FCA, Disadvantages to Seller under Incoterms 2020
Now we can discuss about the demerits for a seller who contracts FCA as delivery term with his buyer.
In an import export trade, the following details are the main disadvantages for exporters under FCA terms of delivery.
01.Since minimum risks are involved for an Exporter under FCA delivery rules, as the delivery takes places in exporter’s country, minimum profit is expected. This is one of the most disadvantages for exporter if carriage contract is on FCA basis in international trade.
02. Another disadvantage for seller under FCA is that in an international trade, the seller does not have any control over main carriage, import clearance and on carriage of goods to final destination. The tracking of shipping details is depended with the buyer as he undertakes main carriage and on carriage contract.
03. Under FCA rules, the seller should be familiar with government rule and regulations on export process, taxes to export his product and other documentary process. The risks and costs involved due to the lack of knowledge are under his shoulders. This is another demerit for seller under FCA terms.
04. Another disadvantage for seller under FCA is that since the seller transfers his risks and costs to buyer once onboard the goods, under FCA terms, the safety of goods cannot by monitored by the exporter in international business.
05. Under FCA terms of delivery, costing at each point of movement of goods , say main carriage, import customs clearance expenses, destination port handling, on carriage to buyer’s final destination etc. cannot be ascertained by the Exporter. This is another disadvantage for exporter under FCA.
06. Another drawback for exporter under FCA is that the main carrier is decided by the importer under FCA terms, and the buyer holds control over documentation, shipping details and further movement of goods.
07. The unit cost would be less under FCA sales; thereby less invoice value of goods. This is a drawback for exporter under FCA terms. The exporter gets less foreign exchange. Sometimes, the total invoice value of goods could be twice lesser than the actual delivery cost, if both buyer and seller situates too far.
08. One of the other demerits for exporter under FCA is that; since main carriage is undertaken by the importer under FCA, the exporter may not have right to release Bill of lading or AWB from the main carrier, as such documents are required for the exporter for various statutory records and claiming export finance and incentives.
We have explained above the challenges for an exporter when agreeing delivery terms as FCA in international trade.
You may share your experience and comment below about the disadvantages of FCA for exporter in import export business.