What it means
FCA is one of the Incoterms, the rules that set out who arranges transport, who pays which charges and where risk passes. It exists because a single word such as "delivered" can mean very different things to a seller and a buyer.
There are two flavours of FCA. If the named place is the seller's premises the seller loads the goods onto the buyer's collecting vehicle, whereas at any other named place the seller simply delivers them ready for unloading and the buyer's carrier takes them from there.
The seller handles export clearance and all charges up to the handover point, while the buyer pays the main carriage, insurance, import duty and onward delivery. That split makes FCA the natural rule for containerised trade, where goods are handed to a terminal rather than lifted over a ship's side.
A practical improvement in the 2020 revision lets the parties agree that the carrier will issue an on-board bill of lading to the seller. That matters when the seller needs such a document to be paid under a letter of credit.
For finance teams the key point is when to record the sale and when to stop insuring the goods. Under FCA both happen at handover, which may be weeks before the goods reach the buyer's warehouse.
In practice
Real-world examples.
Example
A furniture manufacturer sells FCA at its own factory. The buyer's truck arrives, the manufacturer loads it, and risk passes the moment loading finishes, so a collision two hours later on the motorway falls to the buyer and its cargo insurer.
Example
An electronics importer switches its supplier contracts from Free on Board to FCA because all of its cargo now moves in containers. Handover happens at the container yard instead, closing a gap in which neither party clearly bore the risk between the yard and the ship.
Example
A machinery exporter selling under a letter of credit asks its buyer to instruct the carrier to issue an on-board bill of lading. With that document in hand the exporter is paid within five days of handover rather than waiting for the vessel to sail.
Formula
Calculation
FCA price = cost of goods + export packing + inland transport to the named place + export clearance and handling
Buyer's landed cost = FCA price + main carriage + insurance + duty + destination charges
A fictional electronics maker sells a container of components. The goods cost $150,000, export packing costs $3,000, haulage to the container terminal costs $5,000, and export clearance and handling cost $2,000, so the FCA price is $150,000 + $3,000 + $5,000 + $2,000 = $160,000.
The buyer adds origin terminal handling of $1,800, ocean freight of $7,200 and marine insurance of $1,000, giving a customs value of $160,000 + $1,800 + $7,200 + $1,000 = $170,000.
Import duty at 6% is $170,000 x 0.06 = $10,200. Adding destination handling and inland delivery of $4,800 gives a total landed cost of $170,000 + $10,200 + $4,800 = $185,000, which is 15.6% above the FCA price the buyer originally agreed.Case study
Seen in the real world.
Sable Components and Vantree Assembly are invented businesses used here to illustrate how FCA allocates cost when a supply chain stalls. Sable sells four containers of parts to Vantree at an FCA price of $160,000 each, a total contract value of $640,000, with handover at the origin container terminal.
Sable hands the containers over on schedule and its obligation ends there. A dockworkers' dispute then holds the vessel in port for 11 days, and because both risk and cost had already passed, Vantree pays the terminal storage charges of $600 per container per day, or $26,400 in total.
For the following season Vantree buys a delay extension to its cargo policy costing $9,000 a year, having priced the alternative of moving to a delivered term at an extra $31,000 across the same period. The illustrative point is that the chosen Incoterm, not the shipping line, decides who carries the cost of a delay.
Watch out
Common mistakes.
- Using Free on Board for container shipments when FCA is the correct rule, which leaves risk unclear between the terminal and the ship.
- Assuming the seller pays the main carriage under FCA, when the seller's cost obligation stops at the named handover place.
- Failing to name the place precisely, so a term such as "FCA Rotterdam" leaves it unclear which terminal or address is meant.
Questions
People also ask.
Who clears the goods for export under FCA?
The seller does, along with any licences and charges needed to get the goods out of the country of origin.
Does the seller load the goods?
Only when the named place is the seller's own premises; at any other place the seller delivers them ready for unloading by the buyer's carrier.
How does FCA differ from Ex Works?
Under Ex Works the buyer takes on export clearance and loading as well, so FCA places noticeably more of the burden on the seller and is far easier for the buyer to administer.
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