Free Carrier (FCA) Incoterms Explained: What They Mean for Your International Shipping Strategy

Of course, different countries can have different approaches to international trade, tax and customs, which is why there are globally-recognised standards in place to make shipping goods as smooth and simple as possible. These rules are called Incoterms, and as an e-commerce seller, one of the most common types you’ll come across is Free Carrier (FCA for short).

But what is the meaning of FCA Incoterms, how do they work, and what do they mean for your business? This guide gives you all the key facts, so that you’re fully up to date on all your key responsibilities.

Jump to:

• What Are FCA Terms?
• What Are My Responsibilities Under FCA Incoterms?
• What Does the Buyer Take Responsibility For?
• Can FCA Incoterms Be Beneficial to My E-Commerce Business?
• What Are the Potential Complications Around FCA Incoterms?
• What Should I Do If I Need Help with FCA Incoterms?
• FAQs

What Are FCA Terms?

Incoterms have been around since 1936, when the first version of commercial terms for international trade were published by the International Chamber of Commerce. Since then, international trade and global business has changed completely, and so the Incoterms rules have been regularly revised. Over the past few decades, new Incoterms versions have taken effect every ten years, and the current version came into force in 2020.

Free Carrier (FCA) is one of the types of Incoterms set out in these regulations, and sets out the responsibilities for sellers and buyers of goods at different stages of the transaction, from initial purchase all the way through to delivery. The key principle behind FCA Incoterms is that the seller is responsible for goods, up until they are received by the appointed carrier. After this point, the buyer assumes the costs and risk involved with the goods’ transportation.

What Are My Responsibilities Under FCA Incoterms?

In short, as a seller, you’re responsible for everything regarding the shipment until it’s received by the carrier – and this can involve a lot more management and administration than you might think:

Agreeing the ‘named place’

Together with the buyer, you will need to mutually agree the ‘named place’ at which the buyer’s chosen carrier receives the goods. This could be your own premises, if the buyer is happy to arrange collection from there, or could be a third-party location such as a warehouse or distribution centre if the items are generally stored elsewhere.

Packaging

You’ll need to pay for and supply appropriate packaging for the goods, and ensure that they are packed up safely for transportation, minimising the risk of any damage occurring along the way. You may also be required to meet specific contractual or industry requirements for the type of goods being shipped, and ensure that they’re labelled properly.

Contractual compliance

Every item you ship should be in compliance with whatever terms are agreed in the contract, including condition. If goods are being shipped internationally, it will also be your responsibility to ensure the goods are cleared for export and comply with all customs requirements.  For this reason, a thorough inspection of all goods prior to their reception by the carrier is strongly recommended.

Loading, shipping and delivery

The goods remain your responsibility until such time as they are received by the carrier (or arrive at a different place as specified in the contract). This means you’ll need to work with whichever carrier the buyer chooses to ensure the goods are loaded safely, and pay for transport and handling up to whichever place is specified. Once they have reached that point, these responsibilities transfer to the buyer.

Information and documentation

You should keep the buyer fully aware of everything that is going on with regards to the shipment. This includes providing them with all invoices, documentation and packing lists, and giving them an estimated time and/or date that the goods will arrive at the agreed location. Once the delivery has taken place, the seller should also provide proof of delivery for the buyer’s reference.

Assumption of risk

In the event that goods are lost, stolen or damaged, you as the seller retain responsibility for the resulting financial risk, until the goods are received by the carrier at the agreed place. The buyer takes on that risk once that point has been passed.

What Does the Buyer Take Responsibility For?

The latter part of the shipping process is where the buyer assumes control of the situation. Under FCA terms, this includes:

Transportation and freight

Buyers assume the risk and responsibility for transporting the goods from the agreed place to their chosen end destination. This includes paying any applicable freight charges and loading costs, and assuming the risk for loss, theft or damage of the goods during that part of the process. If there are costs for unloading at the final destination, these should be covered by the buyer, too.

Customs clearance

If the goods are being transported internationally, then they may be subject to import taxes like customs duties. Buyers should take care of all the documentation and clearance required at their end, including the payment of any tax required.

Working with carriers

It’s up to buyers to work with their chosen carriers and stay abreast of the progress of the shipment, including coordinating delivery times and helping to resolve any issues along the way. Ideally, this will be arranged before the start of the process, and sellers should be informed to help coordinate everything end-to-end.

Can FCA Incoterms Be Beneficial to My E-Commerce Business?

If applied properly and efficiently, then absolutely. The more complexity that can be taken out of the shipping process, the easier it is for e-commerce operations to cut out any potential headaches or financial loss, and save more time to focus on growing your business. FCA Incoterms can give you:

Clarity

Your buyer will want information and transparency throughout the shipping process just as much as you will, in part for peace of mind that the goods they’ve bought are in the safest possible hands. FCA Incoterms make it absolutely clear who is responsible for what and when, and with a named place for the transfer of that responsibility, the risk of disagreement and ambiguity can be minimised.

Flexibility

FCA Incoterms can be applied to all modes of shipping or transportation, across road, rail, sea and air. It can also be applied for any size of shipment, from a couple of items of clothing going to the next town, to pallets of heavy machinery being flown to the other side of the world. This means you can apply it in the long term, however your business evolves and grows.

Easier international business

FCA Incoterms are globally recognised, which gives you a really solid starting point if you’re going into a new market or negotiating with sellers in a different country for the first time. While there are some variations in some countries (see the FAQ section for more information), it means that both parties are clear on the majority of their responsibilities from the outset.

What Are the Potential Complications Around FCA Incoterms?

There can be some complications when running FCA Incoterms. The good news is that none of them are insurmountable if you apply the right knowledge and rigour to your paperwork and admin, but you should watch out for:

Disagreements and misinterpretations

As with any contract, inaccuracies and ambiguity is where disputes arise from. With specific regard to FCA Incoterms, it is absolutely vital that the choice of carrier and the location of the agreed place is pinned down beyond any doubt, so that there aren’t any disagreements later on.

Complex transportations

Depending on where the agreed place is, you might face a particularly lengthy and/or complex journey for your goods to get from your initial site to that point – especially if shipping internationally. As you’ll be responsible for those costs, this can quickly eat into your profit margin if you don’t agree a place that’s more favourable to your bottom line.

Buyer negotiating positions

Buyers will naturally have the same concerns at their end, and will want to make sure that the deal and agreed place is in their best interests. After all, the shorter the journey that you’re responsible for, the longer it will be within the buyer’s responsibility. For that reason, a balanced agreement that makes sense for both parties is the best way forward.

What Should I Do If I Need Help with FCA Incoterms?

FCA Incoterms can be complicated to get your head around if you aren’t familiar with international shipping, or aren’t experienced with the administration and paperwork involved. However, in order to meet your responsibilities running an e-commerce business, it’s very important that you get it right, so that buyers and authorities alike are satisfied with your operations.

If you aren’t confident that you can take care of things in-house, then consider working with a third-party logistics (3PL) provider who can support you with shipping administration and Incoterms. They’ll be able to advise on the best Incoterms to operate under (which may be FCA or an alternative option), and help you manage every part of the shipping process, from packaging and risk through to delivery and documentation. To find out more, get in touch with the ILG team today to discuss your specific requirements.

FAQs

When is it best to use FCA Incoterms?

FCA Incoterms work very well when the carrier involved is reputable and reliable. If you and the buyer are both happy with the choice of carrier, then FCA Incoterms work very well because the risk levels are relatively low and both parties have confidence in the process. It’s also especially useful in the context of e-commerce operations like fashion retail, where streamlining the whole delivery process reduces the risk of delays and maximises buyer satisfaction.

What other types of Incoterms are available?

There are several types of Incoterms, and they mainly vary by the point at which responsibility transfers from the seller to the buyer. Two of the other popular options for e-commerce firms are Delivered At Place (DAP) and Delivered Duty Paid (DDP), where the seller retains responsibility all the way through until the buyer receives the goods at their destination. You can read all about DAP and DDP in detail in this blog.

Are there any country-specific requirements I should be aware of?

Yes, especially if you’re doing any business involving the United States. US import tariffs and trade policies can change over time, which means additional care may be required to apply the correct duties, taxes and documentation when importing goods in the United States. This may also apply to you as a buyer if you’re bringing goods in from the US. These requirements can vary considerably from country to country, and the expertise of a 3PL partner can help you stay on top of all of them.