A single business transaction undergoes several processes before it is fully consummated that involve prospecting, bargaining, and delivery. In my opinion, the most critical part of the transaction is the delivery of goods since the risk of damage is high while in transit. Thus, the best solution to minimize risk is to agree on the shipping arrangement which includes several types of shipping arrangements with the fca incoterms being the most popular method since it highly benefits the buyer in terms of shipping cost and risk. It’s also beneficial to the seller by way of improving their credibility and increasing the likelihood of returning customers. In this blog, I will provide you with a concise definition of FCA Incoterms and how it works, and understand how it is beneficial to both parties.
Let Us Define FCA Incoterms
Firstly, FCA simply means “Free Carrier” while Incoterms refers to the list of shipping standards by which businesses and consumers have to adhere which especially covers international trades since they are more risky than local transactions. By the definition, the term “free” is coincided to account for the fact that the buyer is essentially free of the responsibilities involving the shipment of products until they are delivered to their intended destination or storage facility that has close proximity to the buyer’s place by way of land, air, or sea. Thus, the transfer of ownership changes hands and the transaction is fully consummated once the said conditions are met.
The Advantages of FCA Incoterms
By this definition alone, the seller will have to pay for the shipping cost, insurance, freight charges, and other expenses related to maintaining and protecting the goods while they are in transit. And basically, the seller bears all the risk of shipment which means that the buyer could exercise the right of canceling the transaction at any point and return them to the seller whenever it is deemed fit. It might seem disadvantageous to the seller, but it is beneficial to them as it builds trust and increases the likelihood of returning customers when they are satisfied with the transaction.
How FCA Incoterms Work?
The conditions of the Incoterms Free Carrier arrangement are flexible because the ownership over the products changes hands depending on the agreed point of transfer between the buyer and seller. For instance, they can arrange for the intended port or terminal where the seller’s responsibility in shipping the goods is deemed fully delivered. The intended destination could also include a particular courier service or any storage facility that has close proximity to the buyer where the risk is relatively low at this point.
Another benefit of the FCA Incoterm over other shipping standards is that the option is not limited when it comes to the mode of delivery. It could be accomplished by way of sea, land, and air, whereby the available shipping arrangement for Ex Work is only via sea. During transit, the seller’s responsibility is to ensure the protection of the goods and ensure that they are in good condition and in one piece until they are fully delivered. Furthermore, the shipment could be transported and carried out by vehicles such as a truck, streamline, boats, airplanes, or trains which also depends on the agreed terms by both parties.
I hope the short but informative blog that I shared with you today has provided you with a good definition of FCA Incoterms and how it works and benefits both parties. In summary, the FCA Incoterms is highly advantageous to the buyer since it takes away from them the potential risks while the products are in transit and the burden of shipping cost, freight charges, insurance, and other related expenses that are essential in keeping the package safe and free of damage.
On the other hand, it is beneficial to the seller as well since it builds trust between them and the buyer which could increase the chances of a returning customer. In addition, it also improves your reputation especially if the previous customers leave a positive rating which could also increase new customers and boost the business profitability in the long run. In other words, it is a win-win situation when you take into account this perspective.