier designated by him for some reason did not accept, the whole risk of loss or damage of the goods falls on him (provided, however, that the goods were duly separated as the object of the contract).

In the EXW and FCA formulas, the importer has a transport gesture along the entire delivery route. The difference is that at EXW, the seller is not obliged to load the goods or perform customs clearance in the export. In the FCA formula, the obligation to perform customs clearance in export is on the seller's and the obligation to load depends on the type of transport. Therefore, it is recommended to use the FCA formula in place of EXW [J. Ramberg, 2011].

Examples of Free carrier (FCA)

  • In FCA, the seller is responsible for delivering the goods to the carrier nominated by the buyer. The seller must package the goods in accordance with the buyer's instructions and ensure that the goods are in a condition fit for transport. The seller is also responsible for paying the costs associated with loading the goods onto the vehicle provided by the carrier.
  • In FCA, the buyer is responsible for all costs associated with the transportation of the goods from the seller’s premises to the destination, including the cost of the carrier, insurance, and all other related costs. The buyer also assumes responsibility for any risks of loss or damage to the goods during transit.
  • In FCA, the seller is responsible for any costs associated with unloading the goods at the destination. The buyer must provide the necessary equipment and personnel for the unloading of the goods. The buyer also assumes responsibility for any risks of loss or damage to the goods during unloading.

Advantages of Free carrier (FCA)

Using Free carrier (FCA) incoterm has several advantages for both sellers and buyers. These include:

  • The seller is responsible for delivering the goods to the carrier at the agreed location, meaning that the buyer does not need to be involved in the physical transportation of the goods.
  • The seller also assumes responsibility for loading the goods onto the carrier's truck or vessel, meaning that the buyer does not need to worry about securing the goods for transportation.
  • The buyer assumes ownership of the goods once the seller has delivered them to the agreed location, meaning that the buyer can begin to make use of the goods immediately.
  • The seller is also not responsible for any additional costs, such as insurance or customs fees, that may be associated with the transportation of the goods.
  • The use of a carrier as an intermediary also allows for a smoother, more efficient transfer of goods, as the seller does not need to be in direct contact with the buyer.

Limitations of Free carrier (FCA)

The Free carrier (FCA) incoterm has several limitations that can affect the transfer of goods between seller and buyer:

  • The seller is responsible for the goods until they reach the designated carrier. This means that the seller must ensure that the goods are adequately packaged and prepared for transport, and that any required export customs clearance is obtained.
  • The seller is also responsible for the cost of transport and any associated insurance up to the point that the goods are handed over to the carrier.
  • The seller must provide the buyer with all the necessary documentation to enable the buyer to take delivery of the goods.
  • If the goods are damaged or lost in transit, the seller is liable unless it can prove that the damage or loss was due to the fault of the carrier.
  • The seller is responsible for any import customs clearance and payment of associated fees and taxes.
  • The seller must ensure that the carrier is aware of any special instructions regarding the goods and their delivery.

Other approaches related to Free carrier (FCA)

One possible approach to Free carrier (FCA) is to use other incoterms, such as FOB (Free on Board). FOB requires the seller to deliver goods to a designated port of shipment, where they will be loaded onto the vessel of the buyer's choice. The buyer then assumes responsibility for transport from the port of shipment to the destination.

Other approaches related to FCA include:

  • CPT (Carriage Paid To) - the seller is responsible for the cost of transport to the destination specified by the buyer.
  • CIP (Carriage and Insurance Paid To) - the seller is responsible for the cost of transport to the destination specified by the buyer, as well as the insurance costs.
  • DAT (Delivered at Terminal) - the seller is responsible for the transport to a named terminal of the buyer's choice. The buyer assumes responsibility for the goods from the terminal onward.
  • DAP (Delivered at Place) - the seller is responsible for the transport to a named place of the buyer's choice. The buyer assumes responsibility for the goods from the named place onward.

In summary, there are several approaches related to Free carrier (FCA), such as FOB, CPT, CIP, DAT, and DAP, which have different responsibilities for the seller and buyer in the transfer of goods.


Free carrier (FCA) — recommended articles
Bill of lading — Shipping terms — Ocean bill of lading — Waybill — Liner terms — FOB destination — Contract of affreightment — Master bill of lading — Sea waybill

References

Author: Krzysztof Kędys

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