FCA (Free Carrier): Definition and full explanation (2024)
FCA (Free Carrier) outlines the responsibilities of both the buyer and seller in shipping. It’s essential for understanding who handles transport and risks during product delivery. In this article we will discuss:
What does FCA stand for and what is the meaning of it?
FCA, or Free Carrier, is an shipping Incoterm that clarifies the responsibilities between buyer and seller in international trade. The seller delivers the goods to an agreed location and ensures they are ready for export. From that point onwards, the risk and further arrangements, including import duties and customs costs, fall on the buyer. FCA is flexible and applicable to various modes of transport, providing clarity on the moment of transfer of responsibility, making it popular in international trade. In common FCA does benefit the seller the most.
Responsibilities for buyer and seller
Below is an overview of the key responsibilities for both the buyer and the seller:
| Seller | Buyer |
|---|---|
| Delivery at the agreed location: The seller must deliver the goods to the agreed place, such as a warehouse, port, or transport terminal. This location could be within the seller's country or elsewhere, depending on the agreement. | Organisation of transport from the delivery point: The buyer is responsible for organising and paying for transport from the agreed point of delivery. This may involve arranging air, sea, or road transport, depending on what has been agreed. |
| Export documentation: The seller is responsible for arranging all necessary documentation for export. This may include export licences, permits, and other required papers to ensure the goods can be legally exported. | Import formalities: The buyer must handle all import formalities in the destination country, including obtaining permits, paying import duties and taxes, and ensuring customs clearance. |
| Packaging and labelling: The seller must ensure that the goods are properly packaged and labelled for transport. This also includes checking that the goods are suitable for the agreed mode of transportation. | Costs after delivery: All costs incurred after delivery, such as transport fees, insurance, import duties, and customs charges, are the responsibility of the buyer. |
| Transfer of risk: Once the goods have been delivered to the agreed location and handed over to the carrier designated by the buyer, the risk of loss or damage to the goods transfers from the seller to the buyer. | Risk bearer from delivery: From the moment the goods are handed over to the buyer's chosen carrier at the agreed delivery location, the buyer assumes full responsibility for any risk of damage or loss. |
| Flexibility: The seller has the freedom to choose a nearby location for the transfer of goods, which is often logistically simpler and more cost-effective. | Risk management: From the agreed point of delivery, the buyer assumes the risk, but they can effectively manage this by arranging their own insurance and controlling the transport. |
Advantages and disadvantages
Below is an overview of the advantages for each party:
| Advantages for the seller | Advantages for the buyer |
|---|---|
| Limited responsibility: The seller is only responsible for delivering the goods to an agreed location, usually within the seller's own country. After this delivery, the responsibility for further transport, including risks and costs, lies with the buyer. | Control over transport: The buyer has the opportunity to fully organise the international transport. This can be beneficial if the buyer can secure better deals with carriers or has preferences for certain logistical partners. |
| Cost control: Since the seller is only responsible for domestic transport and export documentation, they have more control over the costs incurred. They do not need to cover additional expenses such as insurance or freight charges for international transport. | Cost transparency: As the buyer is responsible for the transport from the point of delivery, they have full control over the costs incurred after the transfer, such as customs formalities and import duties. This provides greater insight and control over the total costs. |
| Flexibility: The seller has the freedom to choose a nearby location for the transfer of goods, which is often logistically simpler and more cost-effective. | Risk management: From the agreed point of delivery, the buyer assumes the risk, but they can effectively manage this by arranging their own insurance and controlling the transport. |
FCA offers the seller most benefit
While FCA provides advantages for both parties, the majority of the benefits generally favour the seller, as they have fewer responsibilities and risks once the goods are delivered to the agreed location. From that point onwards, the buyer assumes all further risks but gains greater control over the logistical processes.
Is FCA the right incoterm when shipping or delivering products from the UK?
FCA allows sellers in the UK to end their responsibility early by handing over goods to a specified carrier, shifting the risk and logistics to the buyer after export formalities are completed. This simplifies the export process, especially with complex post-Brexit customs procedures, and helps reduce transportation costs for the seller. However, clear communication about the delivery point is crucial. If buyers prefer more seller involvement, other Incoterms like CPT or DDP may be more suitable. Overall, FCA is efficient, risk-limiting, and cost-effective for UK sellers.
An example in eCommerce when FCA is used (UK to Germany)
Suppose a German consumer purchases a product from a British online store that sells electronics. The consumer orders a new smartphone, which needs to be shipped from the UK to Germany.
Seller's responsibility (the UK webshop):
Buyer's responsibility (the German consumer):
What are the alternatives for FCA?
| Best for buyers seeking full control. | Ideal for buyers wanting less involvement in logistics. | Excellent for sea transport, especially with large shipments. |
| Ex Works (EXW): | Delivered at Place (DAP): | Free on Board (FOB): |
| The seller has minimal responsibility. | The seller is responsible until the goods reach the agreed location. | The seller assumes risks and costs until the goods are loaded onto the ship. |
| The buyer collects the goods from the seller’s location. The buyer is fully responsible for transport costs and risks from that point onwards. | Advantageous for buyers without a strong logistical infrastructure. | Useful for buyers looking to control maritime shipping costs. |
| Suitable for buyers who want full control over their shipments. | The buyer is responsible for import duties and customs formalities. | Specific to sea and inland waterway transport. |
| Less attractive for smaller businesses or those without knowledge of local regulations and logistics. | Reduces logistical concerns for the buyer. | Ideal for large cargo shipments. |
For which industries is FCA used the most?
Depending on the characteristics of a specific sector certain Incoterms such as FCA (Free Carrier), may be used more frequently than others. Below is an overview of how and why FCA is used more often in certain industries than other terms.
Manufacturing and Technical Industry
In the manufacturing and technical industry, FCA is a commonly used Incoterm. This sector often deals with complex, expensive equipment that is highly sensitive to damage during transport. Companies in this industry frequently choose FCA as it allows the seller to deliver goods to an agreed location, such as a transport terminal, after which the buyer assumes full control and responsibility.
Automotive Industry
FCA is also used for the export of car parts and complete vehicles. This industry often utilises complex supply chains where parts from various suppliers around the world are shipped to assembly plants. FCA provides flexibility, as the buyer can arrange transport from a logistics hub, such as a port or distribution centre. This gives the buyer more control over the transportation of often costly and time-sensitive shipments, while the seller limits their risk.
Agriculture and Food Industry
In the agriculture and food industry, FCA is less commonly used because this sector typically relies on terms such as FOB (Free on Board) or CIF (Cost, Insurance and Freight), especially for the export of bulk goods like grain, fruit, or meat. This sector often leans on maritime transport, where FOB is preferred.
FAQ about FCA (Free Carrier)
Where can I find the Incoterm that applies to me?
The Incoterm applicable to a transaction is typically outlined in the sales contract or purchase agreement between the buyer and seller. These contracts specify the terms of sale, including the Incoterm that governs responsibilities for transport, costs, and risks.In addition, the chosen Incoterm may also be included in other documentation, such as:
Invoices or pro forma invoices
Shipping documents, such as the Bill of Lading or Air Waybill
Customs documents
The product breaks down at the carrier. Can I still do anything as a buyer?
There are definitely some actions the buyer can take when a product is damaged:
Transport insurance: The buyer can arrange insurance to cover damage or loss during transport, as FCA does not oblige the seller to provide this.
Carrier liability: In cases of damage caused by the carrier's negligence, the buyer may file a claim, but carrier liability is often limited, so additional insurance is recommended.
Additional services: Buyers can opt for extra services such as protective packaging or temperature-controlled transport to minimise the risk of damage.
What is the role of a fulfilment centre within FCA?
When you have a subscription on fulfilment services from a fulfilment centre, the fulfilment centre supports the seller by storing, preparing, and handing over goods to the buyer’s chosen carrier at an agreed location. This includes packing, labelling, and preparing the goods for shipment, with the fulfilment centre also taking care of customs formalities. Once the goods are handed over, the seller's responsibility ends. The fulfilment centre also plays a key role in communication and coordination between the seller and the carrier, ensuring the process runs smoothly and without delays.
