Why FCA Free Carrier Is The Best Incoterm For An Exporter

The FCA (Free Carrier) Incoterm 2020 is the first Incoterm of the F group, the others being FAS (Free Alongside Ship) and FOB (Free On Board).

Because of its flexibility of use and clarity, FCA is the best Incoterm for wholesale suppliers that do not want (or do not have the means) to provide for transportation.

Before we get into the details of the provision, let us repeat a principle that we already stated in our guide on how to use Incoterms:

Incoterms determine the physical place in the supply chain where the transfer of risk shifts from the seller to the buyer.

In the E group, the only Incoterm being EXW (Ex Works), the seller’s responsibility is minimal as the risk is transferred to the buyer at the seller’s premises upon collection of the goods.

Group F Incoterms: common features

In the F group, which directly follows the E group, the seller’s responsibility is bigger, but, and this is true for all the Incoterms of this category, it ends at some point within the place of origin, i.e. the risk is transferred from the seller to the buyer somewhere at origin (consolidation warehouse, port of loading, etc).

Just to clarify this concept, see how the FCA Incoterm 2020 is written: FCA Free Carrier (named place of delivery). It is even clearer by reading the FAS and FOB, the other members of the F group: FAS Free Alongside Ship (named port of shipment), FOB Free On Board (named port of shipment).

What is that parenthetic place of delivery? As we just wrote, is it the place where delivery takes place, that, in the case of the F group, is always within origin. By contrast, if you read the CFR Incoterm, the first of the C group, it will be written: CFR Cost & Freight (named port of destination).

As you can read from the parenthetic reference, the difference stems from the port of shipment, in the case of the F group, and the port of destination, in the case of the C group (actually, the C group has its own peculiarities: you can read more in our article How to deal with Group C Shipment Contracts).

Either case, you see that Incoterms require the place of delivery to be specified («named port of»…). For more about this topic, you can refer to our article about how to use Incoterms.

FCA Free Carrier: who is the carrier?

With regard to FCA, Free Carrier, the question will be: what is the carrier?

FCA says «named place of delivery», not specifically a port, therefore, the carrier must not be necessarily a shipping line or an airline, but can also be the truck that picks up the goods and takes them to the port.

Under the FCA Incoterm, the place of delivery can be the seller’s facility, the forwarder’s facility, a port, or an airport.

Delivery occurs when the goods are presented to the carrier nominated by the buyer at the named place or port, loaded on the collecting vehicle and cleared for export.

As you can see, the definition of the carrier is paramount.

A practical example

Let’s make an example: a Turkish textile manufacturer buys fabric from an Italian firm established in Milan, under FCA Incoterms 2020.

Because the FCA is part of the F group, we know already for sure that the place of delivery will be somewhere in Italy.

Even if the parties agree that the goods will be shipped from the Genoa port, the place of delivery under FCA Incoterms could be different.

If the contract says FCA (Milan, seller’s address), the place of delivery would be the Italian firm’s premises; the contract will need to define the carrier that will come to collect the goods, and that would be the moment where the seller’s responsibilities end.

If the truck has an accident on the way to Genoa, is not on the Italian firm’s anymore.

On the other side, if the contract says FCA (Port of Genoa), the place of delivery occurs when the goods are presented to the shipping line designated by the buyer at the port of Genoa. In this case, the carrier is not the truck carrying the goods from Milan to Genoa, and anything that happens before the goods are delivered to the shipping line is on the seller.

CFA Free Carrier Incoterms 2020

Updates from the 2020 publication

One aspect that has been clarified in the 2020 version of Incoterms, is that the seller can use their own means of carriage to take the goods to the port or airport. They could do so anyway even in the previous version, but in the new one it has been specifically allowed.

Final thoughts

While in principle carrying more responsibilities for the seller than the EXW, the FCA Incoterm is the best alternative for a seller wanting to minimise their responsibilities in an international sale.

The reason is that the EXW was never meant for international transactions. Instead, international exporters should use FCA and name as place of delivery the seller’s facilities.

The outcome is the same as the EXW, but clearer.

Globartis Research

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