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Incoterm FCA: Definition, challenges and alternatives

Applicable to international trade, the FCA Incoterm is part of the group of multimodal Incoterms. What is it? What are its special features?

 

What is the FCA Incoterm?

Incoterms 2020 are divided into four categories. The FCA Incoterm is part of the “F” family together with the FCA and FOB Incoterms. This group is distinguished by the fact that the seller is released from his obligations upon receipt of the goods by the carrier chosen by the buyer. It is often used by suppliers who wish to avoid delivery of goods in international transactions.

FCA stands for Free Carrier Alongside. FCA can be used for all types of transport: air, road, sea or rail.

 

The principle of the FCA Incoterm

In international trade, the FCA Incoterm limits the exporter’s obligations to the delivery of the goods cleared through customs and loaded with the carrier specified by the customer. The customer can choose between two options:

  • Collection from the supplier’s warehouse

The choice of carrier and the transport costs are at the buyer’s expense. The supplier loads the customs-cleared goods onto the means of transport.

  • Pre-carriage and delivery to the point of departure

The seller delivers the cleared goods to the point of delivery via the means of transport chosen by the customer.

For both options, the seller must provide all the necessary documents for the export of the goods.

 

The changes brought about by the 2020 Incoterms reform

Incoterms 2020 introduces some new features for the FCA Incoterm, namely:

  • The possibility for the seller to obtain recognition ;
  • An extension of the FCA, DAP, DDP incoterms to transport by the customer’s means of transport.

 

Precautions to be taken

The FCA incoterm is quite flexible. However, to avoid ambiguities, a few precautions should be taken into account when trading:

  • Negotiate the cost of passage through the warehouse;
  • Define the packaging procedures for the goods.

 

FCA Incoterm: what are the obligations of each party?

In the case of a commercial exchange subject to the FCA Incoterm, the majority of the transport costs are borne by the buyer.

 

The seller’s obligations

The supplier is responsible for :

  • Packing and labelling the goods so that they arrive in good condition at their destination;
  • Loading the goods onto the customer’s means of transport or arranging for their transport to the place agreed in the sales contract for delivery. If the parties provide for a point of shipment other than the seller’s premises, the seller will not be responsible for unloading. Thus, the supplier fulfills his obligation if the buyer or the person appointed by him to receive the goods has taken delivery of them. The costs of unloading are borne by the customer;
  • Complete the customs clearance procedure in the country of export and pay the relevant duties and taxes so that the goods can leave the country.

The FCA incoterm is particularly advantageous for the seller, as it not only reduces his costs but also allows him to benefit from a VAT exemption, whether the goods are exported to or from an EU country. The buyer assumes all risks and responsibilities once the goods arrive at the point of export.

 

The obligations of the buyer

The customer is responsible for :

  • Organising the main transport from the point of shipment;
  • Carrying the goods to the final destination;
  • Completing the customs formalities for the import of goods.

The costs associated with the origin terminal, unloading, transfer and holding of the goods are borne by the buyer. The buyer is also responsible for import duties, taxes and customs clearance procedures.

 

FCA

 

Contract of carriage

No obligation.

However, if the buyer so requests, or if it is customary commercially and the buyer fails to give the seller instructions to the contrary in due course, the seller may conclude the contract of carriage on usual terms, at the buyer’s expense and risk. In either case, the seller may refuse to enter into this contract; if it refuses, it shall notify the buyer immediately. The buyer must, at his own expense, contract for the carriage of the goods from the named place, unless the seller has contracted for carriage.

 

Insurance contract

No obligation.

 

Delivery

The seller must deliver the goods to the carrier or other person designated by the buyer, or by the seller in accordance with the carrier or other person selected by the seller, at the designated delivery place on the agreed delivery date or within the time limit.

 

Delivery is made when:

  1. a) If the named place is the location of the seller, when the goods are loaded on the means of transport provided by the carrier named by the buyer or by another person acting on behalf of the buyer;
  2. b) If the named place is not a) but any other place, when the goods are on the seller’s means of transport and have not been unloaded and handed over to the carrier or other person named by the buyer or selected by the seller in accordance with A3a) or at the disposal of others.

If no specific delivery point has been determined at the designated place and there are several specific delivery points to choose from, the seller may choose the most suitable delivery point at the designated place for its purpose.

In the absence of express instructions from the Buyer, the Seller may deliver the Goods for transport according to the mode of transport and/or the quantity and/or nature of the Goods.

 

Receipt of goods

The buyer must take delivery of the goods when the seller delivers them as specified.

 

Risk transfer

Except as specified, the seller must bear all risks of loss of or damage to the goods until delivery has been made as specified.

The buyer must bear all risks of loss of or damage to the goods as follows:

from the time of delivery as stipulated; and because the buyer failed to designate a carrier or other person in accordance with the regulations, or the carrier or other person designated by the buyer failed to take over the goods at the agreed time, or the buyer failed to give the seller corresponding notice in accordance with the regulations, then From the agreed delivery date or the date of expiry of the delivery period, provided that the goods have been duly assigned to the contract, that is, clearly set aside or otherwise identified as the goods under the contract.

 

Cost division

Seller must pay

All costs in connection with the goods until they have been delivered as required; and, where customs formalities are required, the costs of customs formalities for export of the goods and all duties , taxes and other charges payable on export.

 

Buyer must pay

All costs related to the goods from the time of delivery in accordance with the provisions; Any additional costs incurred in giving Seller corresponding notice .

When customs formalities are required, all duties, taxes and other charges payable on the import of goods, as well as the costs of customs formalities and transit through other countries.

 

Notify the buyer

The seller must give the buyer sufficient notice that the goods have been duly delivered to the carrier. If the carrier does not take delivery of the goods as stipulated at the agreed time, the seller must notify the buyer accordingly.

 

Notify the seller

The buyer must give the seller sufficient notice of the name of the person named in accordance with the regulations, and specify the mode of transportation and the date or period of delivery to the named person, as the case may be, and the specific point of delivery within the named place, if necessary.

 

Certificate

Proof of delivery, shipping document or equivalent electronic message

The seller must, at its own expense, furnish the buyer with the usual documents evidencing delivery as specified.

Unless the document referred to in the preceding paragraph is a transport document, the seller must, at the buyer’s request, risk and expense, render all assistance to the buyer in obtaining a transport document (such as a negotiable bill of lading, a non-negotiable sea waybill, an inland transport document, air waybill, rail consignment note, road consignment note or multimodal transport document ).

If the buyer and the seller agree to communicate electronically, the documents mentioned in the preceding paragraph may be replaced by Electronic Data Interchange (EDI) messages that have the same effect.

The buyer must accept the delivery documents provided in accordance with the regulations.

 

Check

The seller must pay for the inspection costs required for delivery (such as the cost of checking the quality of the goods, measuring, weighing, and counting).

The seller must provide, at its own expense, the packaging required by the seller for the carriage of the goods (e.g. mode of transport, destination) known to the seller before the conclusion of the sales contract (unless the goods described in the contract are usually shipped without packaging in accordance with relevant industry practice). Packaging should be appropriately marked.

 

Similarities between FCA and FOB

What FCA and FOB have in common is that the price composition does not include freight and insurance , that is, the transportation procedures are all handled by the buyer and the cost is paid by the buyer, and insurance is not mandatory (but general risk bearing When going through the import and export procedures, the seller needs to bear the export procedure fee, and the buyer bears the import procedure fee.

 

The difference between FCA and FOB

The difference between FCA and FOB is reflected in the following aspects:

  1. The transportation methods of FCA and FOB are different: FOB is only applicable to sea transportation, while FCA is suitable for any transportation method.
  2. FCA and FOB delivery locations are different: FOB transportation is delivered at the port of shipment, while FCA completes the delivery when the goods are delivered to the first carrier;
  3. The risk division between FCA and FOB is different: the risk transfer between the buyer and the seller of FOB is loading on board the ship at the port of shipment (the 2010 rule cancels the regulation of crossing the ship’s rail), while FCA completes the risk transfer when the goods are delivered to the first carrier;
  4. The transport documents used by FCA and FOB are different: FOB will only be a sea bill of lading, while the transport bill of lading used by FCA depends on different modes of transport;
  5. FCA and FOB have different regulations on the burden of loading and unloading charges: in the case of chartering, FOB has the deformation of trade terms to solve the burden of loading and unloading charges, while FCA does not need to produce deformation of trade terms to solve the burden of loading and unloading charges.

 

Frequently Asked Questions About The FCA Incoterm

What is the FCA Incoterm?

The FCA Incoterm is a trade term used in international transactions that outlines the responsibilities of the seller and buyer in relation to the delivery of goods. The seller is responsible for delivering the goods to the carrier specified by the buyer, either at the seller's warehouse or at a predetermined point of departure. The buyer is responsible for organizing the main transport and completing import customs formalities.

How does the FCA Incoterm differ from other Incoterms?

The FCA Incoterm is part of the F group of Incoterms, which includes FCA and FOB. The main difference between these terms is that the seller's obligations are fulfilled upon delivery of the goods to the carrier in the case of FCA, while in the case of FOB, the seller's obligations are fulfilled upon transfer of the goods onto the vessel.

What are the obligations of the seller under the FCA Incoterm?

The seller is responsible for packing and labeling the goods, loading the goods onto the carrier specified by the buyer, and completing the customs clearance process in the country of export. The seller is not responsible for unloading the goods at their destination.

What are the obligations of the buyer under the FCA Incoterm?

The buyer is responsible for organizing the main transport, carrying the goods to the final destination, and completing the import customs formalities. The buyer is also responsible for any costs associated with the origin terminal, unloading, transfer, and holding of the goods, as well as import duties and taxes.

Is a contract of carriage required under the FCA Incoterm?

No, a contract of carriage is not required under the FCA Incoterm. However, the seller may choose to enter into such a contract at the buyer's expense and risk if requested by the buyer or if it is customary in the trade.

Can the FCA Incoterm be used for any type of transport?

Yes, the FCA Incoterm can be used for any mode of transport, including air, road, sea, or rail.

Can the FCA Incoterm be used for both domestic and international transactions?

No, the FCA Incoterm is specifically intended for use in international transactions. For domestic transactions, different Incoterms or trade terms should be used.

What are the benefits of using the FCA Incoterm for the seller?

Using the FCA Incoterm can be beneficial for the seller as it reduces their costs and allows them to benefit from a VAT exemption in certain cases. The seller is also released from their obligations upon delivery of the goods to the carrier specified by the buyer.

What precautions should be taken when using the FCA Incoterm in a trade transaction?

To avoid ambiguities, it is important to negotiate the cost of passage through the warehouse and define the packaging procedures for the goods. It is also important for the buyer to provide clear instructions for the delivery of the goods and for the seller to obtain recognition if necessary.

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