What is FCA? – FCA incoterms 2020 (Free Carrier) is the latest version of FCA ICC’s Incoterms. Free Carrier is belong to group Group F (Main Carriage Unpaid) obliges the seller to perform export customs clearance. The seller does not pay transport and insurance costs. FCA, FAS, and FOB belong to this group.
What is FCA – Free Carrier?
Free Carrier (named place) means that the seller delivers the goods to the buyer in one or other of two ways.
- When the named place is the seller’s premises, the goods are delivered;
- When they are loaded on the means of transport arranged by the buyer.
- When the named place is another place, the goods are delivered;
- When, having been loaded on the seller’s mean of transport;
- They reach the named other place;
- They are ready for unloading from that seller’s mean of transport;
- At the disposal of the carrier or of another person nominated by the buyer.
Whichever of the two is chosen as the place of delivery, that place identifies where risk transfers to the buyer and the time from which costs are for the buyer’s account.
This rule may be used irrespective of the mode of transport selected and may also be used where more than one mode of transport is employed.
A sale under Incoterms 2020 FCA can be concluded naming only the place of delivery, either at the seller’s premises or elsewhere, without specifying the precise point of delivery within that named place. However, the parties are well-advised also to specify as clearly as possible the precise point within the named place of delivery.
A named precise point of delivery makes it clear to both parties when the goods are delivered and when risk transfers to the buyer; such precision also marks the point at which costs are for the buyer’s account. Where the precise point is not identified, however, this may cause problems for the buyer.
The seller in this cause has the right to select the point “that best suits its purpose”: that point becomes the point of delivery, from which risk and costs transfer to the buyer. If the precise point of delivery is not identified by naming it in the contract, then the parties are taken to have left it to the seller to select the point “that best suits its purpose.” This means that the buyer may incur the risk that the seller may choose a point just before the point at which goods are lost or damaged.
It is best for the buyer therefore to select the precise point within a place where delivery will occur.
Incoterms 2020 FCA requires the seller to clear the goods for export, where applicable. However, the seller has no obligation to clear the goods for import or for transit through third countries, to pay any import duty, or to carry out any import customs formalities.
In Incoterms 2020 FCA, now if goods are being picked up by the buyer’s road-haulier in Las Vegas, it would be rather uncommon to expect a bill of lading with an on-board notation to be issued by the carrier from Las Vegas, which is not a port and which a vessel cannot reach for goods to be placed on board. Nonetheless, sellers selling FCA Las Vegas do sometimes find themselves in a situation where they need a bill of lading with an on-board notation (typically because of a bank collection or a letter of credit requirement), albeit necessarily stating that the goods have been placed on board in Los Angeles as well as stating that they were received for carriage in Las Vegas. To cater to this possibility of an FCA seller needing a bill of lading with an on-board notation,
FCA Incoterms 2020 has, for the first time, provided the following optional mechanism. If the parties have so agreed in the contract, the buyer must instruct its carrier to issue a bill of lading with an on-board notation to the seller.
The carrier may or may not, of course, accede to the buyer’s request, given that the carrier is only bound and entitled to issue such a bill of lading once the goods are on board in Los Angeles. However, if and when the bill of lading is issued to the seller by the carrier at the buyer’s cost and risk, the seller must provide that same document to the buyer, who will need the bill of lading in order to obtain discharge of the goods from the carrier.
This optional mechanism becomes unnecessary, of course, if the parties have agreed that the seller will present to the buyer a bill of lading stating simply that the seller will present to the buyer a bill of lading stating simply that the goods have been received for shipment rather than that they have been shipped on board.
Moreover, it should be emphasized that even where this optional mechanism is adopted, the seller is under no obligation to the buyer as to the terms of the contract of carriage. Finally, when this optional mechanism is adopted, the dates of delivery inland and loading on board will necessarily be different, which inland and loading on board will necessarily be different, which may well create difficulties for the seller under a letter of credit.
FCA – Free Carrier‘s Cost and obligation
Blue: Cost/ Yellow: Risk/ Orange: Insurance
Using Incoterms 2020 FCA, the seller takes the costs
- Export clearance;
- Delivering and entrusting the goods to a carrier;
- Obtaining an export license or other authorization, taxes, duties, and additional official export charges;
- A ban on the export of the products or costs if there are special taxes on its export;
- Providing the document proving the delivery of the goods or equivalent electronic version;
- Preparing and sending the commercial invoice or equivalent electronic version;
- Informing the buyer that the goods have been delivered and entrusted to the carrier or have not been accepted by the carrier at the agreed time;
- Packaging and marking required for transport, unless the goods are generally transported without packaging;
- Quality control, measurement, weighing, and counting.
The main obligations of the seller
- The seller has to provide the goods, the commercial invoice, and other evidence of conformity as may be required and specified in the contract.
- Upon request and at the buyer’s expense, the seller enables and assists in obtaining a shipping document
- Appoints a person responsible for loading the goods to the vehicle of the purchaser of the products.
- The seller is responsible for preparing the goods for loading (measurement and packing of the goods).
- He adjusts the goods for export and bears the risks and costs involved
- At the request of the buyer, he may conclude a contract of carriage on normal terms and conditions at the cost and risk of the buyer.
The buyer takes the costs
- Related to import issues and transport of goods from the moment of delivery to the courier by the seller;
- Additional, related to non-compliance with the obligation to take delivery of the goods at the place and time agreed in the contract;
- Obtaining documents or equivalent in electronic form (other than usual delivery notes) issued in the country of consignment and/or origin which are necessary for the buyer to import or transit the goods;
- Informing the seller about the date and place where the goods will be delivered to the carrier;
- Related to the transport of the products;
- Unloading the delivered goods from the means of transportation in the terminal of the carrier designated by the buyer;
- Relating to the products from the time they are put at the disposal of the carrier designated by the buyer (including customs duties and taxes and other official charges);
- Additional, resulting from not designating a carrier or notifying the seller of the name of the carrier and the designated date when the goods are to be delivered to the carrier;
- Pre-shipment inspection of the goods, unless the authorities compulsorily require this of the exporting country;
The buyer’s obligations
- The buyer completes the formalities related to the import of goods and their transport from the moment of delivery by the seller to the courier.
- He bears the risk of losing or damaging the products from the moment of delivery to the courier.
- It concludes transport contracts, although the seller may (as an additional service) arrange transport at the expense and risk of the buyer.
- He takes care of all necessary transit formalities and preparing the goods to import.
- The buyer orders transport.
- He takes delivery of the goods at the place agreed upon in the contract in advance.
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