The FCA Incoterm is one of the 11 terms coined by the ICC to ease international freight trade. The FCA is one of the most popular Incoterms, and it can be used for all forms of transport, including multimodal shipments. This flexible rule is often used by importers who prefer to arrange the main carriage of the goods themselves. Learn everything about the meaning of the FCA Incoterm 2020 and learn how to use FCA prices and shipping terms for your cargo.
Under FCA shipping terms, the seller is responsible for delivering the goods to the buyer. Following FCA terms, the goods can be delivered on the seller’s premises or at an agreed location. If the first option is chosen, the seller has to load the goods on the vehicle selected by the buyer, which is often a vehicle from a specific freight forwarder or “carrier”.
Under the Free Carrier Incoterm, the point where the risk of the goods transfers from the seller to the buyer is when the carrier receives the goods. Once the carrier has gotten hold of the goods, the buyer holds all the responsibility.
The FCA Incoterm from 2020 can be used for all types of cargo, although they are preferred for road and sea container shipping.
See below an overview of the responsibilities of the buyer and the seller when shipping under the FCA Incoterm.
As with all other Incoterms, the Free Carrier Incoterm divides the responsibilities of the seller and the buyer. When you are issued an FCA invoice as a buyer, it is important to know what items are included in that price.
HOW IT WORKS
There are two main ways to apply the Free Carrier Incoterm to an international trade contract, depending on where the goods will be delivered. There are two possible options: the delivery can happen at the seller’s premises or at a designated location, which should be agreed upon in advance.
The agreement of the pick-up location is essential because the risk of the goods only transfers to the buyer once they get hold of the goods, and the domestic transport costs are only included in the FCA invoice if the sellers make the goods available at a designated location.
For example, an Irish company sells 100,000 units of merchandise to a US company under the FCA shipping terms. The buyer will pick up the goods at the seller’s premises in Dublin.
Same example as above: an Irish company based in Dublin sells 100,000 units of container merchandise to a US company under the FCA shipping terms. The buyer will pick up the goods at the agreed designated location, in this case, the port of origin in Cork.
When using the FCA terms for importing or exporting, the seller has to go through the export customs procedures in the country of origin. This means that before they make the goods available for the buyer, they have to be already cleared for export.
FCA customs clearance rules determine that the buyer must manage the import customs procedures at the destination country. They will have to provide the documentation to the domestic port authorities and pay for all applicable permits, duties, and taxes, including VAT.
The fact that the seller is responsible for clearing out the goods for export in the foreign country is the main advantage of the FCA Incoterm over the EXW. With this change, the buyer does not have the risk of potential costs related to cargo that has issues being cleared for export.
Although using the FOB Incoterm is the industry standard for container shipping, the ICC advises using FCA incoterms for these shipments. This is because when using the FOB shipping terms for containers, the seller usually cannot load containerised cargo on the selected vessel. In most cases, the containers are left at a terminal, from where they will be handled by the transport company.
When using Free Carrier Incoterm for container shipping, the risk of the goods transfers to the buyer once the containers are left at the terminal in the country of origin. The seller carries the risk until that very moment, and any problem during loading will be covered by the buyer.
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