It’s a simple case of how, when, where.
Like all of the 11 Incoterms® drafted by the International Chamber of Commerce (ICC), the Free Carrier or FCA rule was designed to eliminate confusion in sales contracts and clearly define the roles and responsibilities of buyers and sellers of export goods.
With FCA, it’s all in the details: Exporters must identify how, when and where they will make their goods available to buyers. For example, goods will be delivered by air on a specific date to a loading dock at the buyer’s warehouse or a third-party facility.
Under FCA, when the place of delivery is the seller’s facilities, the seller is responsible for loading the goods onto a truck or other transport vehicle. When the place of delivery is somewhere else, delivery is completed when the goods, which have been loaded on the seller’s means of transportation, arrive at the named location and are ready to be unloaded by the carrier or other person identified by the buyer.
In either case, once the goods have been delivered by the seller, the buyer bears all the risk of loss or damage to the goods. The key to the FCA rule is to specify the delivery point in the contract of sale.
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The buyer is responsible for:
- providing the seller with the name of the carrier (or other specified person) to deliver the goods;
- designating the selected time when the carrier will receive the goods;
- identifying the mode of transport to be used and the location where the goods will be received; and
- performing freight and international transport arrangements. In Canada, this means that an exporter should file an export declaration if goods are valued at C$2,000 or more, and they are destined to any country other than the United States, Puerto Rico or the U.S. Virgin Islands.
The seller is responsible for:
- packaging and marking the goods for transport and any associated costs;
- informing the buyer when the goods have been delivered;
- notifying the buyer if the carrier or another person specified by the buyer has failed to take the goods within the agreed time period; and
- clearing customs for exports.
What’s new with FCA?
Free Carrier has been revised to address one specific situation in which goods are sold FCA for carriage by sea and the buyer or seller requests a bill of lading with an on-board notation. Article A6/B6, the delivery/transport document, now allows the buyer and seller to agree that the buyer will instruct the carrier to issue an on-board bill of lading to the seller as soon as the goods have been loaded on board. It also allows for the seller to tender this document to the buyer.
Who’s responsible for the loss?
Let’s say a Canadian wheat exporter in Manitoba is selling to an American buyer. Using FCA, the contract states that the goods will be available for pickup at the exporter’s warehouse in Manitoba in loading bay No. 1, between 4 p.m. and 5 p.m. on Jan. 15, 2020. On the date of the scheduled pickup, the seller places the goods in front of loading bay No. 1 of their warehouse at 4 p.m. But the buyer doesn’t show up until Jan. 16 at 1:45 p.m. and can’t get access to the specified loading bay because the fire department is onsite trying to put out a truck fire. The goods have been destroyed because they’ve been sitting in the loading bay since the previous day.
Under FCA, if the place of delivery is the seller’s premises, then it’s the seller’s responsibility to load the goods onto a truck (or other transport vehicle). Since he didn’t in this case, the goods weren’t delivered according to the Incoterm rules and therefore, they’re his responsibility.
For more information about Free Carrier and the other 10 Incoterms, see the official Incoterms rule book. The ICC has also created an Incoterms 2020 app, which gives you easy access to a wealth of practical information on your mobile device.