Free Carrier – What is Free Carrier?
Free Carrier is a type of Incoterm that was, along with the other Incoterms developed by the International Chamber of Commerce in the 1930s. These terms were created in an attempt to simplify communicational shortfalls that surround international trade. These terms are a set of rules, which are internationally understood.
Free carrier is one of the most common incoterms used. It is a trade arrangement that depicts the seller holding liability of the goods packaging and the loading into the mode of transport at the port or truck hub. The buyer is therefore responsible for the following:
- Shipment of the goods
- Unloading the goods at the buyer’s port of choice
- Transporting the goods to the end destination.
To be clear, it is the liability of the seller which separates this trade arrangement from Ex Works.
The Shift of Liability
As mentioned, the supplier / seller pays the costs for to produce the goods, package them and also organise transport to the port ready for export. It is worth noting that the seller is more than able to charge for this excess responsibility. As part of this process, the goods must also be cleared through customs, which allows the shipment to be ‘accepted’. Once the shipment’s status has updated to ‘accepted’, the responsibility now lies with the Buyer (and any co-signers they may have involved).
If, for example, the transaction is using sea freight transport, then the shift of liability and status of the shipment may occur in the container yard – the location of which should be clearly defined and agreed within the walls of the contract.
The strength and reason behind much of the demand for Free Carrier Arrangements are that they are applicable to any mode of transport. For instance, the transaction may involve sea, road, rail or even air.
Due to the fact that the seller is responsible for the goods clearing through customs, it is far less problematic than its counter-part – Exworks. Sellers are more likely to have the relevant licenses needed for export out of the country, and may also have better relationships with export carriers – meaning a potentially lower cost which may be beneficial to the buyer.
Table: Advantages and Disadvantages of Free Carrier (FCA)
Price of Free Carrier Arrangements
The price of a free carrier arrangement will vary depending on where the goods are being shipped from and too. However, there are a number of general costs involved with the arrangement:
- Contract fees (contract of sale)
- Shipping/ transport costs
- Warehouse Storage
- Unloading Fees
TFG were able to assist us with a receivables finance line so that we could manage cash flow and working capital at our business, but we also needed to work with their freight forwarders to decide the most cost effective option for delivery. Because our suppliers had the relevant export licenses and were based near Mumbai’s shipping port, we were able to agree an FCA delivery of our goods without being charged inflated shipping costs.
- Fast and efficient – speak with our logistics team within minutes
- Great rates – FCA has full control of the shipping process
- Our partners are regulated and trusted experts
- Experts partners who are specialised in freight forwarding and shipping cargo