FCA Incoterms: Meaning, responsibilities and advantages

The FCA Incoterms rule outlines the responsibilities of buyers (importers) and suppliers (exporters), ensuring a balanced division of obligations. This arrangement allows the buyer to take control of the main transportation while the supplier handles the initial stages of delivery and export formalities.

While navigating international trade can be tricky, Incoterms like FCA offer a powerful combination of flexibility, cost-efficiency, and control over your supply chain. But using FCA also adds some logistical responsibilities.

In this guide, you’ll learn:

• The meaning of FCA Incoterms
• Buyer’s and supplier’s responsibilities
• An example of FCA Incoterms
• Advantages and disadvantages
• Frequently asked questions about FCA

What are FCA Incoterms?

FCA Incoterms (Free Carrier) rule is one of the 11 Incoterms defined by the International Chamber of Commerce (ICC). Under FCA, the supplier’s obligation is fulfilled once they deliver the goods to a carrier or another party designated by the buyer at a specified place. From this point, the buyer assumes all risks and costs.

FCA Incoterms agreement is useful when the buyer wants the exporter to handle the initial transport and export procedures but prefers to manage the main shipping process.

Key features of FCA Incoterms explained:

• Point of delivery: The delivery destination is the designated location where the goods are handed over to the carrier.
• Modes of transport: The Free Carrier Incoterms rule applies to all modes of transport (sea, air, rail, or road), including multimodal.
• Insurance coverage: Negotiable. The supplier doesn’t need to provide insurance.

💡 The International Chamber of Commerce updates the Incoterms rules every ten years. The latest editions are Incoterms 2010 and Incoterms 2020. When you use FCA or any other in a contract, always state which version you're referencing to avoid potential confusion or misinterpretation.

Read more: What are the types and rules of Incoterms?

Buyer’s and supplier’s responsibilities with FCA Incoterms

Let's take a look at the specific duties each party undertakes under FCA Incoterms.

Supplier’s responsibilities

• Export packaging: Ensuring proper packaging for the international shipment of goods.
• Loading charges: Covering expenses for loading products onto the initial carrier at the pickup location.
• Delivery to the named place Transporting the products to the designated carrier or party at the specified port or location per the contract.
• Export formalities: Fulfilling export duties, taxes, and customs clearance procedures.

Buyer’s responsibilities

• Origin terminal charges: Settling costs at the origin terminal, including handling charges.
• Loading onto carriage: Overseeing the loading of cargo onto the primary transportation mode.
• Main freight charges: Bearing expenses for the primary transportation to the specified location.
• Destination terminal charges: Paying for expenses at the destination terminal, such as unloading and handling, up to the agreed delivery point.
• Delivery to the final destination: Assuming responsibility for the goods upon their arrival at the specified place, port, or terminal, and arranging further transportation to the final destination (buyer’s premises or designated place). 
• Unloading at destination: Covering the costs and taking charge of unloading the items, unless otherwise agreed.
• Import formalities: Fulfilling all import requirements and associated expenses, including customs duties, taxes, and clearance in the buyer’s country.

An example of FCA Incoterms

To illustrate the application of Free Carrier Incoterms, consider a Chinese manufacturer, TechSource, who agrees to sell a shipment of electronics to a US-based retailer, RetailMart. 

The Chinese company is responsible for delivering the goods to the named place, which, in this case, is at the Shanghai airport. Then, RetailMart nominates a carrier to transport the cargo to the US.

Supplier's responsibilities (TechSource)

TechSource is responsible for delivering the goods to the named place, which in this case is the Shanghai airport — although it can be at any other location in the country as specified in the contract. 

The supplier ensures proper packaging for international shipment, loads the cargo onto the first transport, and covers all related expenses. TechSource also completes all export formalities, including paying any export duties and taxes.

Buyer’s responsibilities (RetailMart)

Once the goods are delivered to the first carrier at the agreed-upon location, RetailMart. takes over. They nominate the main freight for the journey to the US and are responsible for all transportation costs, including charges and terminal handling fees at both the origin and destination. 

RetailMart also manages import clearance, pays all import duties and taxes, and arranges for the final delivery to their warehouse or any other facility of their choice.

This FCA Incoterms example highlights the shared responsibilities between the buyer and supplier, emphasizing the need for clear communication and coordination.

Advantages and disadvantages of EXW Incoterms

FCA Incoterms rule offers distinct advantages for both suppliers and buyers, making it a versatile choice in international trade. 

Advantages

• Supplier's convenience: The supplier’s primary responsibility is delivering the goods to the carrier, simplifying their logistics.
• Flexibility in delivery location: The supplier can deliver the cargo to a variety of locations, including a warehouse or a transport terminal. This flexibility can be advantageous for both parties.
• Buyer’s control: Buyers have control over the main transportation and can choose the most cost-effective and reliable shipping options.

Disadvantages

• Risk transfer at an early stage: The risk transfers from the supplier to the buyer once the goods are delivered to the carrier. This can be a disadvantage for the buyer if the products are damaged or lost during transport.
• Potential for higher costs for the buyer: If the buyer doesn’t have strong logistics capabilities or negotiating power, they might incur higher transportation costs compared to other Incoterms where the supplier manages the transport.

The specific advantages for each party may vary depending on the negotiated terms of the contract and the unique circumstances of the transaction. Factors such as the nature of the goods, the distance of transportation, and the chosen mode of transport can influence the overall benefits for both exporters and importers.

Learn more: 3 situations in which you should use international invoice finance.

FCA Incoterms: Frequently Asked Questions (FAQs)

Are FCA the same as EXW (Ex Works)?

No, FCA and EXW are Incoterms with different responsibilities for the supplier. Under EXW, the buyer is responsible for collecting the goods from the supplier’s premises and handling all export clearance procedures. In contrast, FCA requires the supplier to deliver the products to the carrier nominated by the buyer and complete export clearance formalities.

What is the difference between CPT (Carriage Paid To) and FCA?

FCA and CPT are similar in that the buyer assumes responsibility for the main carriage costs and risks during transportation. However, under CPT, the supplier is in charge of arranging and paying for the main carriage to the named place of destination, whereas in FCA, the buyer handles this task.

Who pays for freight in FCA Incoterms?

The buyer is responsible for paying the freight charges under FCA Incoterms, as the supplier’s obligation ends once the goods are delivered to the carrier at the agreed-upon location.

When to use FCA Incoterms

FCA Incoterms rule is ideal for scenarios where the buyer wishes to use their carrier or wants to control the transportation process. FCA is also beneficial when the supplier is unfamiliar with export clearance procedures as they can deliver the goods to a named place within their own country, avoiding the complexities of handling export clearance themselves. 

By understanding Incoterms and choosing the right one for your business, you can navigate the complexities of international trade with confidence and achieve success in the global marketplace.

Learn more about other Incoterms:

• EXW (Ex Works)
• FAS (Free Alongside Ship)
• FOB (Free On Board)
• CFR (Cost and Freight)
• CIF (Cost, Insurance, and Freight)
• CPT (Carriage Paid To)
• CIP (Carriage and Insurance Paid To)
• DAP (Delivered at Place)
• DPU (Delivered at Place Unloaded)
• DDP (Delivered Duty Paid)

At Stenn, we appreciate the significance of making international trade processes more efficient. As the foremost and swiftly growing online platform supporting small and medium-sized businesses in global trade, we focus on providing the necessary resources and support for businesses to flourish.

If you aim to optimize your working capital, improve your trading terms, and expedite business expansion, explore Stenn's invoice financing and factoring services.