What is FCA Incoterms and How is It Applied in Logistics

Article content: 

1. FCA Terms of Delivery and Types of Responsibility.
2. What Are FCA Incoterms 2020 Conditions?.
3. Possible Risks with FCA Incoterms.
4. Don’t make mistakes – choose the right terms and minimize risks.

The term stands for Free Carrier or the unofficial "Free carrier." It is one of the international trade terms in Incoterms 2020. It defines the seller's and buyer's obligations when transporting goods. DiFFreight experts have already written about FOB, and today, we’ll look at the FCA model, its terms, advantages, and disadvantages.

FCA Terms of Delivery and Types of Responsibility

The main condition of FCA is that the seller is obligated to deliver the goods to the carrier at an agreed location (warehouse, terminal, port, etc.). From this moment, all risks and expenses are transferred to the buyer.

For example, you are ordering clothes from Turkey to Ukraine. The factory prepares the export documents and delivers the goods to the transport company's warehouse in Istanbul. From this moment, all responsibility is yours: payment for transportation, insurance, and import processing.

This format is somewhat similar to FOB, but the latter is used exclusively for sea freight. FCA, however, applies to air, rail, road, and sea transport.

What’s the Difference from FOB?

• FCA (Free Carrier) – the supplier delivers the goods to the carrier at an agreed place but is not obligated to load them onto the transport. Delivery to the agreed place is the only responsibility, and further loading and all subsequent expenses are borne by the buyer.
• FOB (Free On Board) – the supplier is obligated not only to deliver the goods to the port but also to organize and pay for their loading into the container and onto the vessel. After this, all risks and costs are transferred to the buyer.

Thus, under FCA, the seller is only responsible for delivery to the specified place, while under FOB, they are also responsible for loading onto the vessel.

Seller's (Exporter’s) Responsibilities:

• Prepare the cargo for transportation: packaging, labeling.
• Prepare documents and conduct customs clearance for export.
• Deliver the goods to the agreed place of transfer (warehouse, terminal, port).
  Loading onto transport is not the seller’s responsibility if the place is a third-party terminal or transport company warehouse. However, if the delivery takes place at a shop or the seller’s warehouse, they are responsible for loading.

Responsibility is transferred to the buyer at the moment of delivery.

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Buyer’s (Importer’s) Responsibilities:

• Choose the method of delivery and pay for the freight (its cost).
• Assume all risks and costs after the goods are handed over.
• Organize delivery using third-party logistics services or their own transport.
• Conduct customs clearance in the destination country: i.e., clear the cargo at the import customs.

FCA Incoterms Conditions: When Is It Beneficial?

In which cases should you choose this model?

• The buyer has its own logistics or a partner like DiFFreight, i.e., is ready to send transport. This option is optimal for line haul transport over short distances.
• Receiving and consolidating products from different manufacturers.
• The client wants to choose a company with the best tariffs, especially for multimodal transport, where there are multiple intermediaries and optimal conditions can be found.
• Sending large shipments by any method. It is easier to purchase a container or truck at a better tariff.
• Suppose the supplier does not offer direct delivery to your country. This often happens with factories in China.

When FCA is Not Beneficial:

• For sea transport of bulk goods (grain, coal, oil), FOB is better in this case (Free on Board), as the client does not need to find special loading transport.
• If the seller pays for international shipping, it’s better to use CPT or DAP. CPT places the responsibility of paying for transportation on the seller until the destination, but other risks are on the buyer from the moment the goods are handed over to the carrier. With DAP, the goods are delivered to the buyer’s door (done by the seller), but they are not cleared at the border of the destination country.

Simply put, FCA delivery is a simplified version of door-to-door delivery, where the importer, by agreement, assumes responsibility for the goods from the moment they are received at the agreed location. Such deliveries are commonly used for commercial transport because they offer flexibility for customers.

What Are FCA Incoterms 2020 Conditions?

In 2020, Incoterms introduced some clarifications and changes about who is responsible for what risks during international trade and delivery. For example, the 2020 version clarifies that the seller can transfer the goods not only to the carrier they have a contract with but also to an independent third party.

It was clarified that the exporter may be responsible for loading if the place of transfer (for example, a terminal or warehouse) is located within their territory. Additionally, it was made clear that the seller provides only export documents, while the buyer handles customs clearance at the destination point.

Possible Risks with FCA Incoterms

 What to be prepared for when working under the “Free Carrier” terms:

• Mistakes with the place of delivery:

The buyer must clearly specify where the goods will be received. Also, the location affects who will handle the loading.

• Mistakes in customs clearance:

The preparation of documents for customs clearance is the buyer’s responsibility. It is optimal to use customs brokerage services to prevent the cargo from being delayed at customs.

• Additional costs:

For example, if the carrier refuses to load the goods without extra charges, the expenses fall on the buyer. Or, if the goods are delayed at the warehouse, the client needs to pay storage fees.

• Transportation issues:

If the goods are damaged after delivery, the buyer assumes responsibility. This complicates insurance claims since the goods must be inspected for factory defects before shipment. It is also essential to choose a reliable logistics company that will organize the loading (if necessary), transport, and take care of the delivery to the final point.

Don’t make mistakes – choose the right terms and minimize risks

If you’re unsure which Incoterms terms to choose, contact DiFFreight experts. During a consultation, you will learn the optimal format for your goods and business opportunities. We are ready to be your logistics partner – we handle shipments to the USA, China, and Europe.

We definitely recommend checking the contract, which should outline the responsibilities of all parties. If you're new to international trade, DiFFreight’s professional logistics services are for you! We offer reasonable tariffs, fixed pricing, and transparent cooperation conditions. Trust your deliveries to professionals!