What Is Free Carrier (FCA)?
The free carrier is a trade term dictating that a seller of goods is responsible for the delivery of those goods to a destination specified by the buyer. When used in trade, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier. The destination is typically an airport, shipping terminal, warehouse, or other location where the carrier operates. It might even be the seller's business location.
The seller includes transportation costs in its price and assumes the risk of loss until the carrier receives the goods. At this point, the buyer assumes all responsibility.
- Free carrier is a trade term requiring the seller of goods to deliver those goods to a named airport, shipping terminal, warehouse, or other carrier location specified by the buyer.
- The seller includes transportation costs in its price and assumes the risk of loss until the carrier receives the goods.
- Once the seller delivers the goods to the carrier, the buyer assumes all responsibility for the goods.
- The International Chamber of Commerce updated Incoterms in 2010 to include the free carrier provision.
- As part of the liability transfer, the seller is only responsible for delivery to the specified destination but isn't obligated to unload the goods.
How Free Carrier (FCA) Works
Buyers and sellers engaged in economic trade requiring the shipment of goods can use a free carrier agreement (FCA) to describe any transportation point, regardless of the number of transportation modes involved in the shipping process. The point must be a location within the seller’s home country, however. It's the seller's duty to safely transport the goods to that facility. The carrier can be any kind of transportation service, such as a truck, train, boat, or airplane.
Liability for the merchandise transfers from the seller to the carrier or buyer at the time the seller delivers the goods to the agreed port or area. The seller is only responsible for delivery to the specified destination as part of the liability transfer. It isn't obligated to unload the goods, but the seller might be responsible for ensuring that the goods have been cleared for export out of the United States if the destination is the seller's premises.
The buyer doesn't have to deal with export details and licenses because this is the responsibility of the seller. The buyer must arrange for transport, however. Once goods arrive at the carrier and title transfers to the buyer, the goods become an asset on the buyer's balance sheet.
The Importance of Incoterms
Contracts involving international transportation often contain abbreviated trade terms, or terms of sale, that describe shipment specifics. These might include the time and place of delivery, payment, the point at which the risk of loss shifts from the seller to the buyer, and the party responsible for freight and insurance costs. The details are highly specific in nature because identifying the exact moment when liabilities and cost responsibilities transfer are key points within the agreement.
The most commonly known trade terms are international commercial terms or Incoterms, which are internationally recognized standards published by the International Chamber of Commerce (ICC). These are often identical in form to domestic terms, such as the Uniform Commercial Code (UCC), but there can be slight differences in their official interpretations. Parties to a contract must expressly indicate the governing law of their terms and which edition of the published Incoterms they're using.
The ICC updates Incoterms every 10 years. The following is an example of the kinds of terms included in Incoterms:
- Ex works (EXW).
- Delivered at place (DAP).
- Delivered duty paid (DDP).
- Free alongside (FAS).
- Free on board (FOB).
- Cost and freight (CFR).
- Cost, insurance, and freight (CIF).
All Incoterms are legal terms, but their exact definitions can differ by country. Using clarity and specificity when citing them is critical.
Experts recommend that any party involved in international trade consult with an appropriate legal professional—such as a trade attorney—before using any trade term within a contract.
Example of Free Carrier (FCA)
The seller delivers the goods to the destination named by the buyer. The shipper assumes responsibility for the goods when they arrive there. The buyer would be responsible for loading the goods for transport.
For example, Joe Seller ships goods to Bob Buyer. Bob opts to use his shipper with whom he's done business before. Joe agrees, and it's his responsibility to deliver the goods to the shipper. At this point, all liability passes to Bob.