FCA Incoterms Explained: How Costs, Risks, and Responsibilities are Shared

International trade involves a complex set of rules and guidelines to ensure both buyers and sellers understand their roles, costs, and responsibilities. One of these key guidelines is Incoterms, which stands for International Commercial Terms, published by the International Chamber of Commerce (ICC). Today, we’ll dive into FCA (Free Carrier) Incoterms 2020, a rule that defines how risks, costs, and responsibilities are divided between buyers and sellers in international trade.

What is FCA Incoterms 2020?

FCA, or Free Carrier, is one of the most flexible and widely used Incoterms. Under FCA, the seller is responsible for loading the goods onto a transport arranged by the buyer at an agreed location in the seller’s country. From that point on, the responsibility for all risks and additional costs shifts from the seller to the buyer.

FCA is suitable for almost any mode of transportation, making it versatile for international transactions. It also simplifies things for the buyer by allowing them to choose the transport method and handle the main carriage, making it a popular choice compared to other Incoterms like EXW (Ex Works), where the buyer has to take full responsibility for organizing the transport.

Process Flow in FCA Incoterms

Under FCA, there are two main scenarios for delivery:

Seller’s Premises Delivery

In this scenario, the seller loads the goods directly onto the vehicle provided by the buyer at the seller’s premises. The seller handles all necessary documentation, including export clearance, before loading. Once the goods are loaded, the buyer assumes all risks and transportation costs from the seller’s premises to the final destination.

Buyer’s Location in Seller’s Country

Here, the seller delivers the goods to a location specified by the buyer, such as a transport hub, warehouse, or the buyer’s forwarder within the seller’s country. The seller is responsible for loading and delivering the goods to the designated spot. Once delivered, the responsibility and risks transfer to the buyer, who then manages the rest of the transportation.

In both scenarios, the buyer must arrange the primary transport of the goods and cover any associated costs once the goods are handed over.

Key Documents Required in FCA

The following documents are typically needed in an FCA transaction:

• Commercial Invoice – Provided by the seller, showing the agreed-upon value of the goods.
• Packing List – Details of goods, packaging, and handling instructions.
• Bill of Lading – Proof that goods have been loaded and are in transit.
• Insurance Certificate – Optional, covering the goods during transit.
• Export and Industrial Licenses – Depending on the goods being shipped, these licenses may be required.

These documents, particularly the invoice and bill of lading, are essential for record-keeping and customs processes.

Responsibilities Under FCA: Who Does What?

To understand the responsibilities of each party under FCA, let’s break down their obligations:

Seller’s Responsibilities

• Arrange for the loading of goods onto the buyer’s chosen transport.
• Provide all required documentation, including the commercial invoice and bill of lading.
• Handle export procedures, including customs clearance in the seller’s country.
• Ensure goods are appropriately packaged and marked for export.

Buyer’s Responsibilities

• Pay the agreed price for the goods.
• Arrange and pay for the main transportation from the agreed location.
• Handle customs clearance and any import duties in the buyer’s country.
• Assume all risks and responsibilities once the goods are delivered to the agreed location.

Delivery Terms in FCA Incoterms

Under FCA, delivery obligations depend on the agreed location:

• At the Seller’s Premises – The seller must load the goods onto the buyer’s transport at the seller’s site, at which point the buyer takes responsibility for the goods.

• At a Buyer’s Chosen Location in the Seller’s Country – The seller delivers the goods to a location specified by the buyer, such as a terminal or warehouse. The buyer takes over responsibility once the goods arrive at this location.

In both cases, the seller’s responsibility ends once the goods are loaded or delivered to the designated spot, shifting risks and additional costs to the buyer.

Costs Involved in FCA Incoterms

Costs are another critical element under FCA, as both parties share financial responsibilities:

Seller’s Costs

• Expenses for loading and delivering the goods to the agreed place.
• Any duties and taxes for export clearance.
• Documentation fees, including those for licenses and other export paperwork.

Buyer’s Costs

• All transportation costs from the delivery point onward.
• Duties, taxes, and customs fees in the destination country.
• Insurance for goods in transit, if needed.

Since FCA is a “Free Carrier” term, it provides a clear division of costs, making it easy for both parties to understand their financial obligations.

Transfer of Risk: When the Responsibility Shifts

Under FCA, the transfer of risk from the seller to the buyer happens at the point of delivery:

• If the Goods are Delivered at the Seller’s Premises – The risk transfers to the buyer once the goods are loaded onto the buyer’s transport at the seller’s location.

• If the Goods are Delivered at a Buyer’s Location in the Seller’s Country – The risk transfers to the buyer when the goods are delivered to the buyer’s nominated spot.

The risk transfer is critical for insurance purposes since the buyer may need to insure the goods from the point of delivery until they reach the final destination.

Insurance Responsibilities

While insurance isn’t mandatory under FCA, it’s often advised to cover the goods in transit:

• Seller’s Role – The seller is not obligated to provide insurance beyond the delivery point. However, at the buyer’s request, the seller may assist in arranging insurance coverage.
• Buyer’s Role – The buyer is responsible for securing insurance once the risk is transferred at the delivery point. This insurance will protect the buyer against potential losses or damage during the transport phase.

FCA vs. Other Incoterms: How Does FCA Compare?

FCA differs from other commonly used Incoterms, such as:

EXW (Ex Works)

In EXW, the buyer bears more responsibility, including loading the goods and clearing them for export. FCA offers a better balance, especially for international buyers, since the seller handles export customs.

FOB (Free On Board)

FOB is typically used for sea freight. Here, the seller delivers the goods onto the vessel chosen by the buyer at the seller’s port, making it less versatile than FCA, which can be used with any mode of transport.

FCA offers more flexibility and is more practical for buyers who want more control over the shipping process.

Frequently Asked Questions on FCA Incoterms

FCA Incoterms 2020 is a practical choice in international trade as it offers clear boundaries for cost, risk, and responsibility sharing. For both sellers and buyers, understanding these terms ensures smoother transactions and reduced confusion, making it easier to conduct business worldwide. Whether you’re new to international trade or looking to improve your current practices, FCA can provide a balanced approach that supports efficient and reliable trade.

Also Read: INCOTERMS or INTERNATIONAL COMMERCIAL TERMS – Everything You Need to Know