The Meaning of FCA in International Trade

In international trade, FCA (Free Carrier) is a trade term widely used in import and export trade contracts. The following will introduce the meaning, scope of application, division of responsibilities and precautions of FCA clauses in detail.

Learn more: The 11 Common International Trade Terms

FCA Definition

FCA, or Free Carrier, is one of the commonly used terms in international trade, which is used to clearly define the responsibilities and obligations of the seller and the buyer in the process of goods delivery.

FCA means that the seller needs to hand over the goods to the carrier designated by the buyer at the designated place agreed in the contract and is responsible for handling export customs clearance procedures. Once these steps are completed, the seller is deemed to have completed the delivery, and the risk and cost of the goods will be transferred to the buyer.

Scope of Application of FCA Clauses

FCA applies to all modes of transportation (including sea freight, air freight, rail freight, road and multimodal transport)

Responsibilities of Buyers and Sellers in FCA Agreements

Seller Responsibilities

Under the FCA Incoterm, the seller must handle the entire export process for the products he sells. Once the goods are ready to be shipped, the responsibility shifts to the buyer.

• Packaging for Export: The goods must be packed for export. The party responsible for this must ensure that the packaging complies with export regulations.
• Loading Charges: When the goods leave the seller’s location, these are any costs incurred to load the goods onto the first carrier to transport the goods to the export location.
• Delivery to Port/Location: Once the goods are loaded on the truck, these costs are related to transporting the goods from the seller’s location to the designated port or location where the goods will be exported.
• Export Duties, Taxes and Customs Clearance: The costs and responsibilities incurred to officially export the goods from the country of origin.

When trading under the FCA Incoterm, the above responsibilities are entirely borne by the seller. Once these responsibilities have been fulfilled, the goods can be transferred to the buyer. All risks arising from the subsequent steps of the logistics process will be borne by the buyer.

Buyer’s Responsibilities

When the goods clear customs and arrive at the designated location, the risk passes to the buyer, and the following are the responsibilities that the buyer must fulfill to complete the logistics process.

• Port of Departure Charges: Any charges or requirements incurred to load the goods to the designated vessel’s loading port during the main part of the transportation process.
• Loading Charges: Loading charges required by the shipping company for loading the goods onto the carriage.
• Freight: This is the freight charged when transporting the goods from the port of departure to the port of destination.
• Insurance: Although insurance is not an obligation, it is the buyer’s responsibility to determine whether they want to purchase insurance.
• Destination Terminal Charges: Any terminal charges associated with unloading, transshipment, and holding the goods once the goods arrive at the destination port while awaiting the formal import procedures.
• Delivery to Destination: Transporting the goods from the destination port to the buyer’s requested delivery destination.
• Destination Unloading: Any costs incurred to unload the goods at the buyer’s requested delivery destination.
• Import Duties, Taxes, and Customs Clearance: The costs and responsibilities associated with importing goods are borne by the buyer.

If any inspection, duties, taxes or other requirements imposed by customs authorities occur, the buyer must comply or compensate.

Advantages and Disadvantages of FCA

Advantages of FCA

• Clear division of responsibilities
• Wide scope of application
• Friendly to buyers, better control of the transportation process
• Reduces the transportation pressure of sellers
• Promotes transportation efficiency

Disadvantages of FCA

• The buyer bears higher risks, and the buyer shall bear the losses or damages in the transportation process.
• High export customs clearance requirements for sellers
• Ambiguous insurance liability
• May increase the buyer’s costs

Things to Note about FCA terms

• Clearance of the place of delivery: The place of delivery must be specified in the contract to avoid misunderstandings during the handover.
• Choice of carrier: The buyer needs to inform the seller of the designated carrier information in advance to ensure smooth delivery.
• Clear division of costs: The contract should clearly state who will bear the costs to avoid subsequent disputes.
• Responsibility for export customs clearance: The seller needs to be familiar with the customs clearance process of the exporting country to ensure smooth customs clearance of the goods.
• Preparation of transportation documents: The seller needs to provide accurate transportation documents such as bills of lading or proof of delivery.
• Risk management: The buyer should purchase insurance as soon as possible after the goods are delivered to avoid risks that may arise during transportation.
• Control and payment of goods: Under FCA terms, the buyer needs to pay the price of the goods and require the seller to submit a transferable transportation document. The seller should ensure that he retains control of the goods before delivery to protect his claims

FCA is a flexible trade term applicable to various modes of transport. Understanding its characteristics and using FCA flexibly can make trade go smoothly.