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What are INCOTERMS 2020 ?
INCOTERMS rules are international trade rules that apply worldwide. They are used in international transactions and Incoterms define the responsibilities, costs and risks between buyer and seller. The author of Incoterms is the International Chamber of Commerce (ICC), which created the rules to facilitate smooth and efficient international trade.
What is FCA Incoterms?
The FCA or free carier formula means that the seller must deliver the goods to a designated point, which will most often be the port of loading or the rail or air terminal from which the goods will leave. Choosing this option is quite convenient due to the fact that the seller can often have lower costs for local road services. The point of delivery of the goods is good to be included in the contract, due to the fact that, according to the formula, if a point is not agreed then the seller can choose the delivery point himself. The FCA formula is often applied as follows: the seller delivers the goods to a company with which the buyer has a onward transport contract, this can be maritime transport, rail or aviation. In all these cases, the most convenient point will be the loading port, air terminal or rail terminal from which the cargo will leave. Goods must be delivered on a fixed date, and with shipments it is important to be on time for specific booked transport exits before the cut-off. It is therefore very important that a specific delivery date is set. The FCA rule can be used in all modes of transport, whether by sea, rail, air or road.
Vendor responsibilities:
- The seller is obliged to deliver the goods as well as the commercial invoice and other necessary documents.
- The seller is obliged to deliver the cargo to the agreed place of delivery, will usually deliver the cargo to a port, rail or air terminal and will hand over the goods to a carrier chosen by the buyer.
- The seller bears the risk of loss or damage until the goods are delivered at the designated place
- The seller is responsible for carrying out customs clearance export in the country of consignment and incur all customs export costs
- When asked by the buyer, the seller is obliged to prepare all the necessary data for the cargo to be transported.
- The seller is not obliged to take out cargo insurance
- The costs of quality control, measurements and weighing are also borne by the vendor,
- The seller must pay all costs of packaging the goods for dispatch.
Responsibilities of the buyer:
- The buyer is obliged to pay the costs included in the sales contract
- The buyer is obliged to take over the goods once they have been placed at the agreed place.
- The buyer shall bear the risk of damage or loss of the goods from the time of delivery to the place indicated by the seller.
- Further transport costs from the time the seller delivers the goods at the designated point are to be borne by the buyer. In this he is responsible for arranging further delivery to the place of delivery.
- The buyer is responsible for carrying out import clearance in the destination country. He must also bear the costs associated with the clearance.
- It is the buyer's responsibility to provide information on the details of the carrier with whom he has entered into the contract.
Case Study:
We have to transport cargo from China. We choose a logistics company to organise this process for us, for example we send the cargo by rail. In the case of the FCA formula, we agree with the seller how much it would cost to transport the goods by road to the rail terminal and compare this with the cost of the EXWthat we have received from the company with which we want to carry out the transport. If transporting at FCA will have lower costs then it is worth choosing this option. In a later step, we put our seller in contact with the logistics company and a date and place for delivery are agreed, so that the whole process goes smoothly. Please do not hesitate to contact us if you have specific cases or questions.
FCA INCOTERMS Summary:
Incoterms are one of the trade rules that are among the safest, as the entire further process of transportation is on our side. However, it is advisable that the shipper with whom we are working is quite trustworthy and delivers the goods at the indicated time and performs the export clearance in accordance with the art. If this is your first transport with a particular shipper, it may be a better option to choose a EXW formulas. However, it is worth checking the costs of both options beforehand and then making a decision. It is also possible to agree that the seller at the FCA will only deliver the goods on the basis that he has a lower cost for road transport, and that export clearance will be carried out for us by the company with which we have concluded the transport contract, marine, rail or aviation. It can then help us save some costs, and there is increased security regarding export clearance that everything will be done correctly.
If you would like to learn more about the Incoterms 2020 rules, please see our other articles:
