In this guide we explain the meaning of FCA Incoterms, and how their costs, risks and responsibilities are divided between the parties conducting an international trade transaction. The explanation of FCA Incoterms is as per the Incoterms 2020 rules published by the International Chamber of Commerce (ICC), and this version is expected to be in effect till December 2029.
The Incoterms guidelines published by the ICC have always been crucial in understanding international trade, as they are not only accepted by governments but also legal authorities worldwide. With Incoterms 2020, the ICC has raised the bar for how buyers and sellers can conduct international trade transactions more effectively.
FCA Incoterms 2020 - Meaning
FCA stands for Free Carrier, where the buyer arranges the main carriage. As per the shipping terms under the free carrier system, the exporter is responsible for loading of goods at an agreed upon place in the exporter’s country and from that point onwards, the importer is in charge of all the risks and costs bearing factors.
FCA is known as a flexible rule which can be used for any transport mode, or where there is more than one transport mode. FCA is also considered a better rule for a buyer as compared to EXW (Ex Works), which requires the seller to organise the export documents and follow necessary procedures as per the rules of the exporter's country, which a buyer from another country might not be aware of.
FCA Incoterms Process Flow
There are usually two types of cases which will arise in an FCA transaction:
Case 1: Seller (exporter) delivers at seller’s (exporter’s) premises
The exporter just loads the goods from his premises in the importer’s truck.
Seller’s place of delivery
- In this scenario, the place of delivering goods before shipment is decided by the buyer.
- The processing responsibility rests with the buyer.
- The seller loads the goods, in a vehicle arranged by the buyer.
- The goods are then transported to the place nominated by the buyer (even though it's the seller's place).
- Responsibility of unloading goods totally rests with the buyer.
Case 2 : Seller (exporter) delivers at buyer’s (importer’s) location in seller’s (exporter’s) country itself
Here, the exporter delivers the goods at the location nominated by the importer (terminal, transport hub, forwarding agent's warehouse, etc.).
Agent’s place of delivery
- In (FCA) Free Carrier Incoterms, the place of delivering goods before shipment is decided by the buyer -- nominating his own vessel, transport hub, forwarding agent, etc.
- The processing responsibility rests with the exporter, till the agent’s warehouse.
- The seller loads the goods & transports it till the warehouse.
- Once the goods are transported to the agent’s warehouse, their responsibility shifts from the seller to the buyer.
- The unloading of goods is also the responsibility of the buyer.
Documents Required under FCA
These documents are to be provided by the seller to the buyer.
- Providing all the documents, in terms of commercial invoice, bill of lading, packing list, etc. and the equivalent documents mentioned during the period of contract, along with the loading of goods, supported with proper identification and verification.
- The documents can be in any format, i.e., either paper or electronic form.
Buyer’s Responsibility To pay the price of goods and all the transportation costs from seller’s place to buyer’s nominated place where the goods are unloaded by the seller.
Seller’s Responsibility According to FCA terms, the seller must pay for all the cost bearing alternatives, from inspection to the verification of goods. The procedure may vary in terms of the quality/quantity of checking or measuring and weighting the goods necessary for the purpose of delivery. An inspection of goods has to be carried out before the shipment. The seller has to take into consideration that the goods have to be packaged in a manner which is appropriate for export.
Buyer’s Responsibility There is absolutely no obligation for the buyer concerning checking, marking, verifying and packaging the goods in terms of quality and responsibility procedures.
Seller’s Responsibility Case 1 - Seller must deliver the goods to the person/place nominated by the buyer, even if the place belongs to the seller.
Case 2 - The seller is responsible for the delivery of goods till the agent’s warehouse.
Buyer’s Responsibility The delivery procedure stays the same in both cases. The goods once delivered by the seller at the agreed place must be received by the buyer. In case of a place nominated by the buyer, this can be the responsibility of the buyer's agent.
Seller’s Responsibility Under the transportation terms, there is no carriage obligation in the seller's contract. But on the request of the buyer, the seller may undertake some carriage responsibilities and custom clearance procedures.
Buyer’s Responsibility The buyer may hire an agent/vessel/trustee at their own risk. The cost of carriage rests with the concerned party and is then transferred to the buyer.
Transfer of Risk
Seller’s Responsibility Case 1 - The seller bears the risk of goods upto the loading of goods.
Case 2 - The seller bears the risk & responsibility of goods upto the agent’s warehouse.
Buyer’s Responsibility The buyer bears all the risks concerning damage to the goods from the time goods have been delivered by the seller to the nominated place.
Seller’s Responsibility There is no risk beyond the loading of goods, so there is no obligation of insurance in a free carrier contract. However at the buyer’s request, the seller may also arrange for insurance.
Buyer’s Responsibility All the risk and cost responsibilities from the point of delivery are transferred to the buyer as per FCA incoterm, hence there is no obligation on the seller to arrange for insurance. He may assist the buyer with getting insurance, as per the terms of agreement between them. It is the buyer's responsibility to insure the goods while in transit. If the goods are damaged while they are being transported, and the seller refuses to pay, then the buyer can claim insurance.
Also Read: __ Marine Insurance Policy and Benefits__
Seller’s Responsibility FCA Price borne by the seller :-
- The seller must pay all costs relating to delivery of goods, which are incurred either till the goods are loaded at the exporter’s premises or the goods are delivered at the buyer’s nominated place.
- All the duty taxes paid for the export procedure.
- Costs of providing the documents to the buyer and all the costs incurred in the export customs clearance procedure.
Buyer’s Responsibility FCA Price borne by the buyer :-
- All the costs after the goods are delivered are borne by the buyer
- This excludes any taxes or duties which are to be paid in the exporter’s country for exporting the goods, but includes any taxes or duties to be paid in the importer’s (or buyer’s) country for import procedure.
- The seller has to pay all costs incurred in providing document of proof for delivery of goods.
- Also with reference to Case 2, the buyer has to bear the cost for forwarding agent and vessel and the cost of delivering goods from the nominated place to the actual shipment port.
Difference between EXW, FOB & FCA
Also read: FOB__
FAQs on FCA Incoterms
1. Who is responsible for the rules under FCA?
The term FCA is one of the commercial rules pubilished under Incoterms 2020, issued and governed by the International Chamber of commerce. The rules under FCA are regulated by ICC, but the buyer and seller can execute the trade deal as per their agreement. Hence, both buyer and seller hold responsibility for ensuring that their deal is executed as agreed.
2. What does FCA Seller’s facility mean?
FCA seller’s facility is the warehouse where the goods are maintained at the initial stage of the transit process.
3. What does FCA destination mean?
FCA destination is the ultimate place of delivery where the goods are delivered by the seller and the risk is transferred to the buyer.
4. Can FCA be used for air freight?
FCA can be used for any mode of transit including air freight.
5. How does FCA work?
Under FCA, the buyer arranges the main carriage. In an FCA transaction, the exporter is responsible for loading of goods at an agreed upon place in the exporter’s country and from that point onwards the entire shipping process and risk is on the buyer or importer.
6. Who is responsible for export clearance under FCA?
Responsibility for customs clearance process rests with the buyer, he has to take care of customs duty and procedure in both exporter's country and his own. The seller or exporter has responsibility only till the place of delivery.
7. Who pays FCA freight?
The carriage proceeding under FCA is to be carried out by the buyer, hence the freight too has to be paid by the buyer.