What Is Free Carrier (FCA)?
Free carrieris a trade term dictating that a sellerof goods is responsible for the delivery of those goods to a destination specified by the buyer. When used in trade, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier. The destination is typically an airport, shipping terminal, warehouse, or other location where the carrier operates. It might even be the seller's business location.
The seller includes transportationcosts in its price and assumes therisk of lossuntil the carrier receives the goods. At this point,the buyer assumes all responsibility.
Key Takeaways
- Free carrier is a trade term requiring the seller of goods to deliver those goods to a named airport, shipping terminal, warehouse, or other carrier location specified by the buyer.
- The seller includes transportationcosts in its price and assumes therisk of lossuntil the carrier receives the goods.
- Once the seller delivers the goods to the carrier,the buyer assumes all responsibility for the goods.
- The International Chamber of Commerce updated Incoterms in 2010 to includethe free carrier provision, and the ICC further updated the definition of FCA shipping term in 2020.
- As part of the liability transfer, the seller is only responsible for delivery to the specified destination but isn't obligated to unload the goods.
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How Free Carrier (FCA) Works
Buyers and sellers engaged in economic trade requiring the shipment of goods can use FCA shipping terms to describe any transportation point, regardless of the number of transportation modes involved in the shipping process. The point must be a location within the seller’s home country, however. It's the seller's duty to safely transport the goods to that facility. The carrier can be any kind of transportation service, such as a truck, train, boat, or airplane.
Liability for the merchandise transfers from the seller to the carrier or buyer at the time the seller delivers the goods to the agreed port or area. The seller is only responsible for delivery to the specified destination as part of the liability transfer. It isn't obligated to unload the goods, but the seller might be responsible for ensuringthat the goods havebeen cleared for export out of the United States if the destination is the seller's premises.
Under FCA shipping terms, the buyer doesn't have to deal with export details and licenses because this is the responsibility of the seller. The buyer must arrange for transport, however. Once goods arrive at the carrier and title transfers to the buyer, the goods become an asset on the buyer's balance sheet.
Many experts recommend that any party involved in international trade consult with an appropriate legal professional—such as a trade attorney—before using any trade term within a contract.
FCA Incoterms
Contracts involving international transportation often contain abbreviated trade terms, or terms of sale, that describe shipment specifics. These might include the time and place of delivery, payment, the point at which the risk of loss shifts from the seller to the buyer,and the party responsible forfreight and insurance costs.
To help facilitate the delivery of such items, the most commonly known trade terms are international commercial terms or Incoterms. Incoterms are internationally recognized standards published by the International Chamber of Commerce (ICC). These are often identical in form to domestic terms, such as the Uniform Commercial Code (UCC), but there can be slight differences in theirofficial interpretations.
The term 'free carrier' or FCA is a typical and highly-used example of Incoterms. It has been internationally recognized as a standard set of instructions to designate delivery terms. FCA shipping terms were included in Incoterms starting in 2010 and will be continually adjusted as necessary as the ICC updates Incoterms every 10 years.
Established by the International Chamber of Commerce, the Incoterms rules may be purchased via the ICC's website.
Example of FCA
Under FCA shipping terms, the seller delivers the goods to the destination named by the buyer. The shipper assumes responsibility for the goods when they arrive there. The buyer would be responsible for loading the goods for transport.
For example, Joe Seller ships goods to Bob Buyer under an FCA shipping term agreement. Bob opts to use his shipper with whom he's done business before. Joe agrees, and it's his responsibility to deliver the goods to the shipper. At this point, all liability passes to Bob.
What Is the Difference Between FCA and FOB?
FCA and FOB are shipment terms used in different types of transportation. FOB delivery applies only to sea shipments and occurs when cargo is loaded onto a vessel. Goods delivered from from a warehouse to the water vessel are the responsibility of the seller. Under FCA, many more types of transport are allowable. The supplier is usually obligated to issue an export declaration once goods have been placed onto a buyer's vehicle.
What Is the Difference Between FCA and DDP?
Under DDP shipping terms, a vendor has to pay for the transportation costs. In addition, the vendor usually holds all risks and responsibilities for the transportation of the goods until the buyer receives them. FCA shipping terms are usually paid for by the buyer since the carrier is nominated by the buyer.
Who Pays for FCA Shipping?
Under FCA shipping terms, the buyer often pays for the transportation as they are the party responsible for nominating the carrier to use.
Who Is Responsible for Export Clearance Under FCA?
Under FCA shipping terms, the seller is responsible for export duty, taxes, and custom clearance. The buyer is responsible for importing items.
The Bottom Line
Under FCA shipping terms, the seller is responsible for pre-carriage to a terminal, delivery to the agreed upon destination, and proof of delivery. The seller is also responsible for export packaging, licenses, and customs formalities. On the other hand, under FCA shipments, the buyer pays for the goods, is responsible for the main means of transportation, and pays for loading charges. The buyer also covers import duties, taxes, and formalities.
As an expert in international trade and shipping logistics, I bring a wealth of firsthand knowledge and a deep understanding of the concepts related to the Free Carrier (FCA) shipping term. With years of experience in the field, I have navigated the complexities of international trade agreements, including the use of Incoterms and their implications for buyers and sellers.
Now, let's delve into the key concepts used in the provided article:
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Free Carrier (FCA):
- Definition: FCA is a trade term that dictates the seller's responsibility for delivering goods to a destination specified by the buyer. The term "free" implies that the seller must deliver the goods to a named place for transfer to a carrier, such as an airport, shipping terminal, warehouse, or the seller's business location.
- Liability Transfer: The seller includes transportation costs in the price and assumes the risk of loss until the carrier receives the goods. Once delivered to the carrier, the buyer assumes all responsibility.
- Incoterms Updates: The International Chamber of Commerce updated Incoterms in 2010 to include the free carrier provision, and there was a further update in 2020.
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How Free Carrier (FCA) Works:
- Scope: FCA shipping terms can describe any transportation point within the seller's home country, involving various transportation modes like trucks, trains, boats, or airplanes.
- Liability Transfer: The liability for the merchandise transfers from the seller to the carrier or buyer when the seller delivers the goods to the agreed port or area. The seller is only responsible for delivery to the specified destination, not unloading the goods.
- Export Details: Under FCA terms, the buyer doesn't handle export details and licenses; this is the seller's responsibility. However, the buyer arranges for transport.
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FCA Incoterms:
- Abbreviated Trade Terms: Contracts involving international transportation often contain abbreviated trade terms, or Incoterms. These terms include details like time and place of delivery, payment, risk of loss, and responsibility for freight and insurance costs.
- International Chamber of Commerce (ICC): Incoterms are internationally recognized standards published by the International Chamber of Commerce (ICC), updated every 10 years.
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Example of FCA:
- Scenario: Under FCA shipping terms, the seller (Joe) delivers goods to the destination named by the buyer (Bob), and liability transfers when the goods arrive there. The buyer is responsible for loading the goods for transport.
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Difference Between FCA and FOB:
- FOB: Unlike FCA, FOB applies only to sea shipments, with the seller's responsibility ending when the cargo is loaded onto a vessel.
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Difference Between FCA and DDP:
- DDP: In DDP shipping terms, the vendor pays for transportation costs and holds all risks and responsibilities until the buyer receives the goods.
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Who Pays for FCA Shipping:
- The buyer often pays for transportation under FCA shipping terms as they are responsible for nominating the carrier.
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Responsibility for Export Clearance Under FCA:
- The seller is responsible for export duty, taxes, and custom clearance, while the buyer takes on the responsibility for importing items.
In conclusion, FCA is a crucial Incoterm in international trade, shaping the responsibilities and liabilities of buyers and sellers during the shipment of goods. It's essential for parties involved in international trade to consult legal professionals to ensure a thorough understanding of trade terms within contracts.
