These days, many international commercial terms are used mainly in international transactions. However, how many of them are you well conversant with? One of the common shipping terms is Free Carrier (FCA).
What does FCA free carrier means, or what’s the essence of this incoterms rules? All of that will be answered in this blog.
What is FCA incoterm meaning?
The Free Carrier (FCA) incoterm is used when the seller is responsible for most or all of the export formalities and duties at the origin. On the other hand, FCA means the buyer’s responsibility includes international transportation and some select origin operations.
This FCA shipping term is flexible and indicates that the seller delivers goods to an agreed-up location, generally at a seaport or airport. Still, it can also be the forwarder’s or seller’s warehouse.
FCA is one of the commercial rules published under Incoterms 202, issued and ruled by the International Chamber of Commerce. The International Chamber of Commerce regulates the rules under FCA, but the buyers and sellers can execute the trade deal per their agreement.
How Free Carrier (FCA) works?
FCA shipping terms mean the seller delivers the goods to the carrier’s designated terminal, which the buyer requires at the designated place, and goes through the export clearance and customs formalities to finish the delivery.
It must be considered that the selection of the named place affects the obligations to load and unload at that location. On top of that, the seller is responsible for loading charges, especially if the seller delivers at its place, and is not responsible for unloading if the seller delivers at any other location.
FCA incoterms can be utilized for different modes of transport, including multimodal transport. “Carrier” indicates any person in a contract of carriage who undertakes to conduct the shipment by inland waterway, sea freight, air, road, rail, or a combination of the above.
If the buyer arranges or requests to appoint a person other than the carrier to collect the goods, the seller will be deemed to have fulfilled the obligation of delivery when the goods are delivered to that person.
Seller’s Obligations Under the FCA Free Carrier
· Export and documentation
Export clearance in the export nation is the only file the seller is responsible for in Free Carrier (FCA).
· Pre-carriage
The seller arranges pre-carriage delivery from the seller’s premises to the named place or agreed-on port.
· Pre-shipment inspection
The supplier is responsible for doing the export packaging and pre-shipment inspection and making sure the cargo does not have any damages.
Buyer’s Obligations Under FCA Free Carrier
· Contracting the main carriage
The buyer is responsible for contracting the main carriage, such as the shipping line or airline.
terminal or the seller’s place.
· Transport documents and insurance papers
The buyer assumes to arrange most of the required transport documents except the export and customs formalities in the seller’s home country.
· Duties and taxes
The buyer assumes responsibility for paying their region’s export and import duties, import clearance, and other taxes.
· Buer should take risks after the seller delivers goods.
The buyer should be responsible for all the risks, costs, insurance, and all others after the seller deliver the products to the agreed place.
When Should I Sign an FCA agreement?
You can use free carrier incoterms in international trade and domestic shipping. You must use it if:
· You obtain the first carrier responsible for loading and delivering goods at the shipping terminal and finding the shipping line.
· You understand how to contact a freight forwarder, and you can perform payments for transportation costs.
· You are comfortable with arranging local transport modes in the seller’s country.
· The cargo you are shipping is containerized.
Who pays the freight costs with FCA incoterm?
Overall, the buyer is responsible for covering the transport costs for FCA shipping terms. As the buyer picks the carrier and assumes most responsibility, they will cover the costs once the carrier has received the delivery. Meanwhile, the seller only covers the delivery costs to the carrier.
What is the difference between FCA Agreement and FOB Agreement?
In China, many suppliers request to ship in FOB, as it’s less risky than Free Carrier. The seller is responsible for all the goods and pays for Export country inland shipping and export costs in FOB.
What is the difference between FCA and DDP?
DDP stands for delivered duty paid. Both of these incoterms are utilized for all modes of transport. However, DDP is the opposite of FCA incoterms as it puts all the responsibilities to the seller.
Under DDP, the seller covers everything from pre-shipment inspection, loading charges, and delivery of goods to the final destination (usually the buyer’s premises). Transport document, Loading charges belong to the seller. Export duties are paid by the seller, Origin terminal charges must be paid by the seller, and the seller pays Carriage.
What is the difference between FCA and EXW?
Free Carrier offers lower-risk transfers to buyers than EX Works. In the EXW incoterms rules, the seller is responsible for export packaging at the seller’s premises. Then upon collection, the liability transfers to the buyer, who will arrange it, and the buyer pays for the rest of the shipping process.
With Free Carrier, they pack and load the goods properly and complete the export duty, export clearance, and more, leaving the buyer in full control of logistics. Nonetheless, liability transfers to the buyer when the goods are delivered to the named place.
Is the FCA agreement for China imports a good idea?
Normally, unless you fall into the above categories, the FCA incoterms are not the most suitable agreement to utilize in international trade, especially when importing goods from China for beginners.
Note that China is a unique country where factors export a lot and can do it efficiently. That’s because they depend on one major incoterm: FOB.
Therefore, unless there’s a legit reason why FOB shipping is not suitable for your international trade, it’s best to stick with what works and not confuse things by testing out other terms.
Assuming you are an importer trying FCA shipping terms for your next shipment in China, this is what we can advise. Ask your factory if they’re comfortable with commercial invoices quoting FCA shipping. Next, reach out to your freight forwarder so you can have them help you compare FCA shipping with FOB shipping.
Conclusion about Free Carrier
Remember that the responsibilities switch early to the buyer in FCA shipping terms. Therefore, if you are not confident of whether or not you can deal with the shipping terms and risks of contacting a shipper, freight forwarder, export packaging, pre-shipment inspection, and more, then it might be best to utilize other shipping terms, such as CIF or FOB, as an alternative. Click here to learn more about FOB, CIF, EXW, and DDP.
If you require a reliable freight forwarder to help with your FCA shipping or other incoterms shipping from China worldwide, DFH is here to help. We’ve helped hundreds and thousands of clients pick which shipping terms to use. Don’t hesitate to contact us.
