Free Carrier (FCA) is an international trade term, also known as an Incoterm, that outlines the seller’s responsibilities for delivering goods to a carrier or another party specified by the buyer. FCA indicates that the seller fulfills their obligation when the goods are handed over to the carrier at an agreed-upon location, which could be the seller’s premises, a transportation hub, or another point. From that point onward, the buyer assumes responsibility for transportation, costs, and risks.
Key points related to Free Carrier (FCA) in supply chain and international trade:
- Delivery Point: Under FCA terms, the seller’s responsibility is fulfilled when the goods are delivered to the carrier or another designated person or place. The delivery point is agreed upon between the seller and the buyer.
- Transportation Responsibility: After the goods are handed over to the carrier, the buyer assumes responsibility for arranging and paying for transportation, insurance, and any additional costs associated with moving the goods to the destination.
- Risk Transfer: Risk transfers from the seller to the buyer at the point of delivery to the carrier. Any damages or losses during transportation are the buyer’s responsibility.
- Cost Allocation: The buyer is responsible for all costs incurred after the goods are handed over to the carrier, including transportation, customs duties, taxes, insurance, and any charges related to delivery.
- Applicability: FCA terms are often used when the goods need to be transported by a specific carrier chosen by the buyer. It’s suitable for various modes of transportation, including air, sea, road, and rail.
- Documentation: The seller is typically responsible for providing the necessary export documents required for transportation and customs clearance.
- Risk and Control: FCA provides the buyer with a level of control over transportation and carrier selection, but it also places the responsibility for transportation logistics and associated risks on the buyer.
- Clear Communication: It’s crucial for the parties to communicate and agree on the exact delivery point and responsibilities, especially when using FCA terms.
FCA is one of the Incoterms used in international trade to define the terms of delivery, risk, and responsibility between buyers and sellers. The choice of Incoterm, including FCA, has a significant impact on the distribution of costs, risks, and control in international transactions
Seller’s Responsibility Under FCA
- Delivery of goods
- Preparing invoice and related documents
- Packaging and marking
- Preparing licenses and customs documents
- Transportation in the country of origin
- Customs charges and handling fees in the country of origin
- Insurance
- Proof of delivery
Buyer’s Responsibility Under FCA
- Payment of goods according to the agreed-upon contract
- Unloading the goods at the point of delivery
- Loading charges
- Import formalities, charges and duties
- Transportation in the destination country
Cargo Insurance in CIF
The seller is contractually obligated to provide insurance for the goods’ transportation under CIF. Along with CIP, CIF specifies that the seller must provide the cargo with insurance. In general, buyers prefer the CFR Incoterm if they can obtain higher cargo insurance coverage. This is due to the fact that, unlike CIF, insurance is not a seller’s responsibility under CFR and can be obtained by the buyer as well.
