Shipping goods from one location to another may be a part of your regular operations, but the more phases there are in the process, the more complex it can get.
Sellers must balance many risks and requirements to navigate the shipping process effectively. They need to ensure that the goods - regardless of their value or sensitivity, are transported safely without any major hurdles in the process.
FCA Incoterms lists one of the many approaches you can take towards shipping your goods to buyers. Let us start with the FCA incoterms definition before delving deeper into the topic.
FCA Incoterms: Explanation
FCA Incoterms means Free Carrier and is a trade terminology that represents the requirement for the seller to drop off the shipment at a named destination or a premise specified by the buyer. Once the shipment reaches that specific destination, the buyer can then transfer it to a shipping carrier of their choice.
FCA Incoterms’ full form “free carrier” in this context alludes to the lack of obligation and involvement of the buyer in the process of transferring goods to the named place or destination. If the buyer does not specify a location, the seller can choose a destination and let the buyer know.
Basically in international logistics and shipping, FCA incoterms ensure that the seller manages all the transportation-related processes in the export location while the buyer takes care of the rest of the process in all the other locations involved in the process.
Responsibilities and Obligations of Buyers and Sellers in FCA
Now that you have a basic idea of the FCA incoterms responsibility concept, let us now look at the obligations and responsibilities that buyers and sellers can expect as a part of an FCA agreement.
FCA Incoterms: Seller Responsibility
Here are some of the primary responsibilities expected of a seller as a part of FCA incoterms:
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Bear the costs associated with pre-shipment quality checks, and packaging the shipment and getting it ready for
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Management of commercial invoicing and related documentation
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Loading cargo onto the buyer’s transport vehicle if they are to be delivered to their premises
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Acquiring an export license and managing all the export-related formalities
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Creating and providing proof of delivery and offering transparency into the status of the goods
FCA Incoterms: Buyer Responsibility
Here are some of the primary responsibilities expected of a buyer as a part of FCA incoterms:
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Pay the costs associated with shipping insurance, main carriage, and post-carriage shipping
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Acquire and manage all the import-related documentation and formalities
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Unloading the cargo from the named location if it is not the seller’s premises
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Bear the costs for loading goods on your transport vehicles
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Pay for all the pre-shipment checks required for the goods to be cleared for import
Top 4 Advantages of FCA Incoterms for Sellers
The aforementioned points should give you a better idea of the responsibilities and obligations associated with you the seller, and your buyers. Having said that, let us look at the top FCA incoterms pros and cons that sellers and buyers should know about.
1. Limited Liability and Risks
Under FCA Incoterms risk transfer, the seller is only liable for the goods till they are delivered at the specified location. Any loss, damage or delays taking place after this point in the main transit process falls under the buyer’s responsibilities. As a result, the seller’s exposure to risks associated with long-distance transportation and potential complications decreases significantly.
2. Streamlined Export Documentation
If the seller is familiar with the export process and procedures, taking responsibility for the FCA incoterms export clearance and documentation may in fact be beneficial. After all, this will also streamline the calculation of customs duties and other related charges.
Handling this part of the documentation and compliance with the export regulations can help sellers like you ensure that your goods are transported and delivered smoothly without any delays or penalties.
3. Simplified Logistics and Cost Control
As a part of FCA Incoterms, the sellers can choose the delivery point that can be within their premises or a nearby location. This can simplify your logistics process, and allow you to manage the entire process within a controlled environment. Consequentially, you won't have to deal with any complicated transportation arrangements.
Having total control over your logistics and transportation process can also help you manage your costs and prevent unexpected expenses associated with transporting to distant and unfamiliar locations.
4. Improved Cash Flow Management
FCA incoterms meaning ensure that the seller’s responsibilities end once the goods are handed over to the carrier at the export location. You can arrange for your FCA incoterms payment terms to be structured accordingly, and get quicker access to funds.
As a result, you can improve overall cash flow management in your business, without having to wait for the goods to reach the final destination to receive the payment.
Top 4 Disadvantages of FCA Incoterms for Sellers
Along with the aforementioned benefits, here are some of the disadvantages associated with FCA incoterms for sellers.
1. Potential Coordination Challenges
Even though you are dealing with just one part of a lengthy transportation process, coordinating with the buyer’s carrier can get quite challenging. This can get even more complicated if the goods are not handled properly or you need to deal with unnecessary delays.
Plus, any miscommunication or lack of coordination can lead to additional costs or even penalties for the seller in case the delivery deadline is missed.
2. Potential Disputes Over Delivery Terms
For an FCA agreement to be truly successful, the delivery location and timing should be perfectly communicated and agreed upon by both parties. Any ambiguity or disagreement in this can lead to disputes with the buyer and immediately cause dissatisfaction.
What’s more, all of these issues can also lead to payment delays or additional costs in case you end up not fulfilling your contractual obligations.
3. Limited Control Over the Actual Transport
With FCA Incoterms air freight, you will be dealing with the initial leg of the journey. But once the carrier deployed by the buyer takes over and the responsibilities are reassigned, you will have virtually no control over the rest of the process.
The problem is that the actual transport process from your premises or origin port to the destination is the most crucial and prone to errors. If the carrier faces any issues during the actual transit resulting in delays or damages, you will risk damaging your reputation as a seller.
After all, unlike DDP shipping, even though your responsibility is officially transferred after delivering the goods to the carrier, as a seller, you are accountable for the entire process.
4. Risk of Non-Compliance With Buyer’s Requirements
When the seller is transporting goods from their facility to a named location, they must ensure that it is compliant with the buyer’s specific requirements. You need to maintain accuracy in aspects such as packaging, labelling and documentation.
If you are not able to adhere to the buyer’s requirements in all of these processes, you might end up dealing with several disputes, delays, or even order cancellations. Consequentially, you may even harm your relationship with the buyer and face a lot of financial losses.
When to Consider Using FCA Incoterms Title Transfer
So far, we have discussed the basics of FCA incoterms such as its definition, obligations, advantages, and disadvantages associated with it.
However, having a better understanding of these aspects is of no use, if you don’t know when you should consider implementing FCA incoterms insurance in your eCommerce business. The only time you want to implement FCA incoterms is if the following parameters have been fulfilled.
- The cargo you are shipping to be picked up by the buyer’s carrier should be containerised.
- The buyer should have adequate knowledge of the logistics process and should know about the logistics regulations and requirements in the seller’s country, or they should at least they should use a shipping service
- FCA offers more benefits for your shipping operations, compared to FOB and FAS incoterms
- The cargo is to be transported from the seller’s location to the terminal directly for export, and not a shipping provider’s warehouse
Buyers and sellers should consider signing FCA incoterms for shipments only if all the aforementioned conditions are adequately met.
Concluding Remarks
FCA incoterms list down the many conditions and requirements that sellers and buyers need to follow under this specific approach. FCA incoterms insurance responsibility requires the sellers to be completely accountable for purchased goods till they are loaded onto the main transportation vehicle. Post this point, the responsibilities get transferred to the buyer, thus reducing risks for the seller.
If you need help with shipping your goods domestically or internationally, get a quote from the PACK & SEND website to get started.