There are numerous notable concepts in global trade. International transportation delivery techniques are structured in such a way that the buyer and seller have specific responsibilities. FCA and CIF are two of the 11 delivery systems utilized worldwide. What are the distinctions between the FCA (Free Carriere) and CIF (Cost, Insurance, and Freight) concepts?
What is Cost, Insurance, and Freight (CIF)?
Cost, insurance, and freight (CIF) is an international shipping term that refers to the expenses that include carriage and insurance paid by the seller while the cargo is on its route to the port of origin. The import process and the costs associated with clearing the shipment and delivering the products to the final destination are indeed the responsibility of the buyer.
How is the CIF delivery method done?
CIF is commonly utilized for large, oversized, or heavy shipments. Cost, insurance, and freight are solely applicable to sea or water shipments and do not apply to other forms of transportation. This transportation technique is most commonly applied when shipping full containers.
The items are shipped to the destination port in the sales contract. Any loss or damage to the product remains the seller's responsibility until the goods are delivered to the destination port. When the products arrive at the port of destination, the buyer is responsible for any fees or expenses associated with unloading and conveying the cargo to the final destination. Furthermore, the buyer is liable for the cost of the goods, import clearance and related costs, and shipment from the point of origin.
What Are the Responsibilities of Buyers and Sellers in CIF Agreements?
CIF specifies the seller's liability for delivering the goods to the buyer. The seller is responsible for obtaining export approvals for the product. The seller should cover the cost of any damage or destruction to the items, and provide product inspections. When the items arrive at the port of destination, the buyer becomes responsible for the costs of importing and delivering the commodities. The buyer’s responsibilities are covering the unloading of the product at the port terminal, as well as the customs tax costs and importing of the products.
What is Free Carrier (FCA)?
FCA is the abbreviation of the term Free Carrier. It means that the seller delivers goodsto the carrier by stating the location of delivery in his country in international trade. FCA is known as a mode of transportation in which the buyer bears the majority of the responsibility.
How is the FCA delivery method done?
Under FCA, the seller provides the products to the transport company, which is packed in line with international transport regulations. The seller provides the necessary information for delivery by identifying the delivery location. In the meantime, the seller is accountable for all procedures, including local shipping expenses and export requirements. The seller's obligation is to deliver the products completely to the carrier selected by the buyer. After completing the relevant formalities, the seller transfers the goods. With the transmission of the products, the buyer assumes full liability. The FCA delivery method can be defined as a delivery method in which the risks are undertaken by the buyer.
What Are the Responsibilities of Buyers and Sellers in FCA Agreements?
The seller is principally obligated in this mode of delivery to prepare the goods under the order as required. Some items necessitate specific packaging and packing, whilst others do not. The packing procedure differs based on the product. According to international dangerous goods shipping regulations, it is the seller's responsibility to control the quality of the goods.
During the export of the goods, the seller who prepares the goods provides the relevant permits. The seller's responsibility ceases after the customs processes are completed and the paperwork is delivered. Product delivery occurs at the location agreed upon with the buyer's shipping firm. Expenses such as internal transportation and loading incurred prior to delivery are entirely the seller's responsibility.
All risks pass to the customer after the seller delivers the items. As with other kinds of delivery, it is the buyer's responsibility to pay the price of the products as agreed in the contract. Any damage incurred in transit is the buyer's responsibility. In order to decrease the chance of such occurrences, the buyer obtains products and transportation insurance. The buyer is also responsible for customs and tariffs in the country where he is located, in addition to the freight cost.
What are the Differences Between Free Carriere (FCA) and Cost, Insurance, and Freight (CIF)?
The seller is responsible for the delivery and shipment manner agreed upon in advance with the customer in FCA delivery mode. Regarding that, the buyer assumes accountability. The seller is responsible for all costs until the goods arrive at the point of destination under the CIF agreement. When the products are ready for transport, the customer bears all risks.
Another distinction is the variation in transportation routes. CIF is a limited delivery regulation that is exclusively applicable for products transported by water. However, FCA delivery standards apply to all modes of transport, including land, sea, and air. Under CIF conditions, the exporter covers the majority of the transportation costs and has complete control over the freight. Nevertheless, under FCA regulations, the exporter has no control over the major mode of transportation.
The exporter is required to cover the costs of shipping the products to the specified location in the importer's country under the CIF delivery terms. However, under FCA terms of delivery, the exporter covers the expense of the products' transportation when they are loaded onto the carrier specified by the importer.
