As the delivery terms are perceived from the seller’s point of view, “Free” indicates that the main portion of transport is not paid for by the seller. Therefore, the FCA term is included in the so called “costs sustained on departure”, alongside the Group E, EXW term whose characteristics we have already analysed, as well as the Group F FAS and FOB terms. It should also be noted that the FCA term can be used for all modes of freight forwarding whereas the FAS and FOB terms can only be used for ocean freight transport.

According to the ICC in the case of an FCA sale “the seller delivers the goods by consigning these to the carrier or other person nominated by the buyer at his premises or other named place”. The use of the FCA term must therefore be perfected by indicating a specific place, given that the responsibility for the goods and the associated costs are transferred from the seller to the buyer. There are two delivery options: either at the seller’s premises or other nominated place. We therefore have a delivery term that envisages two separate cases:

In the case of delivery at the seller’s premises, the goods Customs cleared for export by the seller are loaded at their premises into the vehicle sent by the buyer and the risks pass from one party to the other once the goods are loaded.

In the case of delivery at a named place, the goods Custom cleared for export by the seller are loaded into the vehicle at the seller’s premises and are then moved to the agreed place and made available to the buyer. It should also be noted that the goods are not unloaded by the seller at the agreed place of delivery, in fact the risks and responsibilities pass to the buyer when the vehicle arrives at the named place, prior to unloading.

First FCA case study (when not using an Intermodal Freight Terminal).

Both versions of the FCA term require the seller to issue relevant documents, commercial invoices, licences and certificates necessary for the completion of export formalities at their own expense, these being tasks that are logically undertaken by the seller, given their position. Furthermore, if the buyer needs to know any specific information or instructions regarding the pick-up and transport of the goods (e.g. if goods are fragile, perishable or classified as dangerous), the seller must inform the buyer.

Thereafter, in this first case the seller is only responsible for making the goods available, on the agreed date or within the established time-frame, for loading the goods, at their own expense, into a vehicle sent by the buyer, which may be owned by the buyer or be that of a third party, e.g. belonging to a freight forwarder or courier company. Once all the goods are loaded into the vehicle, they are considered to be “delivered” and it is at that moment the transfer of risks during transport takes place, from the seller to the buyer. The rest of the journey is organised, controlled and paid for by the buyer. If the goods are not loaded, for any reason or disservice, the seller must notify the buyer.

Second FCA case study (when using an Intermodal Freight Terminal) and other practical information.

In this second case study, the seller loads the goods into a vehicle at his own expense and this will be driven to the named place. This named place can also be indicated via the generic term “Intermodal Freight Terminal”. This freight terminal is generally a warehouse or freight distribution / sorting centre, accessible to heavy goods vehicles, and often strategically located near a Customs office, perhaps a commercial port and that may also be equipped with a rail connection; it may be the warehouse of the freight forwarder or a collection point for consolidated shipment loads. At the precise moment the goods reach the freight terminal they are considered to be “delivered”. This is when the transfer of risks in this case takes place. Again, it is also important to underline that the risks are transferred prior to unloading. All costs from this point onwards are borne by the buyer, including the costs of unloading, warehouse entry and storage, together with the charges incurred for reloading into another vehicle or container. Due to its inherent characteristics, and indeed as advised directly by the ICC, the FCA terminology is the recommended delivery term for container shipments.

Practical information

We would like to complete our analysis of the FCA term with some useful clarifications from a practical viewpoint. If using the FCA term there is no obligation to take out insurance cover, but both the buyer and seller can of course each take out insurance cover for the portion of the journey they are handling. If the buyer requires specific information in order to obtain insurance coverage, the seller must provide this. Similarly, if the buyer requires information in order to issue import documentation (e.g. Eur1 or COO), the seller must also provide this. In both the above cases, should the buyer’s requests incur costs to the seller, the buyer must reimburse them.
It is also important to note that if the buyer on their way to the Intermodal Freight Terminal crosses a Customs point, they must comply with all the necessary Customs formalities (e.g. payment of duties where applicable). Vice versa, if the seller is the party who has to reach a warehouse overseas, they are responsible for the necessary payments due to Customs in order to obtain the official release of the goods.
In addition, and if asked for, the seller must be in receipt of a document that can then be sent to the buyer proving “delivery”, whether this be when goods where loaded into a vehicle at their premises as in the first case, or on arrival at the Intermodal Freight Terminal as in the second case.

FCA and the Bills of Lading.

Once the goods are physically placed on board the ship, as documented by the Bill of Lading, which “should” in all cases be provided to the buyer, given that in each of the two FCA delivery term options, the loading of goods into the ship is a segment that is the exclusive responsibility and under the control of the buyer.

It is precisely for this reason that, prior to the last revision of the Incoterms in 2020, (to which we have in the past dedicated the following article:

First FCA case study (when not using an Intermodal Freight Terminal).

Both versions of the FCA term require the seller to issue relevant documents, commercial invoices, licences and certificates necessary for the completion of export formalities at their own expense, these being tasks that are logically undertaken by the seller, given their position. Furthermore, if the buyer needs to know any specific information or instructions regarding the pick-up and transport of the goods (e.g. if goods are fragile, perishable or classified as dangerous), the seller must inform the buyer. Thereafter, in this first case the seller is only responsible for making the goods available, on the agreed date or within the established time-frame, for loading the goods, at their own expense, into a vehicle sent by the buyer, which may be owned by the buyer or be that of a third party, e.g. belonging to a freight forwarder or courier company. Once all the goods are loaded into the vehicle, they are considered to be “delivered” and it is at that moment the transfer of risks during transport takes place, from the seller to the buyer. The rest of the journey is organised, controlled and paid for by the buyer. If the goods are not loaded, for any reason or disservice, the seller must notify the buyer.

Second FCA case study (when using an Intermodal Freight Terminal) and other practical information.

In this second case study, the seller loads the goods into a vehicle at his own expense and this will be driven to the named place. This named place can also be indicated via the generic term “Intermodal Freight Terminal”. This freight terminal is generally a warehouse or freight distribution / sorting centre, accessible to heavy goods vehicles, and often strategically located near a Customs office, perhaps a commercial port and that may also be equipped with a rail connection; it may be the warehouse of the freight forwarder or a collection point for consolidated shipment loads. At the precise moment the goods reach the freight terminal they are considered to be “delivered”. This is when the transfer of risks in this case takes place. Again, it is also important to underline that the risks are transferred prior to unloading. All costs from this point onwards are borne by the buyer, including the costs of unloading, warehouse entry and storage, together with the charges incurred for reloading into another vehicle or container. Due to its inherent characteristics, and indeed as advised directly by the ICC, the FCA terminology is the recommended delivery term for container shipments.

Practical information

We would like to complete our analysis of the FCA term with some useful clarifications from a practical viewpoint. If using the FCA term there is no obligation to take out insurance cover, but both the buyer and seller can of course each take out insurance cover for the portion of the journey they are handling. If the buyer requires specific information in order to obtain insurance coverage, the seller must provide this. Similarly, if the buyer requires information in order to issue import documentation (e.g. Eur1 or COO), the seller must also provide this. In both the above cases, should the buyer’s requests incur costs to the seller, the buyer must reimburse them. It is also important to note that if the buyer on their way to the Intermodal Freight Terminal crosses a Customs point, they must comply with all the necessary Customs formalities (e.g. payment of duties where applicable). Vice versa, if the seller is the party who has to reach a warehouse overseas, they are responsible for the necessary payments due to Customs in order to obtain the official release of the goods. In addition, and if asked for, the seller must be in receipt of a document that can then be sent to the buyer proving “delivery”, whether this be when goods where loaded into a vehicle at their premises as in the first case, or on arrival at the Intermodal Freight Terminal as in the second case.

FCA and the Bills of Lading.

Once the goods are physically placed on board the ship, as documented by the Bill of Lading, which “should” in all cases be provided to the buyer, given that in each of the two FCA delivery term options, the loading of goods into the ship is a segment that is the exclusive responsibility and under the control of the buyer. It is precisely for this reason that, prior to the last revision of the Incoterms in 2020, (to which we have in the past dedicated the following article: Incoterms 2020 the FCA term was set aside in favour of the FOB term for sales secured via a letter of credit. In fact, in the presence of a letter of credit, the seller must present the Bill of Lading to their bank with the officially issued annotation that the goods have been loaded on board, commonly referred to as “On Board”, which according to the FCA term should be issued by the maritime carrier exclusively to the buyer. The seller will therefore be totally in the hands of the buyer, who may delay or even fail to forward the Bill to them. Prior to the 2020 revision, to avoid this risk the buyer would often opt for a FOB delivery term instead of the FCA term, incurring greater costs and more risks as the point of delivery is moved from a specific place to the actual boarding of the goods. The ICC resolved this problematic flaw as part of the 2020 Incoterms revision by stating that in an FCA sale, the parties can agree on an obligation on the buyer’s part to instruct the carrier to issue the seller with a Bill of Lading with an official On Board annotation.”

the FCA term was set aside in favour of the FOB term for sales secured via a letter of credit.

In fact, in the presence of a letter of credit, the seller must present the Bill of Lading to their bank with the officially issued annotation that the goods have been loaded on board, commonly referred to as “On Board”, which according to the FCA term should be issued by the maritime carrier exclusively to the buyer. The seller will therefore be totally in the hands of the buyer, who may delay or even fail to forward the Bill to them. Prior to the 2020 revision, to avoid this risk the buyer would often opt for a FOB delivery term instead of the FCA term, incurring greater costs and more risks as the point of delivery is moved from a specific place to the actual boarding of the goods. The ICC resolved this problematic flaw as part of the 2020 Incoterms revision by stating that in an FCA sale, the parties can agree on an obligation on the buyer’s part to instruct the carrier to issue the seller with a Bill of Lading with an official On Board annotation.

 

Autor: Francesca Savia
Operations and Compliance Manager
Savitransport – HQ Florence