Shipping products can be a money-making business.
If you’re a beginner in shipping, you need to know some important shipping incoterms like FCA.
Despite being such an important part of the shipping process.
Most of the people don’t understand what FCA is and how this term is used in the shipping of the products.
That’s why I write this guide for you to provide inclusive information about FCA (Free Carrier).
And clearly explaining the responsibilities of the buyer and seller.
When does FCA obligation transfer from the seller to the buyer?
Oh yes, by FCA vendors feel comfortable because of minimum obligations.
Buyers engaged with maximum responsibilities.
You know, FCA term applied to all transportation modes.
Some of the obligations of the shipping process mentioned here:
Receiving cargo from the factory and delivering to the loading port.
In addition,the seller is responsible for all expenses of shipping.
Most difficult thing is to manage risk factors before delivery of products.
No doubt after accepting consignment all responsibilities automatically transfer from seller to buyer.
Now the question is, what a buyer needs to do after receiving the products?
Buyer deliver all the products from destination port to customer’s warehouse
Shipping by different modes of transport works with the same principle.
There are some slight differences between various incoterms.
What are the Incoterms?
Incoterms stands for the international commercial terms.
Well, trading terms are predefined codes used in international shipping processes.
I know you’re thinking who introduce incoterms.
Incoterms published by the ICC (International Chamber of Commerce).
Terms define the key elements ofthe shipping process.
As you see, learning about incoterms is mandatory for shipping products.
Let’s look at the incoterm 2010 to get standard shipping terminology.
Why should you need to take care about incoterm 2010?
When you start trading business what you need more?
You must have proper knowledge about the Incoterms.
And one thing more you need to know what is in and what is out these days by ICC.
It’s really important to understand all the risks and cost factors of shipping.
Buying, selling, and shipping aren’t simple.
It’s really important to understand the terms to continue the shipping journey smoothly.
Assuming you’re using incoterm 2010
So, why would you want to follow these incoterms?
As I mentioned above, incoterms help to seller and buyer for shipping according to the rules.
You can make your shipping process secure.
Applicable knowledge helps to avoid legal issues.
Above all, it helps to classify the responsibilities of buyers and sellers
What's the Difference between FCA terms and DAP terms?
The name represents the purpose of incoterm.
By DAP,the seller is responsible to deliver your cargo at a specific place.
This is approximately the same as FCA.
One major thing which is different from FCA is customs clearance is the responsibility of the buyer.
1. What is Free Carrier (FCA)?
You know FCA (Free Carrier) is a trading incoterm.
Transfer of products by the seller at the named place (destination).
Keep in your mind destination is the area where shipper and carrier operates.
A seller is a person who takes responsibility for all expenses.
Although it’s very difficult,the seller bears loss until cargo delivered to the carrier.
In FCA, after delivering the goods all responsibilities shifted to the buyer.
FCA (Free Carrier) International trade term
Do you know what the positive edge of this term is?
The term used not only for one mode of transport.
You can have different options to transport your cargo.
Like air transport, sea transport and multimodal transport.
I shocked to know, FCA widely used in international shipping processes.
The thing I find most interesting is,about all international trading terms starts from F.
In FCA the seller works with the freight forwarder.
As you know cargo delivered at pre – designated destination.
Responsibilities of the buyer are insurance and other expenses after receiving the products
As you probably already know,FCA term works on the same principle of FOB.
But there’s a difference between FCA and FOB.
And that’s the seller’s obligation.
Hope you already familiar with the seller’s responsibility before shipping.
Modes of transport in FCA term
FCA supports different modes of transport.
As mentioned above seller handles completes the hipping process.
It doesn’t matter which mode of transport used in the shipping process.
Although that’s true, nature of cargo is very important to decide the mode of transport.
But you need to know how much time you have to ship your products.
Different ways of transport waiting for you in FCA
- Railway transport
- Road Transport
- Airway Transport
- Inland Waterway transport
Before starting the next point I want to explain who bring the products to the loading port.
Yes, shipper helps to bring and load products into the container.
On the other hand, the buyer unloads the products and takes to the final destination.
Sometimes buyer alternatively hires a person to receive the products.
Breaking down Free Carrier (FCA)
Furthermore, you need to know what the carriage point and seller’s location is.
Your seller must be in the same country.
Because he’s the person who’s responsible for all shipping activities.
Don’t you know what shipping activities are?
Like releasing cargo, loading container, & customs clearance.
Once the cargo delivered to the named area then what happens?
Ownership transferred to the buyer as well as responsibilities too.
What are incoterm 2010?
Terms published to help the traders worldwide when products sold and shipped.
Incoterms 2010 are the key terms of international shipping.
All the trading incoterms work as contracts of sale.
These trading terms help the buying and selling parties.
There are a few properties related to every specific term.
You’ll notice FCA incoterm suits your shipping process better.
Do you know who’s behind updating incoterms?
No other than, International Chamber of Commerce.
Here’s what that ICC do for shipping terms
Analyze and update incoterms according to time.
Updated revisions help to design modified versions of International Commercial Terms.
Do you know in 2000 there are 13 incoterms officially published?
Yes, after the update of 2010 incoterms reduced from 13 to 11.
DAF, DES, DEQ, and DDU has been replaced with the updated incoterms DAT and DAP.
According to the International Chamber of Commerce in 2010, we have the incoterms
- CIP (Carriage and Insurance Paid)
- CPT (Carriage Paid to)
- CFR (Cost and Freight)
- CIF (Cost Insurance and Freight)
- DAP(Delivered at Place)
- DDP (Delivered Duty Paid)
- DAT (Delivered at the terminal)
- EXW (Ex works)
- FAS (Free Alongside ship)
- FCA (Free Carrier)
- FOB (Free On Board)
All the incoterms mentioned above are very useful in the shipping process.
Like ocean freight, inland water transport and for all the modes of transportation.
3. Basic Responsibilities of buyers and sellers in FCA term
· Obligations of seller
First of all, Seller needs to handle all formalities like Bill of lading.
Also responsible to get officially approved documents for you.
Majorly help you to manage customs clearance issues.
The seller should be responsible to deliver your products at a designated place.
Delivery on time is an important thing.
The seller has to notify the buyer about the shipping status of cargo.
Seller is responsible for all cost and risk factors of shipping procedure.
But only before the delivery of products at the destination port.
Seller needs to bear all damages and discrepancies before delivering the products.
Communicate electronically is far better
If both parties connected by Emil then formal documents not required.
If buyer and seller agree to communicate electronically then no need to provide formal documents.
Furthermore, delivery of products must be according to the contract of carriage.
The seller must take proof of the delivery before the handover of the products.
On the other hand, the seller needs to have any evidence of cargo delivery.
So, get a proof of delivery before transferring the products.
· Obligations of buyer
Responsibilities transferred from seller to buyer.
Well, it’s simple.
You’re probably thinking when a buyer starts to perform his duties.
The answer is when the products delivered to the designated area.
Buyer needs to pay the fixed amount to the seller according to the contract of carriage.
The authorized certificate is required to manage risk factors.
So, the buyer needs to get from the shipper.
Most important, the buyer should have shipping license to deal with legal formalities.
Buyer should be responsible to pay all charge from the destination port.
Do you think without cargo receipt you may complete the shipping process?
No, you can say never.
So, buyer must get signed receipt of products.
4. FCA Incoterms
You can check some of the delivery conditions under various modes of transportation.
Hope you know the fastest shipping mode is railway shipping.
In general, trains are used to transfer bulk products.
Bulk products are of different types.
Choice of the container totally depends on the type of cargo.
Quantity of products equal to full container?
Don’t worry seller will be responsible to load the products in the container.
You can get receiving receipt whenever your consignment arrived on the destination port.
I think you guys are used to get this service at any time.
The best thing you find in this mode of transport is the seller’s service.
First, you find what the location of the seller is.
If seller belongs to the same area then he’s responsible to load the products in the container.
In another case, you can find the buyer’s service for unloading products.
Keep one thing in your mind road transport is the most common mode.
River transport is the same as road transport as already mentioned above.
If you want to ship heavy products, river transport is best for you.
You can get cost-effective and secure service by this mode.
However, products transfer from seller to inland water carrier to complete shipping process.
I am shocked to know marine transport is commercially worthy.
And in the case of FCL, you need to deliver your products to the ocean carrier.
Oppositely, in case of LCL seller is responsible.
Seller’s responsibility completed on loading port.
After that ocean freight forwarder is responsible to complete the process.
Fast and most efficient freight service is Airway transport.
Is it right?
Yes, prefer this service if you have a short time frame.
The seller delivers the products directly to the freight forwarder or the agent of air freight for the completion of the shipping process.
As a matter of fact, weight and volume are the most important factors in air freight service.
No mode of transport specified
No mode of transfer is a bit different.
The mode of transport when no mode is selected.
In this case,the seller delivers cargo to the freight forwarder.
And freight forwarder helps to complete the shipping process.
Transfer your products by different means of transport
You can ship your products by rail, ocean, marine or the air mode of transport.
Select vehicle according to the weight and nature of your cargo.
Vehicles you can choose for shipping are trucks, trains, ships,and airplanes.
I already explained the transfer of obligation from seller to the buyer.
In multimode transport same rules, you need to follow.
The advantage of multimodal transport
- You can have the option to manage delivery according to weight and volume.
- You can track your freight easily.
- Single contact provides you enough information about shipping modes.
5. Comparison of different shipping terms with FCA
· Difference between FCA and FOB
Have you any knowledge about Incoterms before?
Start reading these differences after getting basic information about incoterms 2010.
First, When FOB introduced?
FOB (Free On Board) introduced in 2000.
Secondly, When FCA introduced?
FCA (Free Carrier) introduced in 2010 (updated version of Incoterms) by ICC.
FCA helps to divide the responsibilities of buyer and seller.
All risks and expenses charged to the seller before delivery of products.
And after the delivery,the buyer is responsible for everything like documentation and customs clearance.
FOB assigns the responsibility to the seller as well as the buyer.
At the first step,the seller is responsible to load the products into the container.
All the expense charged to the seller.
After releasing cargo buyer assigned for the shipping responsibilities.
Same as seller expenses charged to the buyer.
· Difference between FCA and Ex Works
Ex-works belong to the Incoterms 2010.
Buyer is responsible to transfer products from factory to loading port.
There’s no restriction whatever transport used for transferring.
Most important “Insurance policy is arranged by the buyer”.
By using this term you can protect your cargo with the assurance of protection.
In another side, the seller is just loading products into the container.
In FCA all the products delivered from shipper to the carrier
All the charges paid by the seller.
Compulsory thing is to follow the contract of carriage.
Products must be delivered at designated area according to the contract.
· Difference between FCA and DAT shipping term
DAT stands for what?
This term means delivered at the terminal.
According to this term, seller arranges transport to deliver the products.
All the required taxes and charges paid by the seller.
And even customs clearance is also the responsibility of the seller.
In short cost and risk management is the responsibility of the seller until the cargo is not delivered on the terminal.
FCA (Free Carrier) divide the workload and expense load on buyer and seller.
Responsibility transfer from buyer to seller as products delivered at a designated place.
· Difference between FCA Shipping term and CIP
CIP stands for Carriage and insurance paid to
In CIP seller is responsible for packing, loading and transporting the cargo.
Also responsible to pay insurance amount according to the contract.
In FCA there’s no need to pay insurance amount by the seller or by the buyer at any spot.
· Difference between FCA and CPT
CPT stands for carriage paid to.
As name represent the meaning,the seller is responsible to pay all charges till the products delivered to the designated location.
This is approximately the same as FCA.
6. Advantage and disadvantage of the free carrier (FCA)
Every incoterm has some of the pros and cons.
But you must keep 2 things in your mind before discussing the advantages and disadvantages.
- It depends on the nature of shipping products.
- How much time you have to ship your products.
Advantages of FCA (Free Carrier)
- Cost effective incoterm because most of the expenses charged to the buyer.
- No need to panic for customs clearance and legal documentation.
- Everything is according to the contract of carriage.
- All the charges, risk factors,and damages divide into both parties.
- Your cargo can be tracked by this term accurately.
Disadvantages of FCA (Free Carrier)
- No obligation is applied according to the insurance policy.
- Seller has to bear the expense of all documentation and customs duty and other taxes.
- Buyer and seller both are responsible to deliver the products at a designated location at a specific
- Both parties must been gaged in the shipping process
7. Why should you ship under FCA incoterm?
First of all, I thought about the obligations and ownership.
Both are very important to ship your products.
A simple process like above explained as ownership transferred responsibilities also transferred.
Most of the people think how they can choose the way of shipping.
Simple answer way of shipping depends on the nature and type of cargo.
FCA (free carrier) divide the responsibilities between buyer and seller.
Why should you choose FCA is an important question?
Continue reading to get the appropriate answer.
1. Seller’s participation in shipping is compulsory
As I mentioned above, in FCA seller is responsible to deliver the cargo at loading port.
Loading port means a seaport or airport.
Give a try to another incoterm for your shipping process.
This is the way when you find the differences between different incoterms.
In other shipping terms, only the buyer is responsible for everything.
But in FCA seller helps to all the loading, customs clearanc e,and documentation approval process.
2. Seller and Buyer protect the products
You’ll notice, in FCA seller and buyer help you to make your shipping secure.
So, feel comfortable to choose.
If you’re new to shipping business, don’t waste your time and get protected cargo.
Buyer has right to inspect your products in the container.
Well, it’s not simple but essential to deliver products safely.
- Who Pays for FCA Shipping?
- Does FCA Shipping Term include Customs Clearance?
- How Does FCA compare to FAS?
- What is FCA Shipping Point?
- Who Handles Export Clearance in FCA Shipping?
- Is FCA Collect or Prepaid?
- How does DDP compare to FCA?
- How does CIF compare to FCA?
- How Does FCA Compares To FOB?
- Can you use FCA in Air Freight?
- What is FCA Origin?
- Why is FCA the Best Incoterm for Shipment?
- How does FCA Incoterms 2020 compare to FCA Incoterm 2010?
- When do you Transfer Risk between Buyer and Seller?
- Why should you use FCA over EXW?
Who Pays for FCA Shipping?
FCA Shipping 2020
In Free Carrier shipping the seller covers the transportation cost to the designated carrier for delivery to the buyer.
The seller assumes the risk of transporting the goods or product to the carrier, at which point, the buyer assumes the risk of transportation.
Also, the cost of FCA Shipping is usually shared by both the seller and the buyer.
Besides, the buyer covers the import cost of clearing the goods upon delivery by the carrier.
Does FCA Shipping Term include Customs Clearance?
Standard FCA shipping terms provide that the seller shall bear the cost of export duty, taxes, and obtain all necessary export documents and clearance.
The buyer, on the other hand, is obligated to cover the transportation cost, duty, and all importing documents and clearance.
FCA shipping terms provide for the seller to cover the cost of customs clearance of transporting the goods to the specific location selected by the buyer.
Furthermore, the buyer is similarly obligated to cover the cost of customs clearance before receiving the goods.
How Does FCA compare to FAS?
FCA is a free carrier shipping in which the seller covers the cost of delivering the goods to the importer’s carrier for transportation to the importer’s destination.
FAS is a shipping term that means Free Alongside.
Under the FAS the exporter is obligated to hand over the subject of the agreement to an agreed vessel in a particular port to be transported to the buyer.
The FAS covers terms such as the time of delivery, cost, and the mode of payment.
In FCA, the seller covers the cost of transporting the subject of the agreement to the buyer.
In FAS, the seller is only obligated to deliver the goods to a particular vessel.
Under the FCA, the buyer is obligated to cover the cost of transportation and insured the goods against risk.
In the FCA the seller’s risk terminates when the subject of the agreementis delivered to the importer’s nominated carrier.
The seller’s risk terminates upon delivering the goods to the agreed vessel.
Furthermore, the buyer’s risk commences immediately after the goods gave been delivered to the vessel.
What is FCA Shipping Point?
FCA shipping point means the point when the seller delivers the subject of the agreement to the carrier nominated by the buyer for transportation.
The goods passes from the exporter to the transporter at the exporter’sfactory, company, or place of business.
It is necessary for the buyer to be specific and clear about the carrier.
This is because the risk passes to the buyer upon the handing over of the subject of the agreement to the carrier by the exporter.
Who Handles Export Clearance in FCA Shipping?
The export clearance in FCA shipping is handled by the seller.
Here, the seller is under the obligation to acquire the necessary export clearance before delivering the goods to the designated carrier for delivery to the buyer.
The seller’s obligation includes the following:
- Ensuring that the goods are in a deliverable state.
- Preparing commercial invoices and documentation.
- Acquiring the necessary export licenses and customs formal processes.
- Delivery of the subject of the agreement to the carrier.
- Covering the cost of pre-shipment inspection.
- Sending the buyer proof of delivery.
Is FCA Collect or Prepaid?
FCA is prepaid in most parts of the world.
The exporter will deliver the subject of the agreement to the nominated carrier, before delivery to the forwarders facility.
Besides, the transportation is prepaid and must be met before the goods are shipped out by the carrier.
How does DDP compare to FCA?
DPP is a shipping term that stands for Delivered Duty Paid.
This is a delivery arrangement where the seller agrees to cover the cost and risk of transportation until the buyer receives the goods.
In FCA, the seller covers the cost of delivering the goods to the designated carrier.
The carrier is nominated by the buyer and the buyer incurs the risk and cost of delivery.
Under the FCA, the seller’s obligation is fulfilled when the once the goods have been delivered to the carrier and cleared for export.
At this point, the seller-buyer assumes all risk and cost of the delivery of the goods to their destination of choice.
Under the DPP, the seller covers the transportation cost and also bears the risk and covers the insurance cost.
In FCA, the buyer covers the transportation risk and funds the insurance cover for the goods while it is in transit.
How does CIF compare to FCA?
CIF is a shipping term that means Cost, Insurance, and Freight.
This is an arrangement where the exporter covers the cost of transportation, the insurance, and freight of the goods while the goods are in transit to the buyer’s destination.
In CIF, the goods are delivered to a transportation point and cover the customs duties and cost of export processes, and inspection.
The seller covers the cost until the freight is loaded.
At which point, the buyer’s obligation commences.
Also, the FCA obligates the exporter to deliver the subject of the agreement to the importer’s nominated carrier.
Furthermore, the exporter is obligated that the goods are ready for export at the time of delivery.
The seller is not obligated to cover the transportation cost to the buyer or cover the risk and cost of freight.
Under the CIF the seller’s responsibilities are”
- Covering the cost of transporting goods.
- Covering the cost of insurance to protect the state and value of the goods.
- Acquiring the export clearance and licenses for the product.
- Covering the cost of damages or destruction to the goods.
- Inspection of the goods to ascertain it’s in a deliverable state.
How Does FCA Compares To FOB?
FOB is a shipping term that means Free On Board.
In a FOBagreement, the seller is obligated to deliver the subject of the agreement on board a vessel for transportation to the importer.
The seller covers the cost of transportation of the goods to the vessel, and that is the point where the duties and risk of the seller ends.
The buyer would bear the cost of transporting the goods on the vessel to their destination.
The buyer will cover the cost and risk of delivery from the port to their destination.
The duties of the seller in a FOB agreement are:
- Supply the goods as agreed upon in the contract of sale and delivering the subject of the contract on board the importer’s designated vessel and Port.
- The exporter bears the cost and covers the risks regarding the safety and quality of the goods until the goods loaded on the vessel. At which point, the risk passes to the buyer.
- It is the duty of the seller to cover the clearing cost, export duty, and taxes on the goods before delivering the goods to the vessel for transportation.
- The cost of loading the subject of the agreement on the vessel will be covered by the exporter.
The duties of the buyer are as follows:
- The buyer is required to reserve the shipping space and vessel and give due notice of the reservation to the seller.
- The buyer is obligated to cover all cost after he goods have been loaded on the vessel.
- It is the duty of the buyer to cover the freighting cost.
- Importation cost, clearance, duty, and taxes, as well as unloading costs will be covered by the buyer.
Under the FCA, the seller is only obligated to deliver the goods to the buyer’s designated carrier for delivery to the buyer.
The FCA provides that the risk passes to the buyer once the goods have been handed over to the carrier either at the Seller’s premises or the carrier’s office.
In FOB, the risk transfers to the buyer when the goods are loaded on the vessel.
The main difference between FCA and FOB is that FCA is suitable for all means of transportation including Air, Sea, Road, and Rail.
FOB, on the other hand, is only used for freight by sea.
As a result of this limitation, many importers find FOB to be very limiting, so they opt for FCA which is capable of covering all forms of transportation.
Can you use FCA in Air Freight?
Airfreight is available for free carriage.
The seller can deliver the goods to the airport warehouse of the designated carrier for transportation to the buyer.
What is FCA Origin?
FCA origin refers to the place where the package or goods originated.
The origin could either be the carrier’s premises or the seller’s premises.
Also, the location of delivery shapes the seller’s obligation of loading and unloading the goods.
When delivery occurs at the exporter’s premises, it is the duty of the exporter to load the goods on the importer’s carrier.
On the other hand, if delivery takes place outside the premises of the exporter, it frees the exporter the duty of loading the importer’s carrier.
Delivery would be deemed to be completed when the goods are conveyed to the premises by the seller.
Why is FCA the Best Incoterm for Shipment?
There are different ways to transport your goods from one country to another and FCA is one of them.
FCA is popular amongst sellers and buyers because of its many benefits.
This makes it a top incoterm choice for shipment.
The advantages of FCA include:
- Free Carrier allows buyers to cover the transport costs, delivery fees, and import and customs charges.
This way, the buyer can have full say in the transportation of the goods.
- In an FCA agreement, buyers and sellers enjoy visibility in transportation.
FCA makes it easier to split the responsibilities between the buyer and seller in a way that suits their respective needs.
- The buyer can have full access to the transportation cost from the shipping point to the time of delivery.
This will eliminate the chances of the inflation of shipping cost by the seller.
- FCA helps the buyer to avoid the stressful task of acquiring specialist export licenses and custom clearance as these processes are covered by the seller.
How does FCA Incoterms 2020 compare to FCA Incoterm 2010?
ICC incoterm terms are updated every ten years.
There is some notable difference between the incoterm 2010 and 2020 incoterms.
- DAT incoterm changed to DPU: the 2020 incoterm changed the requirement of delivery at the terminal to delivery at place unloaded.
- Insurance cover differs between CIF and CIP: the 2020 incoterm stipulates comprehensive and higher insurance and protection for manufacturing goods. Commodities require a lower level cover under clause C.
- Listing of Costs: the 2020 incoterm lists all costs in the allocation of cost section. This makes it a lot less confusing than the 2010 incoterm.
- Security Requirement: 2020 incoterm adds security requirements to A4 and A7 or each incoterms rule, and the associated costs were added to A9/B9.
- Private Transport: 2020 incoterm allows for private transport by both seller and buyers.
When do you Transfer Risk between Buyer and Seller?
The risk in FCA transfer from the exporter to the importer upon the delivery of the subject of the agreement to the exporter’s nominated carrier.
It is the duty of the exporter to deliver the subject of the agreement to the premises or office of the carrier, and upon delivery, the seller’s obligation has been fulfilled.
The buyer’s risk begins when the carrier takes possession of the goods.
Furthermore, the carrier would cover the cost of transportation to their location.
Again, the buyer is obligated to cover the insurance risk of the goods and also cover the import duty and taxes.
Why should you use FCA over EXW?
Free carrier and Ex-Work are similar.
However, the difference is that free carrier requires the exporter to obtain all necessary export documents before delivery to the carrier for transportation to the importer.
Ex-Work, on other hand, requires the buyer to obtain special export clearance before the goods can be freighted for delivery.
The convenience is the major reason why you should choose the free carrier over Ex work.
FCA obligates the seller to acquire the necessary export and customs clearance before delivering the goods to the buyer’s nominated carrier.
This way, you won’t have to worry about traveling to the seller’s location to clear the goods for export.
It also saves you the cost of hiring the services of a professional in clearing the goods for export.
All the Incoterms are very useful in the shipping industry.
FCA helps to manage the burden of seller and buyer by dividing responsibilities.
You can ship your products safely by the insurance policy.
So, don’t waste your time choose FCA to make your shipping journey most protected.
If you find any confusion, don’t worry and contact BanSar China.
Your shipping process must be smooth if you choose a suitable freight forwarder.
Which has appropriate knowledge about incoterms and shipping ins and outs.
BansarChina helps you to make perfect selection of Incoterms.