In a previous essay, I already explained the importance of Incoterms to drafting of international contracts and discussed one of the Incoterms 2010 (EXW). In this article, I will provide a brief overview of another and more common Incoterms 2010 – FCA.
FCA (Free Carrier) means that the seller delivers (the Incoterms 2010 rules specify exactly when such even occurs) the goods to the carrier or another person designated by buyer at the seller’s premises or another named location. If FCA is used, the seller’s obligations are expanded to clearing the export license (where necessary) and otherwise comply with the customs requirements for exports in addition to providing the goods conforming with the contract specifications. There is no such requirements for securing an import license; rather, this is still the buyer’s obligation.
The buyer still makes the contracts of carriage and insurance under FCA. However, there are exceptions to this rule whether based on the buyer’s request or commercial practice. Furthermore, the buyer is not obligated to the seller to make such contract of insurance. If the buyer wishes to obtain the contract of insurance, the seller is obligated to supply the information necessary for the buyer to secure the contract of insurance.
There are fairly complex rules surrounding FCA with respect to the transfer of risk under FCA. Generally, the seller bears all risks of loss and damage up to the point of delivery of goods as specified by the Incoterms 2010 rules. However, there are important exceptions that may modify the main rule and force one of the parties (usually buyer) to bear the burden of risk from an earlier point.
Unlike EXW, the allocation of costs to the seller now explicitly includes all costs related to the customs formalities related to the export of the goods (inlcuding taxes, duties, and other export-related charges). The buyer’s obligation to pay costs is also expanded in certain circumstances, including the failure to provide certain notices to the seller. Likewise, there are specific exceptions to these rules.
It is also important to note here that Incoterms 2010 provide a number of specific requirements with respect to the notices that should be given by the parties to each other, packaging of goods, checking the goods, pre-shipment inspection, security-related information, and other numerous rules.
Whether you are a buyer or a seller, you are well-advised to consult an international contract attorney before you use any of the Incoterms 2010. The description of FCA provided in this essay is fairly basic and for general information only. It should not be relied upon in drafting the contract.
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