FCA – Free Carrier (Named Place) Incoterms® 2020
Article 3 in our series of Incoterms® 2020 – In each article, we will identify the responsibilities of the seller in the transaction at different points in the shipping journey.
What are Incoterms used for?
Incoterms® are primarily used for determining how the sale of equipment for delivery across international boundaries will be handled and who will pay for what in the transaction. They will not address the consequences of a breach of contract or exemptions of liability. Incoterms® relate to the terms between the exporter and importer.
Incoterms® cover the following broad points:
Delivery - Incoterms® 2020 specify when seller delivers to buyer:
Risk - Incoterms® 2020 specify when risk transfers from seller to buyer. Risk passes from seller to buyer when seller has fulfilled his obligation to deliver the goods
Costs - Responsibility of costs passes from seller to buyer at a point up to which the seller is obliged to pay transport (and insurance) costs
Our second Incoterm® is
- FCA – Free Carrier (Named Place)
This term is a rule that can be used for ANY MODE OR MODES OF TRANSPORT
The seller is responsible for either making the goods available at its own premises or at a named place. In either case, the seller is responsible for loading the goods on the buyer's transport and is responsible for delivery to the port and export clearance including security requirements. Risk transfers once the goods are loaded on the buyer’s transport.
This term has changed the most in the Incoterms 2020 rules. Previously, problems occurred with this term when the seller was responsible for loading the goods on a truck or some other transport hired by the buyer and not directly on the international carrier. If the seller and buyer had agreed on using a letter of credit as the payment method for this transaction, banks often require the seller to present a bill of lading with an on-board notation before they can get paid.
An international carrier will not typically provide a seller who did not present the goods directly to them with such a bill of lading. Under the new Incoterms 2020 rules, FCA allows the parties to agree in the sales contract that the buyer should instruct its carrier to issue a bill of lading with the on-board notation to the seller.
Seller delivers goods, cleared for export, to carrier nominated by buyer at the named place
• If ‘named place’ is seller’s premises, seller is responsible for loading
• If ‘named place’ is elsewhere (eg carrier’s yard), seller not responsible for unloading
• If commercial practice or at buyer's request, seller may (but is not required to) arrange transport at buyer's cost and risk
• Suitable for use with any mode of transport
FCA and the Bill of Lading ProcessUpdates were made to the previous Incoterms® 2010 to encourage exporters of containerized goods to use the FCA Incoterm®. Most parties are still using FOB when they should be using FCA. This is because even experienced sellers still wanted to use FOB as this term is considered better for a payment/Letter of Credit sale.
Therefore provisions have been made to the Incoterms® 2020 to state that the buyer must instruct the carrier to issue a transport document stating that the goods have been loaded – i.e a Bill of Lading with an ‘on board’ notation. In the past carriers have frequently refused to issue a Bill of Lading with a notation to the seller if they have received the goods from an intermediary transport (such as a truck), instead of directly from the seller.
Carriers are not obligated to comply with the request to issue a bill of lading; and
FCA is still a generally more buyer-friendly term, as the seller is responsible for all costs and risks associated with export formalities. The risk only shifts to the buyer when the goods have been delivered to the buyer’s nominated carrier.
Missed the first two articles? Catch up on them here: