FCA Incoterm Definition:
Free Carrier

When specifying the place of FCA delivery, this should be stated as clearly as possible - especially since onward transport can be carried out via any conceivable transport route. While ‘FCA Hamburg’, for example, is very general, ‘FCA Seaport of Hamburg’ makes it immediately clear that the goods are to be transported by ship. For container transport, the corresponding container terminal can be named, and for freight transport, the railway station as well as the track. Alternatively, the means of transport can also be listed, such as ‘FCA Company Factory’.

Experience has shown that it is advisable to eliminate sources of misunderstanding as far as possible by providing precise information, even in the case of supposedly obvious details. Furthermore, the seller has the right to deliver the goods where it makes sense from their point of view if the delivery point is imprecise. The problem for the buyer is that the risk is transferred to them on delivery - this also includes damage and loss, which may be associated with a less suitable delivery point.

The specification/naming of a mode of transport is not a condition, and there are also justified cases in which this can be waived. If the buyer wishes to remain flexible regarding the desired mode of transport, they have the option of notifying the carrier at short notice (but in good time for the seller) as part of the buyer’s notification obligations to the seller, and thus also the mode of onward transport. This can have an influence on the type and manner of packaging. This procedure is referred to as ‘FCA instructions’.

If a factory or warehouse of the seller is listed as the place of delivery, the seller loads the goods onto the buyer's means of transport and thus completes the delivery. If the place of delivery is elsewhere, it is sufficient for the seller to deliver the goods ready for unloading. It should be noted that there are two different conditions for when the FCA delivery is deemed to be completed: loading by the seller at their own factory/warehouse or provision for loading by the first carrier at another location (seaport, airport, freight station, etc.). The latter can also mean that the goods are handed over at a container terminal.

As with other ‘single-point clauses’, the transfer of risk and costs takes place at the same time, namely upon delivery in accordance with the contract. In the case of FCA, as stated in the paragraph above, this is the loading onto or making available to the first carrier. The seller provides the buyer with proof of delivery and, if required, transport documents for onward transport (e.g. for FCL and LCL container transport).

If onward transport is to take place in a shipping container, the seller delivers the goods to the container terminal. Depending on whether the goods are intended for an FCL or LCL container (‘Full Container Load’ or ‘Less than Container Load’/general cargo), different costs are incurred. Both terminal fees or ‘Terminal Handling Charges’ are borne by the buyer.

In many cases, it may be advisable for the seller to organise the transport. This may be due to industry practice or an established practice between buyer and seller. It may even be that the seller proactively concludes a contract of carriage on the basis of standard practice if the buyer does not give other orders in good time. Although the risk and costs are generally borne by the buyer, the seller must first make advance payment to the carrier in order to be reimbursed for the costs later by the buyer. If, for example, the seller has doubts as to whether the buyer will fulfil this obligation later, they can refuse to conclude a transport contract.

In the case of FCA shipping in particular, it may be in the seller's interest to organise the transport themselves. In this way, they can better control the time of collection than if they informs the buyer in advance that the goods are ready for collection and the buyer then (hopefully) accepts the goods on the agreed date. Furthermore, the seller chooses the transport company and thus has an influence on the quality of the delivery. This can be of interest, for example, when it comes to sensitive goods that require special care.

The current Incoterms 2020 make even more explicit reference than before to the fact that the seller must take the necessary safety precautions for transport up to delivery. This reflects the increased awareness of safety aspects during transport. What is ‘customary in the industry’ or best practice can of course be a matter of interpretation. Here, for example, the insurer of the transport can make corresponding specifications.

Neither the seller nor the buyer has to take out insurance with FCA, but of course it makes sense to do so for ‘their’ section of the transport for which the risk is borne. If you want to avoid the critical moment of transfer of risk, when one insurance policy ends and the other begins, one can also take out a single continuous insurance policy where the buyer and seller share the costs proportionately.

The seller is responsible for export clearance, including all formalities, checks and authorisations. They bear all costs. It should be noted that it may be the case that an export is not possible or is refused. The granting of an export licence often also depends on transit countries authorising transit or the presentation of the necessary certificates from the destination country. Passing pre-shipment inspections and obtaining a security clearance can also be a hurdle.

If it is impossible for the seller to export the goods, the buyer can withdraw from the contract. However, if the impediment to export was beyond the seller's knowledge or ‘reasonable expectation’, the seller is not liable for damages under CISG Art. 79 para. 1.

The buyer, in turn, is responsible for the transit and import of the goods (if necessary). In this respect, the buyer is dependent on documents and information from the seller, which the seller must provide at the ‘request, risk and expense of the buyer’.

It is generally advisable for both contracting parties to check in advance to what extent they can fulfil their obligations with regard to import and export and - if, for example, the granting of an export licence is outside their sphere of influence - to indicate this as a reservation (e.g. ‘FCA subject to export licence’).

The seller must ensure that the goods are packaged for transport. This protects the goods from damage and loss, but also the carrier itself from damage. Which packaging is usual and appropriate depends on the nature of the goods (value, fragility, etc.). The goods must be labelled accordingly (e.g. ‘Caution glass’) so that the carrier treats the goods appropriately. The means of transport envisaged by the buyer also plays a role: transport by sea has different packaging requirements than transport by plane, for example.

Ideally, the seller should find out which mode of transport or packaging is required before the contract is concluded so that he can include the packaging costs in his calculation. In this way, they can also calculate particularly high requirements that exceed the usual industry standard. If the further means of transport (and the packaging required as a result) is kept open - see the FCA instruction above - the trade term FCA can be supplemented with the addition ‘plus packaging costs’.

FAQ FCA