Understanding Incoterms: Free Carrier (FCA)

Here we’re reviewing the Incoterm “Free Carrier” or “Free Carrier Agreement,” abbreviated as FCA.

What is the Incoterm “Free Carrier” (FCA)?

In an FCA shipping arrangement, the seller is responsible for arranging the transit to a designated pick-up point where the costs and the risks are transferred to the buyer.

The seller is only responsible for the goods until they are dispatched to the buyer’s responsibility at a designated point. This could be the warehouse or the factory of the seller but is normally a terminal or transport hub. After the transfer, full responsibility for the goods is taken up by the buyer.

Seller’s responsibility

If the pre-arranged point of collection arranged by the buyer’s forwarder is away from the seller’s own premises, the seller has no responsibility to unload the goods and reload them onto the buyer’s mode of transport.

If the specified point of loading is the seller’s own premises, the seller is responsible for loading the buyer’s goods on to the container/pallet/truck.

In an FCA shipping agreement, the seller is responsible for arranging the export clearance but not for anything after that event, as the buyer assumes full responsibility after the transfer of goods from the seller to the buyer. Up until the point of transfer, the seller is responsible for employing the forwarding/freight company responsible for the transit.

Buyer’s responsibility

In the event that the goods arrive at the designated point to the carrier nominated by the buyer, the whole responsibility of transport, documentation (import paperwork), and insurance now falls to the buyer.

Seller’s benefits

The main benefit for a seller using the Free Carrier is that after he/she has successfully dispatched the goods to the buyer’s forwarder, his/her responsibility is over.

Buyer’s benefits

The buyer benefits from the fact that the responsibility for the freight to his/her preferred pick-up point is all held by the seller. The buyer must arrange for transport to his/her destination, however. Once goods arrive at the carrier and the title transfers to the buyer, the goods become an asset on the buyer's balance sheet and can be entered as part of his/her inventory.

General benefits

The very nature of this transaction means that both parties (buyer and seller) can operate in the areas in which they have the most expertise. The seller is responsible for export from their domain, something that they should be familiar with and able to overcome any local obstacles. Likewise, the buyer should have experience in his/her duty according to the agreement. Because of the nature of this shipping agreement, it is often thought of as one of the fairest transport deals in terms of shared responsibility.

Transport and shipping types that benefit from FCA

Of all the forms of shipping and freight used in global business, the one that stands out as benefiting the most from the FCA shipping agreement is that of overland transit. It works particularly well when arranging transit logistics over big landmasses like Europe or Central Asia, as quite often the vehicle collecting the goods will be the one that transports the goods to the destination.

This being said, many manufacturers and traders also use this method when shipping internationally, as it shares the responsibility with both the buyer and seller.

FCA compared to other shipping methods

An FCA agreement is best compared with an Ex Works agreement in terms of contrast. In an Ex Works agreement, the buyer is responsible for every single factor of transport and bureaucracy. The seller has a minimal amount of responsibility – potentially limited to packaging and labeling the goods safely and correctly.

In an FCA shipping agreement, the seller is responsible for physically handling the goods and arranging the correct export documentation until the transfer of goods to the buyer (at the place of his/her choice) has been completed.

With a Free on Board (FOB) shipping transport agreement, the responsibility of the seller ends and passes on to the buyer when the ship is loaded at the seller’s port, rather than at a designated point of transfer (hub, terminal, airport) for an FCA shipping arrangement.

Conclusion

In conclusion, the FCA Free Carrier shipping arrangement is one that primarily shares the responsibility of goods transport between the seller and the buyer. This lessens the workload for both parties and also places the responsibility for transporting the goods squarely in the domain of expertise of the seller until the goods are transferred and find themselves in the domain of expertise of the buyer.

Also, taking the responsibility of the goods over at an earlier stage allows the sellers more time to find potential buyers. It’s clear that an FCA agreement is preferred by sellers who are arranging transport and logistics overland or by air freight as opposed to shipping by sea.