Free Carrier or FCA shipping is a great tool used for the transportation of goods, allowing flexibility for the buyer to make choices that are economically sound. There are many specifications and obligations associated with FCA shipping that anyone interested should be aware of.
What Is Free Carrier?
Free carrier is a term that is meant to designate the process of requiring the seller of certain goods to deliver said goods to a carrier location specified by the buyer. It is a term used in trade and during this process, the seller is responsible for the risk of loss until the carrier receives the goods, and then everything is in the hands of the buyer.
What Does FCA Mean in Shipping?
In shipping terms, FCA is when the seller arranges the export of a product, and the buyer handles the import of the said product. All that the seller is responsible for is getting the product to whatever destination that is agreed upon in the contract. After this, it is the buyer’s responsibility to arrange for a carrier and assume all risks associated with transporting goods.
How Does Free Carrier (FCA) Work?
Buyers and sellers have specific responsibilities and obligations under FCA that are predetermined.
Seller’s responsibilities include packaging the cargo per requirements so that it is ready to be exported, paying for costs associated with putting the cargo onto the first carrier transporting goods (loading charges), delivering said cargo to the place of export that is agreed upon, and handling all costs and obligations required that fall under exporting such as taxes, customs, or any other requirements. It is important to note that the seller may not request additional compensation for any of these services, as they are included within the original contract price.
The buyer’s responsibilities include everything that falls after the cargo arrived at the agreed-upon place. All risks associated fall onto the buyer at this point and they are responsible for finishing out transport. Responsibilities include handling origin terminal charges, carrier charges, insurance, destination terminal charges, and any import taxes and customs clearances that happen after import. Buyers are also responsible for loading cargo onto the mode of transportation after it arrives at the agreed-upon place, delivering it to the final destination, and ultimately unloading it.
Advantages of Free Carrier Shipping
FCA shipping provides a buyer with a bit more control and less responsibility than the alternative EXW shipping methods, as the buyer in this situation has ultimate control over how and when their cargo or product is delivered.
FCA allows the buyer to control costs associated with importing a product, which can result in a more economically sound decision as many sellers may not consider the ultimate cost and try to get the lowest price. This is a great option for a buyer when they are familiar with shipping processes and can find a lower price than advertised by the seller for loading costs.
Disadvantages of Free Carrier Shipping
Free carrier shipping does come with some disadvantages. It can be an inefficient option when considering ocean travel due to all of the logistics and moving parts associated with the port of origin. In countries like China, sellers are unfamiliar with FCA which can cause issues logistically.
Overall, the biggest disadvantage of FCA is the fact that the buyer assumes responsibility before the shipment is officially in their hands. If anything happens to it during transport but after export, it is not the seller’s responsibility, and the buyer is simply out of luck.
When to Use an FCA Agreement
When considering FCA, it is important to know a bit about the shipment and the seller’s background knowledge about FCA.
The International Chamber of Commerce recommends that FCA be used only during containerized shipments to minimize as much risk as possible. It is also vital that the seller knows about FCA and is well versed in the logistics involved with exporting a product, or they alternatively utilize a shipping service. When sellers are from places like China where FOB or FAS may be used, FCA is not the best option because things may be twisted or confused with one of the alternative preferred methods. It is also vital that the cargo is being sent straight to the agreed-upon point as opposed to sitting in a warehouse first.
If these are all met, FCA is a great option. If not, it is best to consider the risks associated as this shipping method may not be the most efficient for your cargo.
When Does FCA Transfer Obligation from Seller to Buyer?
Responsibility is transferred to the buyer at the named place. The seller is responsible for everything up until this point, but once the cargo is delivered to the agreed-upon place it is now the buyer’s responsibility to continue the shipping process and assume all risks associated.
Who Pays Freight with an FCA Incoterm Agreement?
Freight costs are the responsibility of the buyer.
Does FCA Include Customs Clearance?
As customs clearance is a factor in both the country of export and import, both the buyer and seller are responsible to some point. The seller is responsible for exporting the cargo, thus handling customs. Upon import, the buyer is then responsible for handling customs clearance.
Where is the Named Place for Handing Over Responsibility from the Seller to the Buyer?
The named place is agreed upon by the seller and buyer and is clearly defined in the initial contract. This location is predetermined and is the spot in which the seller will drop off the cargo and the buyer will have it picked up, taking all responsibility for the rest of the shipping process. If there is not a predetermined named place, the seller may choose one.
Example of Free Carrier (FCA)
An example of a free carrier (FCA) is as follows.
Jill has bought the cargo from Jason and Jason quoted Jill a loading price. Jill realized that her shipping company could handle loading for significantly less, so they decided to enter into an FCA shipping arrangement. Jill uses her shipping company to cut costs, and less responsibility is now on Jason. Jason will now be responsible for delivering the cargo to Jill’s shipping company at an agreed-upon destination. After Jason hands the cargo to Jill’s company, Jason walks away with no further obligation or responsibility regarding the goods. It is now Jill’s responsibility to get the cargo to herself and all risks associated now fall onto her.
Modes of Transport in FCA Terms
FCA may be utilized under any form of transportation. This includes rail, sea, road, air, or any other type of freight.
Why Should You Ship Under FCA Incoterm?
FCA is a great option for anyone looking to cut costs while not taking on all of the obligations and risks associated with shipping. As the seller handles half of the work, buyers can make economically sound decisions related to loading while also offloading initial import obligations to the seller. This results in compulsory shipping participation regarding the seller and protection of the product by both parties, ensuring the cargo arrives safely.
Credo Trans is ready to help you out with FCA service from Russia to any port in the world. For all details about export from Russia, please contact us via email firstname.lastname@example.org.