All You Need To Know About Free Carrier (FCA)

There are transport modes determined according to definite rules, regulations, and laws in international commerce. Transport modes are a substantial issue between the buyer and the seller. Commerce does not take place properly without an agreement or definite rules.

Some rules determine how goods will be transported in international trade. These include where the delivery will be made, who will pay for costs, insurance, and transport contracts. Briefly, to ensure delivery in international trade, the obligations of the buyer and seller must be clearly defined. The most accurate information on this issue is available at the International Chamber of Commerce. The ICC publishes a glossary of terms containing all kinds of details about the transactions in international trade.

What are Incoterms?

Incoterms are known as International Commercial Terms. Incoterms are the most important rules of international commercial law. Also,  legal authorities and governments accept these rules, and are legally binding. ICC publishes these rules regularly and updates and explains all information about international commerce.  

The International Chamber of Commerce published the first Incoterms in 1936. However, Incoterms were also updated by the ICC in line with the developments in international commerce. ICC published the last updated Incoterms in 2020. Incoterms are closely related to all parties that are a part of international trade. It is an essential resource for understanding all changes related to international trade and how global supply chains should be implemented. Also, Incoterm states the responsibilities of the buyer and seller and the cost and risk of transactions. 

Incoterms explain the conditions of sale that both the seller and the buyer must agree upon during transactions in international trade. Besides, the same rules do not apply to all types of transport. Some rules cover a particular type of transport. Such as, while all modes of transportation include FCA, CPT, and CIP,  maritime transportation includes FAS, FOB, and CFR. Also, free carriers are one of the modes of transportation in international commerce. Let's take a look at all the details of Free Carrier. 

What is a Free Carrier?

In the FCA mode of transport, the seller must deliver the shipment to the 'Named Place'. Under the FCA agreements, the buyer determines where the goods will reach. Free Carrier is the seller's delivery of the goods to the designated port. The seller carries out the process of loading the goods and the operations before it. On the other hand, the buyer handles all transactions that occur as a result of loading the goods.

FCA can be used for all modes of transport, including road, sea, rail, and air transport. The most prominent advantage of this type of transportation for the buyer is that it is flexible and more profitable in transportation costs. In FCA, when the goods reach the point of export, all responsibility and risk belong to the buyer. At this stage, the seller is in an advantageous position. Because the process after the export of particular products can be risky and problematic.

Buyer and Seller Responsibilities

The buyer and seller have specific responsibilities under the FCA agreement.

Buyer's Responsibilities

The responsibility passes to the buyer after the goods reach the named place and after leaving the customs. The buyer's responsibilities are as follows:

• Origin Terminal Charges: The buyers are responsible for the transportation terminal-related expenses when loading the cargo on the ship, plane, truck, etc.  during the transportation process,

• Loading in Carriage: Shipping lines demand to charge an amount for loading the goods onto the means of transport. Buyers are responsible for covering this amount.

• Carriage Charges: The buyers are responsible for the charges of freight from the port of departure to the port of destination of the goods.

• Insurance: Insurance is not obligatory. But insurance is at the buyer's discretion.

• Destination Terminal Charges: When the products arrive at the destination port, there are procedures related to the official import process. Such as all terminal charges that cover unloading, transferring, and holding the load. The buyer is responsible for covering these costs.

• Delivery to Destination: The buyers are responsible for all charges in the process of transporting the goods from the port of departure to the port of destination.

• Unloading at Destination: All charges of unloading the goods at the determined point are the responsibility of the buyer.

• Taxes and other Customs Clearance: All costs and responsibilities related to the importation of goods belong to the buyer. Customs authorities carry out certain inspections during the import process. Costs may arise as a result of these inspections. The buyer is responsible for covering the costs.

Seller’s Responsibilities

Within the framework of the FCA agreement, the seller is obliged to carry out the entire export process of the products they sell. After the goods are loaded on the ship, truck, or train, the responsibility now belongs to the buyer. However, until this process, the seller has defined responsibilities. These are:

• Export Packaging: Goods must be packaged for export to happen. Some governments have different rules about how products should be exported. Sellers must follow these determined rules. For example, it could be a specific mark on the packaging or a different type of packaging. The seller is obliged to carry out the packaging process in accordance with all regulations.

• Loading Charges: The seller carries out the process of loading the goods to the carrier for the first time. And also the seller covers the costs of all these transactions.

• Delivery to Place: The seller is responsible for all the processes from the point of origin to the destination. The seller bears all of the expenses in these processes.

• Taxes: The seller is in charge of the entire export process and of all costs. For example, customs inspection, a special permit for the export of goods, and inspection before shipment, etc.

All responsibilities mentioned above within the framework of the FCA agreement belong to the seller and the buyer. If the seller or buyer does not fulfill any of these responsibilities, it will be a breach of contract. Finally, FCA is a multimodal transport agreement.  FCA provides advantages to both the buyer and the seller.