FCA Incoterms: Costs, Risks & Responsibilities

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 Meaning

FCA stands for Free Carrier, where the buyer arranges the main carriage. As per the shipping terms under the FCA 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 2020

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

• Here 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

• Commercial Invoice
• Packing List
• Bill of Lading
• Wood Packaging (if required)
• Insurance Certificate
• Industrial License
• Export License

These documents are to be provided by the seller to the buyer.

Seller’s Responsibility

General Obligations

• 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.

Packaging

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.

Delivery terms

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.

Carriage

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.

Transfer of Risk

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.

Insurance

There is no risk beyond the loading of goods, so there is no obligation of insurance in an FCA contract. However at the buyer’s request, the seller may also arrange for insurance.

Costs

• 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 Responsibilities

General Obligations

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.

Packaging

There is absolutely no obligation for the buyer concerning checking, marking, verifying and packaging the goods in terms of quality and responsibility procedures.

Delivery terms

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.

Carriage

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

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.

Insurance

All the risk and cost responsibilities from the point of delivery are transferred to the buyer as per FCA, 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 advised that the buyer should 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

Costs

• 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