FAS vs FOB Incoterms: What is the Difference?

In the following post, we focus on FAS (Free Alongside Ship) and FOB (Free On Board), two key Incoterms widely used in maritime trade. We’ll examine their differences and help you understand how they may affect your shipping operations. Additionally, we will demonstrate how digital freight forwarders like Ship4wd help you implement these terms effectively to enhance your shipping process.

Understanding Incoterms

Incoterms, established and maintained by the International Chamber of Commerce (ICC), are standardized shipping terms that define the division of responsibilities in international trade. 

These terms specify which party is responsible for various stages of the logistics process, from booking ocean or air freight to managing customs clearance and securing cargo insurance. This helps prevent miscommunication and ensures smoother shipping operations around the globe.

To address evolving shipping practices and industry needs, the ICC periodically updates these terms. The current version, Incoterms 2020, contains these 11 terms:

1. EXW (Ex Works)
2. FCA (Free Carrier)
3. FAS (Free Alongside Ship)
4. FOB (Free On Board)
5. CFR (Cost and Freight)
6. CIF (Cost, Insurance, and Freight)
7. CPT (Carriage Paid To)
8. CIP (Carriage and Insurance Paid To)
9. DAP (Delivered at Place)
10. DPU (Delivered At Place Unloaded)
11. DDP (Delivered Duty Paid)

What Is FAS (Free Alongside Ship)?

FAS (Free Alongside Ship) is an Incoterm primarily used in maritime and inland waterway transport. Under this Incoterm, the seller is responsible for delivering the goods alongside the vessel at the designated port of shipment, at a loading point specified by the buyer. This includes completing export clearance and providing all the necessary documentation to the buyer. 

Once the goods are delivered alongside the vessel, the buyer takes on full responsibility for loading them onto the vessel, along with all subsequent costs and risks. This means the buyer arranges the main transportation, secures cargo insurance (if desired), manages the import clearance process, and coordinates the final delivery. 

FAS is typically employed in situations where direct access to vessels is practical and where buyers prefer to maintain control over the loading operations and main carriage arrangements. 

Advantages of FAS:

• Clear Transfer Point: Risk and responsibility transfer occurs at a clearly defined location – alongside the vessel at the port of shipment.
• Seller Export Management: The seller handles export clearance procedures, leveraging their local expertise and relationships.
• Flexible Loading Control: Buyers can manage loading operations according to their preferences and requirements.
• Cost Transparency: The seller pays for delivering the goods alongside the ship and covers export duties. From that point on, the buyer pays for the rest of the journey. This includes ocean freight, loading the goods aboard the ship, cargo insurance (optional), import duties, and final delivery.

What Is FOB (Free On Board)?

Under FOB (Free On Board), the seller is responsible for all export duties and loading the goods aboard the vessel at the named port of shipment. The seller maintains control and responsibility until loading is complete, ensuring proper handling throughout the process.

Once the goods are securely loaded aboard the vessel, all risks and costs transfer to the buyer. From this point, the buyer assumes responsibility for the main carriage, including freight costs, insurance (if desired), import duties, and final delivery arrangements.

FOB applies exclusively to sea and inland waterway transport. It’s particularly well-suited for bulk cargo and non-containerized shipments. For containerized cargo that involves buyer-centric arrangements, you can check out Incoterms like FCA (Free Carrier) or EXW (Ex Works).

Advantages of FOB:

• Defined Loading Responsibility: The seller manages the entire loading process, ensuring proper cargo handling.
• Seller Export Management: The seller handles export formalities, leveraging their local knowledge and relationships.
• Clear Risk Transfer: The transition of risk occurs at a specific point – when goods are loaded aboard the vessel.
• Buyer Control Over Main Carriage: The buyer can select preferred carriers and negotiate freight rates directly.

FOB vs. FAS: What’s the Difference?

Both Incoterms were designed for maritime trade but differ in how responsibilities are allocated, especially regarding the loading of goods onto the vessel. Understanding these differences is essential for making informed decisions in international shipping operations.

FOB vs. FAS: Differences in Responsibilities

Let’s examine how these Incoterms distribute responsibilities between buyers and sellers during the shipping process.

Understanding FAS Responsibilities

According to FAS, the seller’s responsibility ends when the goods are cleared for export and placed alongside the vessel.

Seller Responsibilities Under FAS:

• Preparing and packaging goods appropriate for maritime transport.
• Managing transportation to the port of shipment.
• Placing goods alongside the vessel at the specified loading point.
• Handling export clearance procedures and documentation.

Buyer Responsibilities Under FAS:

• Managing and paying for loading operations onto the vessel.
• Arranging and paying for the main carriage (ocean freight).
• Securing cargo insurance (if desired).
• Handling import customs clearance and associated costs.
• Coordinating final delivery to destination.

Understanding FOB Responsibilities

Under FOB, the seller is responsible for not only bringing the goods to the port and handling export duties, but also for loading them safely onto the vessel.

Seller Responsibilities Under FOB:

• Managing pre-shipment preparation and packaging.
• Arranging transport to the port of shipment.
• Handling export customs clearance.
• Loading goods aboard the vessel.

Buyer Responsibilities Under FOB:

• Arranging and paying for ocean freight.
• Securing cargo insurance (if desired).
• Managing import customs clearance and duties.
• Coordinating final delivery arrangements.

FOB vs. FAS: Risk Transfer Comparison

• FAS (Free Alongside Ship): Risk transfers from seller to buyer when the goods are placed alongside the vessel at the named port. The buyer assumes responsibility for loading operations and all subsequent risks.
• FOB (Free On Board): The seller maintains responsibility through the loading process. The risk is passed on to the buyer once the goods are loaded safely aboard the vessel. 

FOB vs. FAS: Cost Implications

The cost distribution between these Incoterms reflects their different points of responsibility transfer:

• FAS (Free Alongside Ship): The seller covers costs until the goods are placed alongside the vessel, including transport to the port and export clearance. The buyer assumes costs from this point, including loading, ocean freight, insurance (not mandatory), and all import-related expenses.
• FOB (Free On Board): The seller bears costs through the loading process, including the expenses of loading the goods aboard the vessel. The buyer’s costs begin once loading is complete, covering ocean freight, optional insurance, import duties, and final delivery.

FAS vs. FOB Incoterms: The Bottom Line

Both FOB and FAS are maritime-specific Incoterms that provide clear frameworks for international shipping responsibilities. The key distinction lies in the handling of loading operations – FAS places loading responsibility on the buyer, while FOB extends the seller’s obligations to include loading the goods aboard the vessel.

Both FOB and FAS are typically less common when it comes to containerized cargo. In many cases, shippers may find that the FCA Incoterm offers greater flexibility regarding shipping methods and the transfer point. 

The choice between these terms should reflect your operational capabilities, risk preferences, and specific cargo requirements. Consider factors such as your experience with port operations, relationships with local service providers, and the nature of your cargo when making your decision.

Ship4wd: Your Trusted Partner for International Shipping

As soon as you’ve chosen the Incoterm that best fits your business strategy, the next step is to ensure its successful implementation as a part of your shipping operations. As your dedicated digital freight forwarder, we focus on simplifying and optimizing your shipping logistics, so you can concentrate on running your business.

With our digital platform, booking and managing international ocean freight is simple and stress-free. We offer competitive rates for both FCL (Full Container Load) and LCL (Less than Container Load) shipments. For additional flexibility, we also provide air freight solutions when you need faster alternatives.

To streamline your imports, we provide a comprehensive customs clearance service designed to minimize delays and help avoid potential pitfalls. In addition, our platform offers cargo insurance coverage to protect your shipments, advanced tracking capabilities, and pre-shipment inspections to verify your goods meet all specifications before they are shipped out.

Additionally, our dedicated customer service team is available 24/7 to support your shipping operations, answer questions, and help you navigate our user-friendly platform effectively.

Register with Ship4wd today to streamline your shipping operations.