INCOTERMS 2020 | FCA — FREE CARRIER
FCA, short for “Free carrier”, means that the exporter has to deliver the goods to the importer’s collecting vehicle at the point of delivery, which can be at the exporter’s premises or another point that’s been specified in the contract of sale. If the delivery point is the exporter’s premises, then the responsibility of loading the goods on the vehicle belongs to the exporter. If the delivery point is another place than the exporter’s premises, transporting the goods to the designated place/port and unloading is the importer’s responsibility. At this point all the risks transfer to the importer.
Why FCA instead of EXW?
First of all, I’d like to clarify that both Incoterms rules are employed for all modes of transport. The two obvious differences between them are that, FCA requires the exporter to load the goods on the carrier of the importer when the delivery is at its place and is liable for export clearance. As you’ll remember EXW doesn’t require the exporter to take any responsibility but to make the goods ready for loading on the transport vehicle at its premises.
As FCA is more workable for importers in that they avoid the risks of a foreign country’s unpredicted formal or informal practices, it’s generally preferred to EXW especially when the importer has no business background in that country.
Anything new with Incoterms 2020?
In the case that the agreed Incoterm is FCA and the main carrier is a vessel, there is a problem on the seller’s side. Especially when the L/C payment term is involved in the transaction, the seller, upon delivery of the goods to the buyer’s inland carrier, has to present the bill of lading with on-board notation to the bank so that it is paid. However, the forwarder doesn’t issue a b/l with on-board notation to the seller as the goods are still on the way to the port. On the other hand, the beneficiary bank expects the b/l with on-board notation to make the payment; otherwise it doesn’t pay to the seller. Consequently the seller fails to provide the b/l to the bank and doesn’t get paid.
The International Chamber of Commerce (ICC) brings a potential solution to this problem in Incoterms 2020. In the sales contract, the parties may agree that the buyer must instruct its carrier to provide the seller with a b/l with an on-board notation with which the seller can proceed smoothly. Yet, we cannot certainly say that the problem is completely solved, because in spite of the instructions of the buyer, it’s up to the carrier to comply with the instructions or not which may lead us to the situation in the previous version of Incoterms.
Originally published at https://umitgumusten.com on May 28, 2021.
