Incoterms FCA: Spotlight on Free Carrier

David Noah | February 24, 2016 | Export Basics, Incoterms
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Fotolia_84303322_XS.jpgIncoterms are the official International Chamber of Commerce (ICC) rules for explanation of trade terms. Incoterms are adhered to by all major trading nations of the world, and they are the authoritative text for determining how costs and risks are allocated to the parties conducting international transactions. Incoterms facilitate the conduct of international business by defining the responsibilities of the involved participants.

In this series, we’ll explore all 11 Incoterms by investigating the basic meaning of each trade term. The first Incoterm I’ll discuss is Free Carrier (FCA).

What Does the FCA Trade Term Mean?

The Incoterm Free Carrier (FCA), sometimes known as Free Carrier At (named place), means “that the seller delivers the goods to the carrier or another person nominated by the buyer at the seller’s premises or another named place.” (ICC)

When Can FCA Be Used?

FCA can be used for any mode of transport—air, courier, truck, rail, vessel or multi-modal shipments.

Use Case

A seller agrees to FCA Incoterms 2010 ex seller's premises (you can substitute this for an actual collection point with full postal address details). On this basis, the seller's cost responsibility is limited to the mandatory provision of export clearance, with no additional costs being incurred. The responsibility of collecting the goods from the exporter's premises and having them forwarded to the final destination is the responsibility of the buyer. The risk in transit transfer point also happens to be at the seller's premises.

This means that the buyer bears any transport risk while the goods are travelling within the exporter's country. The buyer may well expect to achieve a comparatively lower buying price but has comparatively more costs to bear as they are now responsible for the movement of the goods. (You can find more examples here.)

Benefits

  • Flexibility of use. Carriage can be decided by the buyer or the seller on the behalf of the buyer.
  • FCA is the a preferred option for goods where the buyer arranges for the main carriage. (Incoterms Explained)

Considerations

  • Because the term FCA is flexible, it can lead to misunderstandings between the seller and the buyer as to which costs accrue to which party and who is responsible for providing transport documents. This is because the delivery point under FCA can vary anywhere from the seller's premises to the point of export, be it the wharf or the airport, or where land-based transport is used for export, the road or rail terminal. You can learn more about that issue in Roberto Bergami’s article, Variations in Using Incoterms 2010.
  • With FCA, “parties are well advised to specify as clearly as possible the point within the named place of delivery, as the risk passes to the buyer at that point.”  (ICC)
  • Being as precise as possible with the delivery address will help you avoid potentially costly mistakes with FCA.

Learn More about Incoterms and FCA

There are myriad resources available to help you further understand the trade term FCA and all Incoterms. We have a robust archive of Incoterms-related articles on our International Trade Blog. To get you started, we’ve chosen several of our most popular helpful articles along with other industry resources.

Shipping Solutions export documentation and compliance software can help you streamline the process of adding Incoterms and making sure your documentation is correct throughout the transaction. You can try it for free today!

Download Incoterms 2010 Chart of Responsibilities