With the increase in world population, globalization and technological developments, the volume of international trade has grown and its importance has increased compared to previous years. This situation has increased the importance of the rules for international trade, which should already be clear.
It is essential for the parties involved in the trade to clarify issues such as where the goods considered within the scope of international trade will be delivered, who will bear the expenses arising from this trade or how they will be shared between the parties, how insurance and transportation contracts will be made for the goods in question in the commercial activity.
In order to clearly determine all the frameworks of these issues without causing any discussion, a list of rules accepted internationally by ICC (International Chamber of Commerce), called INCOTERMS (International Commercial Terms), which determines the obligations between the buyer and seller in commercial activities, is taken into consideration. is taken.
INCOTERMS, which ICC first published in 1936, was last updated on January 1, 2020. INCOTERMS shows us the rules that must be followed in international trade and guides us when we encounter an impasse, but ultimately it is not an international law and compliance with the determined rules does not constitute a legal obligation. Of course, in all commercial activities, it is possible for the trading parties to regulate commercial rules among themselves, independently of the ICC.
However, the main purpose of ICC is to provide a solid basis that can be referred to in banking transactions or mutually signed contracts needed in international trade. In this way, it is aimed to facilitate the resolution of any disputes that may arise. According to INCOTERMS published on January 1, 2020, there are a total of 11 different delivery methods defined in international trade.
These delivery methods are divided into two: rules covering all types of transportation and rules covering only maritime and in-water transportation.
The rules and brief explanations covering all transportation types are as follows:
EXW (Ex Works): Delivery at commercial premises
FCA (Free Carrier): Delivery to the carrier at the specified location
CPT (Carriage Paid To): Delivery with transportation fee paid
CIP (Carriage and Insurance Paid To): Delivery with transportation and insurance paid
CIP (Carriage and Insurance Paid To): Delivery with transportation and insurance paid
DDP (Delivered Duty Paid): Delivery with customs duties paid
DAP (Delivered at Place): Delivery at the specified point
DAT (Delivered at Terminal): Delivered at the terminal The rules used on sea and inland routes and their brief explanations are as follows:
FAS (Free Alongside Ship): Delivery alongside the ship
FOB (Free on Board): Delivery on board
CFR (Cost and Freight): Freight paid delivery
CIF (Cost, Insurance, Freight): Delivery with insurance, expenses and freight paid. To learn what freight is and the details of the CIF term, see What is Freight? You can visit our blog content titled.
The part of the INCOTERMS rules that is the subject of our article is Free Carrier, abbreviated as FCA. In the FCA delivery method, the seller, who is the exporter, completes all customs procedures of the goods and delivers them to the first carrier on the predetermined date and place, thus fulfilling his part of the responsibility. Upon delivery, all responsibility and risk for the goods pass to the buyer. From this moment on, all costs related to the goods, insurance, agency and freight expenses are now the responsibility of the buyer.
Basic Responsibilities of the Seller in FCA: The seller prepares the goods according to the mutually signed contract conditions, arranges all the documents that will be requested in the country and pays the customs expenses of the goods. It delivers the ready goods to the predetermined point on the predetermined date. All costs and all possible risks incurred until delivery belong to the seller. After delivery, all responsibility passes to the buyer.
Basic Responsibilities of the Buyer in FCA: The buyer pays the full price of the goods in accordance with the contract they signed with the seller. It pays the customs duties and other expenses to which the goods are subject, by obtaining all the necessary permits and documents related to import. It covers the freight cost of the goods by making an agreement with the logistics company. Afterwards, he/she receives the goods at the predetermined place and date in accordance with the contract. In this way, all responsibilities and risks regarding the goods are taken over from the seller.
After this stage, the buyer makes an agreement with a logistics company for the transportation of his goods. Considering the type of goods, the destination to be reached and other factors, logistics planning of the goods is carried out using one or more of the following: air transportation, road transportation, sea transportation, river or railway logistics services. The buyer company makes an agreement with a logistics company that can manage this entire logistics process.
Basic Responsibilities of the Logistics Company in FCA: In the FCA delivery method, the responsibility of the company that will manage the logistics processes begins in a limited way with the receipt of the goods from the designated place. It may be possible to conclude a contract between the company that undertakes logistics management and the seller. After the logistics company receives the goods from the specified place, it collects all expenses, insurance, agency fees and freight expenses from the buyer.