Free Carrier (FCA) Incoterms: A Complete Guide for UK Traders
Understanding FCA in the Context of Global Trade
In the complex world of international commerce, clarity is paramount. The Incoterms®, a set of standardised trade rules published by the International Chamber of Commerce (ICC), provide that clarity by defining the responsibilities of sellers and buyers. Among the most versatile and widely used of these is Free Carrier (FCA). For UK businesses exporting goods, a robust understanding of FCA is crucial for managing costs, mitigating risks, and ensuring smooth transactions.
This guide offers a definitive look at the FCA Incoterm, breaking down the obligations, costs, and strategic considerations. At Shipping International, we believe empowering our clients with this knowledge is the first step towards building a resilient and efficient global supply chain. We translate the technicalities of Incoterms into practical, actionable insights for your business.
What is Free Carrier (FCA)? A Clear Definition
Free Carrier (FCA) means the seller fulfils their delivery obligation when they hand over the goods, cleared for export, to a carrier or another person nominated by the buyer at a specific, named location. This named place is the critical point where the risk of loss or damage to the goods transfers from the seller to the buyer. From that moment on, the buyer assumes all responsibility for the costs and risks associated with the onward journey.
The flexibility of FCA allows the named place to be one of two common locations: either the seller's own premises (like their factory or warehouse) or another location, such as a forwarder's warehouse, an airport, or a seaport terminal. The choice of location has specific implications for loading responsibilities, which both parties must clearly understand.
A Detailed Breakdown of Seller vs. Buyer Responsibilities
A core function of any Incoterm is to allocate tasks and costs precisely. Under FCA, the division of responsibility is clear and logical, provided it is properly documented in the sales contract.
The Seller's Responsibilities
- Export Packaging: Ensuring the goods are properly packaged and marked for international transport.
- Export Clearance: Manage and pay for all export customs formalities, including obtaining any necessary export licences and completing security clearances.
- Pre-Carriage to the Named Place: Arranging and paying for the transportation of the goods from their location to the agreed-upon named place of delivery.
- Loading Obligations: If the named place is the seller’s own premises, the seller is responsible for loading the goods onto the buyer's collecting vehicle. If the named place is anywhere else (e.g., a port), the seller is responsible for getting the goods there but is *not* responsible for unloading them from their vehicle.
- Proof of Delivery: Providing the buyer with the usual proof that the goods have been delivered to the nominated carrier.
The Buyer's Responsibilities
- Nominating the Carrier: Choose and contract with the carrier performing the main international transport.
- Main Carriage: Paying for the main freight journey, whether by air, sea, or road.
- Risk from Delivery: Assuming all risk of loss or damage to the goods from the moment the seller delivers them at the named place.
- Insurance: While not mandatory, it is the buyer's responsibility and highly advisable to arrange transit insurance from the point of delivery onwards.
- Import Formalities: Manage and pay for all import customs clearance procedures, including paying any import duties and taxes in the destination country.
- On-Carriage: Arranging and paying for the transportation of the goods from the port or airport of arrival to their final destination.
FCA in Practice: Real-World Scenarios
To fully grasp how FCA works, let's consider two common examples for a UK-based exporter.
Scenario 1: Delivery at the Seller's Premises (FCA Seller's Factory, Birmingham)
A UK company sells industrial components to a customer in France. The sales contract specifies the Incoterm as "FCA, Seller's Factory, Birmingham, UK". The French buyer nominates a trucking company to collect the goods. The UK seller's responsibility is to package the goods, complete the UK export declaration, and load the components onto the French buyer's nominated truck when it arrives at their Birmingham factory. When the goods are safely loaded onto that truck, the risk and responsibility transfer to the French buyer, who then manages the entire journey to France.
Scenario 2: Delivery at a Named Place (FCA Port of Felixstowe)
A UK business exports goods to a client in the USA. The contract states "FCA, Container Terminal, Port of Felixstowe, UK". The US buyer nominates a shipping line to handle the Ocean freight. The UK seller must package the goods, handle export customs, and arrange for a truck to transport the container to the specified terminal at Felixstowe. The seller's responsibility ends, and risk transfers to the buyer, once their truck has arrived at the terminal and the container is ready for unloading by the port authorities. The US buyer is responsible for all subsequent charges, including the terminal handling, Ocean freight, and all costs in the USA.
Advantages and Key Considerations of Using FCA
FCA is popular for good reason, but it's essential to understand its strategic implications.
Key Advantages
- Flexibility: It is suitable for all modes of transport and allows the buyer full control over the main international carriage, which can be beneficial if they have better freight rates or trusted forwarding partners.
- Clear Responsibility for Export: Unlike Ex Works (EXW), FCA clearly places the responsibility for export clearance on the seller, who is typically better positioned to handle it in their own country.
- Suitable for Containerised Cargo: It is the recommended Incoterm for containerised shipments where the seller hands goods over at a terminal before they are loaded onto the vessel.
Important Considerations
- Buyer's Early Responsibility: The buyer takes on risk earlier in the journey compared to other terms like Cost and Freight (CFR) or Cost, Insurance and Freight (CIF).
- The 'Named Place' is Crucial: Ambiguity regarding the precise point of delivery can lead to disputes. The contract must state the exact address or terminal point where the handover will occur.
Frequently Asked Questions About FCA
Who is responsible for loading the goods under FCA?
This depends on the named place of delivery. If the delivery location is the seller's own premises, the seller is responsible for loading the goods onto the buyer's collecting vehicle. If the delivery location is any other place (like a port terminal), the seller is responsible for transporting the vehicle to that place but is not responsible for unloading it.
What happens if goods are damaged in transit under FCA terms?
The risk transfers from the seller to the buyer when the goods are delivered to the buyer's nominated carrier at the named place. Any damage that occurs after this point is the buyer's responsibility. This is why it is highly recommended for the buyer to secure appropriate cargo insurance.
Is the buyer required to arrange insurance under FCA?
No, the FCA Incoterm does not obligate either party to purchase insurance. However, since the buyer assumes the risk for the main part of the journey, it is in their best interest to obtain a comprehensive cargo insurance policy to cover the goods from the point of delivery onwards.
What is the main difference between FCA and EXW (Ex Works)?
Under EXW, the seller's only responsibility is to make the goods available at their premises. The buyer is responsible for everything else, including the risky and often complex task of loading the goods and handling export customs clearance. FCA is often preferred as it places the responsibility for export clearance and loading (at their premises) on the seller, who is better equipped to handle these tasks in their own country.
What export documentation must the seller provide under FCA?
The seller is responsible for providing all documentation necessary to clear the goods for export. This typically includes the commercial invoice, packing list, and obtaining any required export licences or permits. They must also assist the buyer, at the buyer's request and cost, in obtaining any documents needed for import into the destination country.
