What are Free Carrier terms?
Free Carrier (FCA) relates to the payment terms and contractual obligations between a buyer and a seller.
Free Carrier terms dictate that the seller is responsible for the logistics of a shipment until it reaches a specific destination.
The seller fulfills his obligation to deliver when he has handed over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point.
FCA is a trade term from the Incoterms list developed by the International Chamber of Commerce.
The Free Carrier scenario means that the seller will include these logistics costs within their sell price, and this is dictated during the pricing and contractual obligation discussions.
Free Carrier (FCA): Incoterms 2020
FCA, as defined under Incoterms 2020, means that the seller is responsible for loading the buyer’s products to a specified ‘carrier’ on an FCA Named Place or the seller’s premises.
In cases where a seller is located abroad, for example, the seller transports the products from its warehouse and loads them to a buyer’s carrier at a ‘Named Place.’ Upon transfer of custody to the carrier, the buyer is released from any risk or liability. The seller is also responsible for getting export clearance for said products.
In most cases, the buyer hires a carrier (transportation) that picks up the products from the seller’s place of business or warehouse. However, under FCA, the seller is still responsible for safely loading the products to the buyer’s transport.
FCA – Buyer and seller obligations
- Must provide a commercial invoice or electronic equivalent and proof of delivery
- Must provide authorization or export license for the delivery of the goods
- Must shoulder all risks/damage until goods are transferred to the buyers/ carrier’s custody
- Is under no obligation to make a contract of carriage
- Insurance is to be provided at the buyer’s risk and cost
- Must check, mark, package goods
- Responsible for all charges prior to delivery
- Give notice that the goods have been delivered or failed to be collected by the buyer’s carrier
- Must pay the agreed price of the goods as contained in the contract of sale
- Must receive the goods upon delivery
- The buyer must shoulder all risks after custody of the products has been transferred from the seller
- Is under no obligation to insure the goods
- Must assist seller with import/ export clearance
- Responsible for any costs including transportation, insurance, customs documentation, and taxes after custody of goods has been transferred by the seller
FCA and EXW
Under Ex Works (EXW), the seller is responsible for making products ready for pickup at a designated location, but not for loading. This buyer-seller agreement holds the buyer responsible for transportation costs. EXW is one of the current Incoterms (International Commercial Terms) published by the International Chamber of Commerce.
It is important to remember that under EXW, the buyer is not responsible for loading products to your preferred carrier. A common practice is for sellers to transfer/ load products to the carrier, but this is not guaranteed. It is why sellers must verify this arrangement with the buyer and plan their transportation accordingly.
FCA Named Place
The FCA Named Place refers to the location as specified by the buyer where the seller delivers the product for pickup by the carrier. This information is usually included in the shipping terms agreement. Unlike EXW, an FCA agreement stipulates that the shipper would also be responsible for loading the products. It could be a lifesaver, especially if products are being shipped from abroad.
In cases where the FCA Named Place is not indicated, the seller may specify the place where a buyer’s carrier can pick up the products. When the buyer’s participation is required when negotiating with a carrier, the seller may act on the buyer’s behalf but at the buyer’s expense.
The term ‘carrier’ refers to any entity or organization responsible for picking up the products from the seller and delivering it to the buyer. Once the carrier receives the products from the seller, the seller is released from any obligation.
Free Carrier (FCA) quick questions
1. Who decides the carrier of the products?
Under FCA terms, the buyer decides the carrier of the products. The seller receives instructions from the buyer and delivers the products using the buyer’s preferred carrier only.
2. Who pays for transportation?
Since the buyer dictates the carrier of the products, the cost of transportation is shouldered by the buyer. However, it is the responsibility of the seller to ensure that the products are safely delivered/loaded to the carrier.
3. Who pays for insurance?
Under FCA terms, the buyer shoulders insurance payments. The seller’s obligation ends when the products are loaded to the carrier. The buyer, on the other hand, is responsible for selecting the carrier and pays for all the costs associated with transporting products.
4. What happens when there is no specified FCA Named Place?
In cases where no location is specified under FCA, the seller may select the location where the buyer’s carrier can collect the products.