Understanding Free Carrier (FCA) Shipping Terms

What Is Free Carrier (FCA)?

Free carrier is a trade term dictating that a seller of goods is responsible for the delivery of those goods to a destination specified by the buyer. When used in trade, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier. The destination is typically an airport, shipping terminal, warehouse, or other location where the carrier operates. It might even be the seller's business location.

The seller includes transportation costs in its price and assumes the risk of loss until the carrier receives the goods. At this point, the buyer assumes all responsibility.

How Free Carrier (FCA) Works

Buyers and sellers engaged in economic trade requiring the shipment of goods can use FCA shipping terms to describe any transportation point, regardless of the number of transportation modes involved in the shipping process. The point must be a location within the seller’s home country, however. It's the seller's duty to safely transport the goods to that facility. The carrier can be any kind of transportation service, such as a truck, train, boat, or airplane.

Liability for the merchandise transfers from the seller to the carrier or buyer at the time the seller delivers the goods to the agreed port or area. The seller is only responsible for delivery to the specified destination as part of the liability transfer. It isn't obligated to unload the goods, but the seller might be responsible for ensuring that the goods have been cleared for export out of the United States if the destination is the seller's premises.

Under FCA shipping terms, the buyer doesn't have to deal with export details and licenses because this is the responsibility of the seller. The buyer must arrange for transport, however. Once goods arrive at the carrier and title transfers to the buyer, the goods become an asset on the buyer's balance sheet.

FCA Incoterms

Contracts involving international transportation often contain abbreviated trade terms, or terms of sale, that describe shipment specifics. These might include the time and place of delivery, payment, the point at which the risk of loss shifts from the seller to the buyer, and the party responsible for freight and insurance costs.

To help facilitate the delivery of such items, the most commonly known trade terms are international commercial terms or Incoterms. Incoterms are internationally recognized standards published by the International Chamber of Commerce (ICC). These are often identical in form to domestic terms, such as the Uniform Commercial Code (UCC), but there can be slight differences in their official interpretations.

The term 'free carrier' or FCA is a typical and highly-used example of Incoterms. It has been internationally recognized as a standard set of instructions to designate delivery terms. FCA shipping terms were included in Incoterms starting in 1980 and have been revised every ten years.

Example of FCA

Under FCA shipping terms, the seller delivers the goods to the destination named by the buyer. The shipper has responsibility for the goods until they arrive there. The buyer would be responsible for loading the goods for transport.

For example, Joe Seller ships goods to Bob Buyer under an FCA shipping term agreement. Bob opts to use his shipper with whom he's done business before. Joe agrees, and it's his responsibility to deliver the goods to the shipper. At this point, all liability passes to Bob.

The Bottom Line

Under FCA shipping terms, the seller is responsible for pre-carriage to a terminal, delivery to the agreed upon destination, and proof of delivery. The seller is also responsible for export packaging, licenses, and customs formalities. On the other hand, under FCA shipments, the buyer pays for the goods, is responsible for the main means of transportation, and pays for loading charges. The buyer also covers import duties, taxes, and formalities.