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Understanding free carrier

25 Mar 2023 00:00:00 | Update: 24 Mar 2023 23:53:24
Understanding free carrier

Free carrier is a trade term dictating that a seller of goods is responsible for the delivery of those goods to a destination specified by the buyer. When used in trade, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier. The destination is typically an airport, shipping terminal, warehouse, or other location where the carrier operates. It might even be the seller's business location.

The seller includes transportation costs in its price and assumes the risk of loss until the carrier receives the goods. At this point, the buyer assumes all responsibility.

Free carrier is a trade term requiring the seller of goods to deliver those goods to a named airport, shipping terminal, warehouse, or other carrier location specified by the buyer. The seller includes transportation costs in its price and assumes the risk of loss until the carrier receives the goods.

Once the seller delivers the goods to the carrier, the buyer assumes all responsibility for the goods. The International Chamber of Commerce updated Incoterms in 2010 to include the free carrier provision, and the ICC further updated the definition of FCA shipping term in 2020. As part of the liability transfer, the seller is only responsible for delivery to the specified destination but isn't obligated to unload the goods.

Buyers and sellers engaged in economic trade requiring the shipment of goods can use FCA shipping terms to describe any transportation point, regardless of the number of transportation modes involved in the shipping process. The point must be a location within the seller’s home country, however. It's the seller's duty to safely transport the goods to that facility. The carrier can be any kind of transportation service, such as a truck, train, boat, or airplane.

Liability for the merchandise transfers from the seller to the carrier or buyer at the time the seller delivers the goods to the agreed port or area. The seller is only responsible for delivery to the specified destination as part of the liability transfer. It isn't obligated to unload the goods, but the seller might be responsible for ensuring that the goods have been cleared for export out of the United States if the destination is the seller's premises.

Under FCA shipping terms, the buyer doesn't have to deal with export details and licenses because this is the responsibility of the seller. The buyer must arrange for transport, however. Once goods arrive at the carrier and title transfers to the buyer, the goods become an asset on the buyer's balance sheet.

Many experts recommend that any party involved in international trade consult with an appropriate legal professional—such as a trade attorney—before using any trade term within a contract.

Contracts involving international transportation often contain abbreviated trade terms, or terms of sale, that describe shipment specifics. These might include the time and place of delivery, payment, the point at which the risk of loss shifts from the seller to the buyer, and the party responsible for freight and insurance costs.

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