Lesson 5 - FCA part 2 - more on what FCA really is about including how it functions with L/Cs!

Summary

In this comprehensive lesson on Incoterms 2020, Bob Rodney dives into the details of FCA (Free Carrier), explaining key concepts such as the delivery transport document, allocation of costs, and the complexities of letters of credit. The lesson highlights the seller’s role in handling export formalities, providing proof of delivery, and the buyer's responsibility for transport costs once goods are delivered. Special attention is given to the impracticality of FCA in relation to traditional letters of credit, along with the nuances of documentation and cost allocation. A detailed breakdown of the FCA rule helps clarify common misconceptions, with a focus on practical application in international trade.

Takeaways

• 😀 The course is a comprehensive guide to understanding Incoterms 2020, with a focus on FCA (Free Carrier).
• 😀 The speaker, Bob Rodney, emphasizes that this content is not legal advice but based on his experience in trade over five decades.
• 😀 FCA involves the seller delivering goods to a carrier nominated by the buyer, but the seller does not ship the goods.
• 😀 The key issue with FCA and transport documents is that the seller provides proof of delivery but does not control how the goods are shipped.
• 😀 The seller must provide assistance to the buyer in obtaining a transport document at the buyer's cost, but only when the buyer instructs the carrier.
• 😀 FCA is not compatible with standard Letters of Credit (LCs) because the seller doesn't control the shipping process and has limited involvement in shipment details.
• 😀 The allocation of costs is clearly defined: the seller pays for export formalities and all costs until delivery, while the buyer is responsible for costs afterward, such as transport and import clearance.
• 😀 The buyer's carrier controls the transport documents, which can lead to complications if the seller needs a specific document for payment purposes, such as an onboard bill of lading.
• 😀 FCA works best for multimodal transport, where the seller either delivers to the buyer's vehicle or a terminal, but the seller does not ship the goods themselves.
• 😀 The next lesson will cover CPT (Carriage Paid To) and CIP (Carriage and Insurance Paid To), diving deeper into delivery, taking delivery, and transport documents in these rules.
• 😀 The lesson is dense and complex, and viewers are encouraged to review it multiple times for better understanding.

Q & A

What is the main purpose of this lesson?

The main purpose of this lesson is to provide a comprehensive understanding of the Incoterms 2020 rule 'FCA' (Free Carrier) with a specific focus on delivery, transport documents, and allocation of costs.

What does the speaker clarify about their role in this course?

The speaker, Bob Rodney, clarifies that he is not a lawyer and that the course content is not legal advice. However, he shares insights from his extensive experience in international trade and his role in the drafting of the Incoterms 2020 rules.

What are the two types of transport documents mentioned in the script?

The two types of transport documents mentioned are: one from the buyer’s carrier indicating receipt of goods delivered by the seller, and the other, which involves the seller assisting the buyer in obtaining a transport document.

What issue does the speaker raise regarding transport documents and letters of credit?

The speaker raises concerns about how letters of credit (LC) often require an onboard bill of lading, which is not feasible in FCA transactions as the seller does not control how or when the goods are shipped.

What are the buyer's responsibilities under the FCA rule?

Under the FCA rule, the buyer is responsible for paying all costs related to the goods after delivery, including transport charges, port charges, and any charges related to import clearance.

What does the speaker say about the compatibility of FCA with letters of credit?

The speaker explains that FCA is not compatible with letters of credit because the seller does not control shipping details like the port of loading or discharge, and thus, an onboard bill of lading cannot be provided by the seller.

How does the FCA rule allocate costs between the seller and the buyer?

The seller is responsible for paying all costs related to the goods until delivery, including export formalities and proof of delivery, while the buyer covers costs after delivery, including transport, import clearance, and other charges related to documents and assistance.

What is the key issue with the B6 clause mentioned in the lesson?

The B6 clause is criticized as being 'useless and pointless' because it relies on the buyer to instruct the carrier to issue a transport document, but the seller has no control over the carrier, which creates potential issues for the seller.

What does the speaker suggest about the buyer’s role in contract transportation?

The speaker emphasizes that under FCA, the buyer contracts for carriage, and their risk begins once the goods are delivered in the seller's country, even before the goods cross the border.

What is the speaker's recommendation for using an LC in an FCA transaction?

The speaker recommends that in an FCA transaction, the LC should require the presentation of the seller’s invoice and a copy of the buyer's or carrier’s cargo receipt instead of the traditional onboard bill of lading.