What is Free Carrier (FCA)?
Free carrier (FCA) is an Incoterm, or international trade term, that defines the seller’s responsibility for delivering goods to a named place or carrier specified by the buyer. Under this contractual arrangement, the seller fulfills their obligation by handing over the goods, cleared for export, to the carrier or another party nominated by the buyer, at the agreed-upon location. The seller integrates the cost of transport into the price and assumes the risk of loss, until the carrier receives the goods.
Free Carrier Shipping Terms
A free carrier arrangement gives the buyer control over transportation arrangements, while ensuring that the seller fulfills its responsibility to deliver the goods to a specified location.
Here are the terms of the agreement and the responsibilities of each party:
- Delivery point: the seller is responsible for delivering the goods to a named place, which can be a specific location, such as the seller’s premises, a warehouse, or a port. The exact delivery point is determined and agreed upon by both parties.
- Transfer of risk: the risk associated with the goods is transferred from the seller to the buyer once the goods are delivered to the carrier, or the designated party at the agreed-upon location. The buyer assumes responsibility for any loss or damage that may occur after this point.
- Export clearance: the seller must complete all export clearance procedures, ensuring that the goods are ready for export in compliance with relevant customs requirements and documentation.
- Transport arrangements: the buyer arranges and pays for the transportation of the goods from the delivery point, to the final destination. This includes selecting and contracting with the carrier, or freight forwarder, to transport the goods.
- Insurance: it is the buyer’s responsibility to arrange insurance for the goods during transit, unless otherwise agreed between the parties.
Documentation: the seller is required to provide the buyer with the necessary documents required for export clearance, or import purposes.
Use Cases: When to Use Free Carrier
Free carrier is a good option for buyers who want to control the logistics of their shipment. For example, when buyers have a high level of confidence in their shipping service provider’s ability to offer better transport costs than those provided by the seller. This is particularly true for buyers who have established strong relationships with reliable freight forwarders, ensuring timely and efficient delivery of goods.
FCA is commonly employed in containerized cargo shipments, since it requires the carrier to issue a bill of lading. If the cargo is intended to be transported directly to the terminal for export, free carrier is a suitable choice.
Another good time to use FCA is when the buyer wants control over the transportation logistics. The buyer can select and negotiate with the carrier directly, ensuring that their specific transportation requirements are met. This control can be beneficial in terms of cost optimization, route planning, and scheduling.
Using an FCA agreement is also beneficial when the buyer has specific requirements for the delivery of goods. For example, if the buyer needs the goods to be delivered to a specific location, such as their own warehouse or a distribution center, FCA allows them to designate the delivery point according to their needs.
Free carrier is beneficial for sellers who prefer to limit their liability once the goods are handed over to the carrier. Upon delivery to the carrier at the agreed-upon location, the seller’s responsibility and risk are generally transferred to the buyer. This can protect the seller from potential loss or damage during the subsequent transportation process.
When to Avoid Using Free Carrier Incoterm
Not every shipping scenario calls for an FCA. Business owners who are new to the shipping process can become overwhelmed with the logistics and may find FCA challenging. It requires that they arrange a shipping line or freight forwarder to collect the goods from a specific location specified by the buyer. The buyer assumes responsibility for loading the goods at the named place and providing the necessary transport documents to the seller after loading. These steps can be cumbersome and complex for buyers lacking experience in shipping procedures.
Even experienced buyers may prefer an arrangement where the seller takes on more responsibility in the shipping process. In this case, they might prefer a more suitable arrangement for their needs, such as Delivered Duty Paid (DDP) or Cost, Insurance, and Freight (CIF). These shift more burden onto the seller, providing buyers with a greater level of convenience and simplification.
FCA Vs. FOB
“Free on Board” (FOB) is an Incoterm used to define the point at which the seller fulfills its obligation and the buyer assumes responsibility for the goods during the shipment process. The main difference between free carrier (FCA) and rree on board (FOB) lies in the point of transfer of risk and responsibility from the seller to the buyer during the international shipment of goods.
When dealing with an FCA, the risk of loss or damage to the goods transfers from the seller to the buyer when the goods are delivered to the carrier, or another party nominated by the buyer at the named place of delivery. The buyer assumes responsibility for any subsequent loss or damage to the goods, as well as the costs and risks associated with the transportation from the named place of delivery to the final destination.
In contrast, under FOB, the risk of loss or damage to the goods transfers from the seller to the buyer when the goods are loaded onto the vessel at the named port of shipment. The seller is responsible for delivering the goods, cleared for export, to the specified port of shipment. The buyer assumes responsibility for any loss or damage that may occur after the goods have been loaded onto the vessel, as well as the costs and risks associated with the transportation and delivery of the goods from the port of shipment to the final destination.