Incoterms, established by the International Chamber of Commerce (ICC), are standardized rules used worldwide in international trade contracts to define the responsibilities of buyers and sellers. These terms clarify which party is responsible for specific tasks, costs, and risks associated with the delivery of goods. Free Carrier (FCA) is one of the 11 recognized terms. FCA is highly flexible and designed for use with any mode of transport, including air, road, rail, and sea, making it a common choice in modern logistics.
What is Free Carrier (FCA)?
The core concept of Free Carrier is that the seller fulfills their delivery obligation when they hand over the goods to the carrier or another person nominated by the buyer at a specified location. The seller clears the goods for export and places them at the buyer’s disposal at the agreed-upon point. Governed by the ICC Incoterms 2020 rules, FCA is a multimodal rule suitable for any mode of transport, and it is often preferred for containerized goods. The term is heavily used because it allows the buyer significant control over the main transportation contract, which is advantageous for managing freight costs and schedules.
The Two Types of FCA Delivery Locations
FCA defines two distinct possibilities for the delivery location, and the choice significantly impacts the seller’s loading responsibilities.
If the delivery point is the seller’s own premises, the seller is obligated to place the goods on the collecting vehicle. The seller is responsible for safely loading the cargo onto the transport arranged by the buyer.
Alternatively, the parties may agree on a named location that is not the seller’s premises, such as a specified terminal, a warehouse, or a freight forwarder’s facility. In this scenario, the seller is responsible for moving the goods to the named point and making them available to the buyer’s carrier on the arriving vehicle. The seller is explicitly not responsible for unloading the goods from their own transport or for the subsequent loading of the cargo onto the buyer’s main carrier. Specifying the exact point of delivery clarifies the moment the seller’s duties cease and the buyer’s responsibilities begin.
Allocation of Responsibilities and Costs
FCA clearly delineates the division of logistical duties and financial obligations between the seller and the buyer. This separation is based strictly on the agreed-upon point of delivery. The seller handles all costs and arrangements up to the point of delivery, while the buyer assumes control and expense for the main carriage and all subsequent activities.
Seller’s Obligations
The seller is responsible for all activities and costs until the goods are delivered to the nominated carrier at the specified location. This includes packaging the goods for export and transport, and managing any necessary pre-carriage to the delivery point. The seller must obtain all necessary export licenses, authorizations, and security clearances required by the country of origin. The seller pays for all costs related to these official export formalities and provides the buyer with the commercial invoice and documentation proving delivery.
Buyer’s Obligations
The buyer’s primary responsibility is to contract with the carrier for the main transport of the goods from the named place of delivery to the final destination. The buyer pays all freight charges for this main carriage and bears all costs incurred from the moment the goods are delivered to their nominated carrier. This includes subsequent transportation, transit costs, and the arrangement and payment of all import formalities. The buyer must obtain necessary import licenses and pay all applicable customs duties, taxes, and fees required by the destination country. The buyer is strongly advised to arrange cargo insurance to protect the goods during the main transport phase.
When Does the Risk Transfer Occur?
Under the FCA rule, the transfer of risk from the seller to the buyer occurs at the precise moment the seller delivers the goods to the carrier nominated by the buyer at the agreed-upon place. This point of delivery marks the definitive shift in liability, meaning that any loss or damage to the goods after this point becomes the buyer’s responsibility. The seller has fulfilled their obligations once the goods are physically handed over to the carrier, even if the goods have not yet begun the main international transport leg. This transfer of risk happens relatively early in the overall shipping process compared to terms that transfer risk at the destination port. The fact that risk transfers at the origin, before the main carriage commences, is a defining characteristic of the FCA term and is an important consideration when arranging insurance.
Critical Documentation Requirements
The seller must provide the buyer with the commercial invoice and proof of delivery document, which is necessary for the buyer to take control of the goods. For customs clearance, the seller must furnish all required export documentation, including necessary licenses and security information.
A change introduced in the Incoterms 2020 revision addressed a practical issue concerning the Bill of Lading (B/L) in containerized shipping. Under the updated rules, the buyer can instruct their carrier to issue an on-board B/L to the seller after the goods have been loaded onto the vessel. This specific document is often required by banks when a transaction is financed through a Letter of Credit, as it proves that the goods have been successfully shipped. Although the seller receives this document, the issuance of the B/L does not alter the core principle that the risk transfer occurred at the initial FCA delivery point when the goods were handed to the carrier. This mechanism provides a necessary financial safeguard without changing the logistical boundary of the seller’s responsibility.
Why Choose FCA Over Other Incoterms?
FCA is often selected because it offers a practical balance of responsibility, proving superior to other terms in specific logistical contexts.
Compared to Ex Works (EXW), FCA is more favorable for the buyer because the seller is responsible for managing the official export clearance formalities and the loading of the goods when delivery occurs at the seller’s premises. Under EXW, the buyer is solely responsible for all transport and customs procedures from the seller’s location, which can be complex and challenging in a foreign country.
FCA is generally preferred over Free On Board (FOB) for modern container shipments. FOB is strictly a sea and inland waterway term, and it defines the risk transfer point as the goods passing over the ship’s rail. This is difficult to confirm with containerized cargo. FCA, being a multimodal term, is better suited for container logistics because the delivery and risk transfer occur clearly and reliably when the goods are handed to the carrier at a terminal, long before they reach the ship.