FCA Incoterms: What FCA Means and Pricing

FCA meaning is "Free Carrier," a trade term that states the seller of goods is responsible for delivering the goods to a named place or specified destination by the buyer.

The word "Free" in the term means that it is the seller's obligation to deliver the goods to the mentioned destination.

Under the FCA Incoterm, the seller has the right to select the location or destination if the buyer does not provide one. The seller must carry out all the export formalities, while the buyer is responsible for import formalities.

The FCA terms in export have an agreement that helps in determining the buyer and seller's responsibilities. Let us explore the buyer and seller's responsibilities under the FCA agreement.

-Seller Responsibilities Under FCA Terms in Export

Under the FCA Incoterm, the seller needs to handle the full export process for the goods and products they are selling.

Once the product is loaded onto the vessel, the responsibility is transferred to the buyer. Some of the responsibilities of the seller under the FCA Incoterm are mentioned below:**

-Export Packaging: The seller must properly package the goods or products that need to be exported. Some countries have special requirements for packaging, such as specific markings on packages or types of packaging. So, the seller needs to ensure that the package is in accordance with export regulations.

-Loading Charges: Another seller's responsibility is to ensure that when the goods leave the seller's place, they are properly loaded onto the first carrier and transported to the export location. The seller needs to pay for the loading charges.

-Delivery to Place or Port: When the goods are loaded on the vehicle, they need to be transported to the defined port from where they will be exported. This port can be a seaport, rail port or airport. The seller needs to pay for all the vehicle charges.

-Export Duty and Custom Clearance: When the cargo is officially transported from the origin country, the seller must carry out the customs formalities, such as paying export duty.

The seller can quote all these prices to the buyer along with the product price under FCA Incoterms.

-Buyers Responsibilities Under FCA Terms in Export

Once the cargo arrives at the specified destination or named place, the risk and responsibilities under FCA Incoterm transfer to buyers. Some of the common responsibilities for buyers under FCA Incoterm are as follows:**

-Origin Terminal Charges: The buyer must fulfil the cost or requirement associated with the shipping terminal where the product loads on the designated vessel.

-Loading Carriage Charges: The buyer is also responsible for paying loading carriage charges for loading the goods onto the carriage. The shipping line requires this charge.

-Insurance: This is not necessary, but it is the buyer's responsibility to pay for an insurance policy for goods.

-Destination Terminal Costs: When the cargo arrives at the destination port, buyers need to pay the terminal costs associated with transferring, unloading and holding the cargo.

-Unloading at Destination: The buyer is also responsible for costs associated with unloading the cargo at the destination port.

-Export Duties and Custom Clearance: When the cargo arrives at the destination country, it needs to undergo customs checks and clearance. The buyer is responsible for carrying out those formalities and paying the necessary taxes to the customs department.

Let us understand the FCA Incoterms by example. Rahul, an Indian buyer, has ordered a product from Bryan, a UK-based seller. Bryan ships the product to Rahul under an FCA agreement.

Under the FCA agreement, Rahul must commission the freight forwarder and carrier to transport the goods. Bryan must arrange for pre-carriage from transporting goods to a named place, such as a transport hub or terminal. Bryan is also responsible for carrying out the export formalities in the country of origin.

The moment Rahul receives the goods, the liability of the goods is transferred to him.

Under FCA Incoterm, the seller is responsible for delivering the goods to a designated location and covering the costs until that point.

After the goods are handed over, the buyer assumes responsibility for all remaining costs, including main transportation, insurance and import duties.

The seller's obligations end once the goods are delivered to the agreed location. The seller can include all these expenses in their price at the time of quoting the buyer.

Let us understand the advantages and disadvantages of FCA in export.

-Advantages of FCA Incoterms for Buyers:

• Under FCA Incoterms, buyers regain significant control as the seller is responsible for the export formalities, empowering them in the trade process.

• Another advantage of the FCA Incoterm for buyers is it gives them full control over the cargo once it is formally exported from the country of origin, providing a sense of security.

• Another advantage of FCA Incoterm is for buyers who are sure that their shipping service can beat the loading cost offered by the seller.

• Under the FCA Incoterms, the buyer controls all the logistic costs associated with cargo after the formal export.

-Disadvantages of FCA Incoterms for Buyers:

• One crucial disadvantage of FCA Incoterm for buyers is that they are responsible for terminal and loading costs at the port of origin.

• Buyers must manage and coordinate shipping, which can be complicated if unfamiliar with international logistics or dealing with multiple carriers.

• Without strong logistics partnerships, buyers may face higher shipping costs, making it less cost-effective.

Under the below-mentioned parameters, the buyer should consider opting for an FCA Incoterm agreement.

• If the cargo they are shipping is containerised.

• If the buyer has prior knowledge of the shipping or logistic process in the seller's country or knows the shipping service in that country, then he should consider opting for FCA.

• Another important reason for opting for FCA is sellers also preferring it over FOB and FAS.

• If the cargo is transported directly to the terminal for export and not to the shipping service provider warehouse then you can opt for FCA.

Free Carrier or FCA is considered one of the best Incoterms or a strong alternative to Ex Works or EXW. It clearly defines the responsibilities of both buyer and seller, with the seller taking care of delivery to a designated location. In contrast, the buyer assumes risks and costs from that point.

By delineating these roles, FCA facilitates smooth and efficient international transactions, ensuring better coordination and reducing potential disputes over logistics.

In addition to using FCA, businesses often purchase cargo insurance policies to protect their assets from unanticipated risks during transit.

By securing adequate coverage, companies can safeguard themselves against potential financial losses due to damage, theft or other unforeseen events, ensuring their goods are protected throughout the shipping process.

To support businesses, there are various plans available for marine insurance in India. It is essential to select a marine insurance plan that suits your specific needs and budget.

TATA AIG offers a range of SME Insurance plans, including marine cargo insurance, designed to protect businesses from potential losses during the transit of goods. These plans provide comprehensive coverage against risks like damage or theft.

-Who pays FCA costs?

In Free Carrier terms, the seller pays for the costs of delivering the goods to the agreed-upon location, such as a carrier or transport hub.

After the handover, the buyer assumes all remaining costs, including transportation, insurance and import duties.

-Can FCA terms in export be used for Sea Freight?

Yes, FCA terms can be used for sea freight, but the delivery point must be a place where the seller can hand over the goods to the buyer's designated carrier, such as a port or terminal.

FCA is versatile and can apply to various modes of transport, including sea, provided the agreed location is accessible for the goods' transfer.

-What is the FCA price vs the DAP price?

In FCA pricing, the seller is responsible only for delivering the goods to the buyer's carrier at a designated location. In contrast, the buyer covers transportation, insurance and import costs from that point.

In DAP or Delivered At Place pricing, the seller covers all costs and risks until the goods are delivered to the buyer's specified location, but the buyer handles import duties and taxes.