What is FCA (Free Carrier) Delivery Terms

One of the most convenient delivery terms introduced with the Incoterms update is FCA (Free Carrier). Here’s a breakdown of what it is and how it’s practically used.

Definition of FCA

Under FCA (Free Carrier) terms, the seller’s responsibility ends once they hand over the goods to a carrier specified by the buyer. From that point, the buyer assumes all risks associated with transporting the goods. FCA terms apply to all transport modes — road, rail, air, sea and even multimodal transport.

Key Conditions of FCA

With FCA, the seller must deliver the goods, which have been cleared for export, to a specified location determined by the buyer. The location of delivery affects the distribution of risk and cost since they are transferred from the seller to the buyer once the goods are handed over. If delivery is at the seller’s premises or a neutral location, the seller is responsible for loading the goods.

Responsibilities and Risks for Each Party

• Seller’s Responsibilities: The seller must deliver the goods to the buyer along with supporting documents, help secure necessary licenses and deliver goods in a chosen or specified manner to the designated place. They are responsible for all expenses up to the point of delivery, including export duties. The seller also handles all packaging, labeling and accompanying documentation.
• Buyer’s Responsibilities: The buyer must pay for the goods, obtain import licenses and other necessary documents, and receive the goods upon delivery. They bear import costs, all expenses after delivery and any costs due to the carrier’s failure to meet its obligations.

A primary disadvantage of FCA for the buyer is the early transfer of risk, which begins in the seller’s country and leaves the buyer accountable for potential loss or damage early in the logistics chain.

Key Changes in FCA (Incoterms 2020)

Incoterms 2020 clarifies the roles of both parties under international purchase contracts, specifying transport and customs responsibilities, where and when the seller transfers goods to the buyer, and what costs are covered by each side.

One notable update is that the buyer can instruct the carrier to issue a bill of lading with an on-board notation to the seller. This allows the seller to fulfill the terms of an open bank letter of credit more promptly.

The International Chamber of Commerce (ICC) does not mandate the use of Incoterms 2020, but it recommends them. Therefore, contracts can still reference Incoterms 2010 or even earlier versions, depending on the parties’ preference.