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What is Free Carrier (FCA) Shipping Incoterm?

Free Carrier - FCA

The International Chambers of Commerce in the decade of the 1930s developed several incoterms of which Free Carrier incoterm was one. Incoterms were created for the sole reason of simplifying the communication shortfalls that surrounds international trade. These terms are internationally understood thus act as a standard.

What is Free Carrier Incoterm?

This is the most common incoterm used. Free carrier incoterm is a trade arrangement which states that the seller holds liability or only for packaging the good and loading into the mode of transport at the truck hub or the port. Post that the buyer is responsible for these things:

  • Shipment of goods
  • Unloading the goods at their port of choice
  • Transportation for the goods till the end destination

This shifting of liability to the seller is what separates Free Carrier Incoterm from the Ex Works.

Free Carrier is also an international commercial term brought into existence by the International Chambers of Commerce that essentially standardised global shipping terms and responsibilities between the seller and the buyer.

In case of Free Carrier Incoterm, the level of responsibility of the supplier is more as compared to Ex Works incoterm. Where as in Ex Works incoterm the seller is only responsible for making or producing goods at their own factory or their place of manufacture, in Free carrier the seller is additionally responsible for the transportation and loading of goods onto a truck at their transport hub or port. From there on the buyer is responsible for everything else including shipping, unloading and transportation till the last stop.

The shift of liability

Now you may be wondering exactly when the liability of the goods shifts from the seller to the buyer in case of Free Carrier Incoterm agreement. As explained above, the seller is responsible for producing, packaging and transporting the goods to the port ready for export. He is able to charge for this extra responsibility. Post that, the good must also be cleared by customs, which is the authority which allows the good to be ‘accepted’. Once the goods are accepted for export, the liability of goods shift to the buyer.

So for example, if the transaction is to occur through sea freight transport, then the shift of liability will happen on the container yard, whose location will be clearly defined in the contract.

Multimodal

The beauty and strength of Free Carrier Arrangement is that they are applicable to multiple modes of transport. They include road, air freight, sea and rail.

Another benefit of this is that it is beneficial and cost efficient for the buyers in the sense that the seller is supposed to take care of all the export licenses and preloading cost which if done in bulk will reduce cost. Above that the buyer will get full transparency of the shipping cost and would not have to deal with any red tape if that exists in a foreign land. Although the seller is allowed to increase the prices due to extra liability but the process on a whole is more trustworthy.

Cost involved with FCA

The total cost of the FCA will depend on from where the goods are being transported and where too. However, a number of general costs are involved as mentioned below:

  • Contract fees (contract of sale)
  • Shipping/ transport costs
  • Insurance
  • Warehouse Storage
  • Unloading Fees

There are also some disadvantages of FCA. Like whenever there is a communication between the buyer and the seller, the buyer will be charged for this communication. Since the seller is not liable post the goods are accepted for shipment, the buyer would have to organize for the insurance post that. These are some key points of disadvantages when it comes to FCA.