Incoterms : FCA – Free Carrier

FCA Incoterms

FCA – Free Carrier – named place. It is important to note that this incoterm can be used for any mode of transportation.

While it is my opinion that no single incoterm is better than another, this particular incoterm allows for a great deal of flexibility as it can be used for either airfreight or seafreight shipments. In order for this incoterm to be used correctly the shipper or consignee must state a named place, i.e. Free Carrier – freight forwarders facility Los Angeles, California. Free Carrier can also technically be stated FCA – shipper’s facility. In this scenario the only difference between FCA and EXW would be that the shipper would be responsible for loading the cargo onto a truck at the dock.

Under the terms of FCA, the seller must deliver the goods to a carrier nominated by the buyer at a specified named place. The seller fulfills his obligation to deliver when he has handed over the goods, cleared for export, into the charge of the carrier named by the buyer at the named place or point.

Payment Responsibilities Outlined Below:

Seller’s Responsibilities
1. Warehouse storage at point of origin
2. Warehouse labor at point of origin
3. Export packing
4. Loading at point of origin

Buyer’s Responsibilities
1. Inland freight
2. Port of receiving charges
3. Forwarder’s fee
4. Loading on ocean carrier/airline
5. Ocean/air freight charges
6. Charges in foreign airport/port
7. Customs duties and taxes abroad
8. Delivery charges to final destination

This interpretation is provided as a guide only.

Incoterms are published by the International Chamber of Commerce and are available on their website and official publication “Incoterms 2000″. For a complete and official overview please refer to the ICC’s publication.

Intermodal/Port News Mon 30 Jan 2006

It hasn’t been an exciting weekend on the news front, or at least nothing that really caught my eye.

A company in South Carolina plans to develop an inland intermodal port:

The company, also known as CaroLinks, is proposing to invest $10 to $15 million over the next five years to develop an inland port near the Interstate-95/U.S. 301 interchange in Orangeburg County.

The company plans to move shipping containers from Charleston to Orangeburg for distribution. Containers will both be stored and shipped from the port. Transdocking will also be done where containers are transferred from ship to truck.

CaroLinks officials say they have a contract on about 800 acres near Santee. They expect the Orangeburg County facility to eventually employ at least 200.

Past Orangeburg County Economic Development Partnership President Marion Moore said the project “makes sense to me.”

Quick News: Wed 25 Jan 2006

Australia’s troubled customs system was down for 3 hours yesterday:

Customs was forced to enact its manual Business Continuity Plan when the system’s extensive back-up facilities failed to engage, officials said.
The failure at Customs main data centre in Sydney was the result of a power outage, a spokesman for the service said.

It is not yet known whether the power failure was localised inside the Customs data centre, or was a wider failure.

While the systems were up and running early in the afternoon, Customs IT staff were still investigating why its back-up systems failed.
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“Far from being world’s best practise, Australia is fast becoming a laughing stock of the world’s shipping and custom’s brokerage industries,” Senator Ludwig said.

While most of the world is excited about the prospects of Airbus’ super jumbo A380 aircraft, Las Vegas officials have confirmed they won’t make the necessary upgrades to accomodate the aircraft:

With a growing number of tourists every year and the challenge of filling tens of thousands of new hotel rooms that will come on line in the next decade, wouldn’t the A380 be a perfect fit here?

No, says Clark County Aviation Director Randy Walker.

Not only is McCarran International Airport not planning modifications to accommodate the A380, but Walker says the plane would not be welcome.

It’s simply too big and the cost of improvements to bring it in for the minimal number of flights that would be made are too great to justify. The hundreds of millions of dollars it would cost to retrofit McCarran — and putting up with air traffic delays the jet would create — make the appearance of the A380 at the local airport highly unlikely.
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Few U.S. airports are gearing up for the A380. According to the FAA, New York’s John F. Kennedy International Airport and the major international airports in San Francisco; Los Angeles; Miami; Anchorage, Alaska; and Memphis, Tenn. (the home of Federal Express) are committed to infrastructure work to accommodate the big jet.

Read more

Quick News: Mon 23 Jan 2006

The Atlanta airport is planning to open a large facility next year in their South Cargo area in an effort to improve the airport’s standing as a top cargo handler:
But while Hartsfield-Jackson Atlanta International Airport is the busiest passenger airport in the world, it has lagged behind some of its peers as a cargo gateway.

Airport officials are doing something to change that.

Next year they expect to open a fourth, 104,000-square-foot building at the South Cargo complex, where domestic and international freighters and passenger planes load and unload.

In just a few months, the airport should complete a horse transfer facility, also at the South Cargo complex. And soon, there could be a multimillion-dollar inspection facility that federal agents will use to inspect live tropical plants.

It’s all part of a new focus on cargo — a profitable and growing specialty that has an almost $4 billion economic impact on the Atlanta economy — and which Hartsfield-Jackson Atlanta International Airport officials think has potential for growth.

In Memphis, TN, 3PLs and other logistics companies are having a hard time finding workers without criminal backgrounds, causing industry leaders and educators to meet in a forum to discuss ways of improving the workforce :

Dan Randall, manager of Priority Solutions, a third-party logistics provider in Memphis, tells the sobering story.

“Because we distribute pharmaceutical samples, we require extensive background and drug checks,” Randall said. “We see applicants who are 17, 18 and 19 with felonies on their records. We can’t hire them. Or they have bad credit ratings or bankruptcies. We aren’t allowed to hire them.”

The idea behind the forum is “to put more focus on students in the middle grades, so they don’t make the wrong decisions.”

“You’ve got to have living wage skills to earn a living wage,” said Randall, president of Council of Supply Chain Management-MidSouth Roundtable.

The group and the Regional Chamber of Commerce are co-sponsoring the half-day event, beginning at 9 a.m. at the University of Memphis Fogelman Executive Center.

China Southern Air says it “probably” had a loss in 2005. Hmm. Probably, huh? Not sure yet? Those pesky state-controlled airlines with their funky accounting can’t be sure of anything these days. Just read the article:

The airline, which had a 2004 profit of 103 million yuan ($13 million) under China’s accounting rules, didn’t give a figure in today’s statement to the Shanghai Stock Exchange. State-controlled China Southern, based in southern China’s Guangzhou city, is scheduled to report earnings on April 20.
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China Southern’s 2005 loss would have been its first in at least four years under Chinese accounting standards. China’s publicly traded companies must disclose if they expect earnings to rise or fall by more than 50 percent. Under international accounting, China Southern had a 2004 loss of 48 million yuan.

So according to China’s accounting rules, China Southern had a 2004 profit of 103 million yuan ($13 million), but under international accounting rules posted a loss of 48 million yuan ($6 million). Why, that’s only a small difference of 151 million yuan ($19 million) !!
My reason in pointing this out is to be very wary of all those nice business headlines you see out of China all the time. I took a course in college about doing business in China and one of the points the professor hammered home time and time again was that you simply could not trust the information coming out of China if it was from a government source, as the information was often inaccurate or inflated to make the government or state-run business look better than it really was.
If the official spin from China Southern is that they “probably” had a loss in 2005, then I would bet they DEFINITELY had a loss in 2005. Most likely the official loss under “China’s accounting rules” will be substantially less than that under standard international accounting rules.

The Far Eastern Economic Review has a very interesting article from Stephen Flynn from the Council of Foreign Relations on Port Security. In the article he praises a pilot program being used in Hong Kong to use high-tech scanning machines to check the radiation level, contents, and container number of each arriving container. His article also contradicts my thoughts on providing true container benefits to high level C-TPAT participants, instead arguing that low-risk, legitimate importers would be the ideal target for smuggling a weapon of mass destruction inside a cargo container:

….terrorists will likely target a legitimate company with a well-known brand name precisely because they can count on these shipments entering the U.S. with negligible or no inspection. It is no secret which companies are viewed by U.S. customs inspectors as “trusted” shippers; many companies enlisted in C-TPAT have advertised their participation. All a terrorist organization needs to do is find a single weak link within a “trusted” shipper’s complex supply chain, such as a poorly paid truck driver taking a container from a remote factory to a port. They can then gain access to the container in one of the half-dozen ways well known to experienced smugglers.

Third, this terrorist threat is unique in terms of the severity of the economic disruption. If a weapon of mass destruction arrives in the U.S., especially if it enters via a trusted shipper, the risk-management system that customs authorities rely on will come under intense scrutiny. In the interim, it will become impossible to treat crossborder shipments by other trusted shippers as low-risk. When every container is assumed to be potentially high-risk, everything must be examined, freezing the worldwide intermodal transportation system. The credibility of the ISPS code as a risk-detection tool is not likely to survive the aftermath of such a maritime terrorist attack, and its collapse could exacerbate a climate of insecurity that could likely exist after a successful attack.
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Asean and the EU should also endorse a pilot project being sponsored by the Container Terminal Operators Association (CTOA) of Hong Kong, in which every container that arrives passes through a gamma-ray content-scanning machine, as well as a radiation portal to record the levels of radioactivity within the container. Optical character recognition cameras then photograph the number painted on several sides of the container. These scanned images, radiation profiles, and digital photos are then stored in a database where they can be immediately retrieved if necessary.

The marine terminals in Hong Kong have invested in this system because they hope that a 100% scanning regime will deter a terrorist organization from placing a weapon of mass destruction in a container passing through their port facilities. Since each container’s contents are scanned, if a terrorist tries to shield radioactive material to defeat the radiation portals, it will be relatively easy to detect the shielding material because of its density.

Another reason for making this investment is to minimize the disruption associated with targeting containers for portside inspection. The system allows the container to receive a remote preliminary inspection without the container leaving the marine terminal.

By maintaining a record of each container’s contents, the port is able to provide government authorities with a forensic tool that can aid a follow-up investigation should a container with a weapon of mass destruction still slip through. This tool would allow authorities to quickly isolate the point in the supply chain where the security compromise took place, thereby minimizing the chance for a port-wide shut-down. By scanning every container, the marine terminals in Hong Kong are well-positioned to indemnify the port for security breaches. As a result, a terrorist would be unable to successfully generate enough fear and uncertainty to warrant disrupting the global trade system.

I think what Hong Kong is doing is a superb way of ensuring container integrity as it passes through the port, and I hope the pilot system becomes a success and can be duplicated in other ports around the world. However, I don’t share his criticism of the C-TPAT program, at least not at the level found in the entire article. I fully agree that C-TPAT has many problems and short-comings, as has been pointed in the GAO report and numerous articles. However, changes are being made constantly with the program and the next big focus for C-TPAT – at least from what I can find out from US Customs – is a focus on trucking, namely screening of drivers, use of pre-determined routes and tracking, and using ever better technology to track containers as they move from the warehouses to the ports. Part of this article does mention the use of high-tech tracking methods for ensuring container integrity, and Maersk-Sealand and IBM are working together to develop this technology. Hopefully strong improvements will be made in C-TPAT and other security programs to improve the overall security of incoming cargo containers without overly hindering the free movement of goods. The combination of strong governmental security programs with private technology advancements is necessary to secure ports and borders around the world.

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