FCA, disadvantages to buyer under Inco terms 2020
Are you an importer who does business under FCA terms? You may have to keen on the below 07 challenges when contracting FCA as your delivery terms.
Here are the disadvantages for a buyer under FCA delivery terms.
01. One of the main disadvantages for importer under FCA terms is that under FCA, buyer takes higher risks from seller’s named load port to his place for movement of goods, as the seller discharges his risks and costs when goods loaded to the carrier or placed at the disposal of the buyer.
02. Initial investment to move goods from loading port at exporter’s country to buyer’s premises is required to be met by the buyer under FCA terms of delivery. This is a demerit for buyer under FCA terms of delivery. This cost may be more than 150% sometimes higher than cost of manufactured goods for sale, if both exporter and importer situate far.
03. Another demerit for importer under FCA delivery terms is that rules and regulations of government in buying country for import customs clearance, movement of goods and duties and taxes involved are required to be learned and experienced by the importer under FCA delivery terms. There are chances of unexpected costs than anticipated expenses. So, this is a disadvantage for buyer under FCA.
04. Another challenge for an importer under FCA is that safety of goods can be directly taken care only after arriving goods from destination port of discharge although the seller delivers the goods on board the vessel. The main carriage is undertaken by a shipping carrier who is a third party, and the safety is connected with insurance. The risks during on carriage are also under the responsibility of importer under FCA. This is a demerit for buyer under FCA.
05. One of the other disadvantages for importer under FCA is that once ocean freight contracted by the buyer who is responsible for main carriage, any port congestion or delay in arriving, berthing, cancellation of vessel or aircraft, or any other unexpected incidents occurs, buyer is responsible to bear the risks and costs under FCA terms of delivery.
06. Although, the buyer controls main carriage (ocean freight) under FCA rules, he needs original bill of lading or Airway Bill for import customs clearance for which he has to take the help of exporter to release Bill of Lading at Seller’s country. (However, Incoterms 2020 suggests solutions for these demerits). This is also a challenge for importer under FCA terms.
07.Another disadvantages for importer under FCA is that overseas business turnover (amount of foreign outward remittance) under FCA delivery ruled business transaction could be minimized up to the level of cost of movement of goods which may affect the importers for import finance up to that extend.
The above information is about the drawback for importer when moving their goods on FCA basis. You may share your experience and knowledge about the disadvantages for buyer under FCA terms below: