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What is a Free Carrier (FCA) incoterm?
A Free Carrier or FCA incoterm means that the exporter is responsible for delivery of goods to the destination specified by the importer. Learn more about it here.
In an export-import business, the element of risk is usually higher since goods are under transportation for longer periods when compared to domestic transactions. To promote safe and hassle-free export, the International Chamber of Commerce (ICC) has defined terms and guidelines.
What is a Free Carrier (FCA) incoterm?
A Free Carrier or FCA incoterm means that the exporter is responsible for delivery of goods to the destination specified by the importer. The word ‘free’ means that the exporter takes responsibility and liability of goods during transit and the importer is free from any such responsibility. The destination specified by the importer is typically an airport, warehouse, office or port in the country of the importer. The exporter usually includes the transportation cost in the price and is liable for goods until they are received by the importer at the agreed destination1.
How does a Free Carrier (FCA) incoterm work?
Exporters and importers engaged in international trade can use FCA shipping terms to highlight the nature of the transaction, terms and to describe any transportation point. The number of transportation modes has no impact on the shipping process. The importer and exporter agree on the final delivery point for goods and the exporter is responsible for timely delivery. The importer is not expected to handle the export licenses and transportation process.
Example of FCA
To understand the concept of FCA better, let us consider an example. Business A (importer) purchases 1,000 pieces of home décor products from business B (exporter). Under FCA shipping terms, they have agreed that B will deliver goods to A’s warehouse. In this case, B is responsible for ensuring that the goods reach the warehouse promptly without any damage. B is also responsible and has the liability for goods till they reach the warehouse.
The above-mentioned example is fictional and has been used to explain the concept.
The above-mentioned example is fictional and has been used to explain the concept.
Documents required for FCA
Below are some of the documents that the exporter needs to provide to the importer3:
• Commercial invoice
• Packing list
• Bill of lading
• Industrial license
• Export license
• Insurance certificate
• Commercial invoice
• Packing list
• Bill of lading
• Industrial license
• Export license
• Insurance certificate
Advantages and disadvantages of FCA
Advantages of FCA
The key advantage of FCA is that the importer has high control and flexibility in the process. As the exporter is liable to deliver goods at the agreed point, the liability only shifts once the goods have been delivered. For the exporter, it is beneficial because the transportation of merchandise is until a certain point and after that, the importer is responsible for the goods. Also, the exporter has better control over price as shipping costs are usually added to the total cost.
Disadvantages of FCA
The main disadvantage is that the importer is a participant in the process, which might lead to confusion or involvement.
FCA exporter and importer obligations
Some of the obligations of the parties involved are:
General obligations
Exporter’s obligations
Supplying all the paperwork, including commercial invoices, bill of lading, packing list, etc., and any other paperwork that might have been discussed throughout the course of the contract are the obligations of the exporter. The documents can be in any format, i.e., either paper or electronic form.
Importer’s obligations
To cover the whole cost of the products, including all transportation fees from the seller's location to the buyer's designated location when the goods are unloaded are the obligations of the importer.
Packaging
Exporter’s obligations
The exporter is required by the requirements of the FCA to cover all cost-bearing options, from inspection to the verification of the goods.
Importer’s obligations
The importer is under no need to inspect, mark, confirm, or package the items in a way that reflects accountability and quality.
Terms of delivery
Exporter’s obligations
Even if the location belongs to the vendor, the exporter must deliver the products to the person or location specified by the importer.
Importer’s obligations
The importer is required to accept the items after the supplier delivers them at the designated location.
Carriage
Exporter’s obligations
The exporter’s contract contains no carriage duty as defined under the transportation terms. The exporter may take on some carriage duties and customs clearance processes.
Importer’s obligations
The burden of paying for transportation falls on the party in question before being passed on to the importer.
Risk of transfer
Exporter’s obligations
Up until the point of loading to the agent’s warehouse, the exporter is responsible for the items.
Importer’s obligations
When the vendor delivers the products to the designated location, the importer assumes full responsibility for any risks of product damage.
Insurance
Exporter’s obligations
A free carrier contract does not require insurance because there is no danger when the goods are loaded. However, the exporter may also make insurance arrangements if the importer so requests.
Importer’s obligations
According to the FCA incoterm, the importer is responsible for covering all costs and risks from the date of delivery.
Cost
Exporter obligations
All delivery-related expenses, up to the items being loaded at the exporter's facilities or until the goods are delivered at the importer's designated location, need to be covered by the exporter.
Importer’s obligations
After products are delivered, the importer is responsible for paying all taxes or duties incurred in the import procedure.
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More blogs on incoterms
Frequently Asked Questions
Where is the Rubber Board of India situated?
FCA and FOB are shipment terms that are used during transportation of goods. FOB is primarily used for sea shipments. FCA covers all types of transport.
What is the difference between FCA and DDP?
Under DDP, the exporter is responsible for paying transportation costs and is liable for transportation of goods to the importer. However, in case of FCA, transportation cost is paid by the importer while the exporter is responsible for shipment of goods.
Are FCA and EXW the same?
No. Ex Works or EXW means that goods are delivered to the importer at the exporter’s premises, while the exporter is responsible for delivering goods at a decided place under FCA.
Who pays freight in FCA incoterms?
Under FCA incoterms, freight cost is usually paid by the importer.
Who does customs clearance in FCA?
The exporter is responsible for customs clearance in FCA.
What does FCA origin mean for shipping?
FCA origin means that the exporter can deliver goods at a decided place, which can be the exporter’s premises or any other named place.
What is the difference between FCA and FOB?
FCA and FOB are shipment terms that are used during the transportation of goods. A designated port or shipment acts as the delivery point in Free on Board (FoB), whereas in Free Carrier (FCA), the goods need to be delivered at a place or carrier accepted by both the importer and exporter. primarily used for sea shipments4.
Published on November 29, 2022.
Sources:
1. https://www.aitworldwide.com/incoterms-fca
2. https://www.investopedia.com/terms/f/fca.asp
3. https://www.dripcapital.com/en-in/resources/blog/fca-incoterms
4. https://www.cargoflip.com/post/fob-vs-fca#:~:text=With%20FOB%2C%20a%20designated%20port,the%20buyer%20and%20the%20seller.
Sources:
1. https://www.aitworldwide.com/incoterms-fca
2. https://www.investopedia.com/terms/f/fca.asp
3. https://www.dripcapital.com/en-in/resources/blog/fca-incoterms
4. https://www.cargoflip.com/post/fob-vs-fca#:~:text=With%20FOB%2C%20a%20designated%20port,the%20buyer%20and%20the%20seller.
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*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
*Map not to scale. The map has been used for design and representational purpose only, it does not depict the geographical boundaries of the country. These do not conform to the external boundaries of India recognized by the Survey of India.
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