The complexities of international shipping can be challenging for small and medium-sized businesses (SMBs), especially when using terms like Ex Works (EXW) and Free on Board (FOB). The choice between these two can significantly affect your SMB’s shipping strategy, depending on your goals and objectives.Read More
Find easy-to-understand explanations of the most common freight forwarding and shipment terms
What is the FAS Incoterm?
FAS (Free Alongside Ship) is an Incoterm that defines a delivery arrangement whereby the seller is responsible for delivering goods to a designated port. The seller must place the goods alongside the vessel selected by the buyer, and all costs incurred up until this point are covered by the seller.
Once these obligations have been fulfilled, responsibility and risk are transferred from the seller to the buyer; the buyer now bears any additional costs, such as freight or insurance.
FAS is most commonly used in shipments of bulk commodities, applying to ocean transport only.
Frequently Asked Questions
The following section contains a list of frequently asked questions concerning the FAS incoterm.
What is the Significance of the “Free Alongside Ship” in FAS?
The significance of the phrase “Free Alongside Ship” in the FAS Incoterm lies in its definition of the specific delivery point and the moment when the seller’s responsibilities end and the buyer’s responsibilities begin. In FAS, the seller’s primary obligation is to place the goods alongside the ship specified by the buyer at the named port of shipment. This means that the seller is responsible for ensuring that the goods are ready for loading onto the vessel, and they must arrange for the goods to be positioned conveniently for this purpose.
The phrase “Free Alongside Ship” signifies that the goods should be positioned on the quay, the dockside, or within reach of the ship’s loading equipment, as determined by the contract. It does not imply that the goods are loaded onto the vessel; instead, they are positioned for loading. The significance of this is that the risk and responsibility for the goods typically transfer from the seller to the buyer at this specific point.
Once the goods are placed alongside the ship, any subsequent costs, risks, or damages are generally the buyer’s concern. It is important for both parties in the transaction to clearly understand this point, as it defines the moment when the transition of risk occurs and when the seller’s obligations under FAS Incoterms are fulfilled.
What Are the Seller’s Responsibilities Under the FAS Incoterm?
In FAS, the primary responsibility of the seller is to deliver the goods alongside the ship at the designated port of shipment. Once this delivery is successfully accomplished, the risk and responsibility for the goods typically shift from the seller to the buyer. This transfer of risk signifies that any subsequent loss or damage to the goods generally becomes the buyer’s responsibility.
Furthermore, the costs and risks associated with loading the goods onto the vessel usually fall under the buyer’s responsibility in FAS transactions. To ensure a smooth international trade transaction, it is crucial for both the seller and the buyer to have a clear understanding of when the seller’s obligations and limitations come to an end under FAS Incoterms. Any additional services or obligations beyond this point should be explicitly outlined in the sales contract or discussed and agreed upon separately by the involved parties.
What Are the Buyer’s Responsibilities Under the FAS Incoterm?
Under the FAS Incoterm, the buyer’s responsibilities begin the moment goods are delivered alongside the ship by the seller. This requires the buyer to be prepared to take over the cargo’s management for its onward journey.
The buyer’s duties extend to booking a carrier, covering all costs from loading the goods onto the vessel, arranging cargo insurance if necessary, and managing customs clearance for import at the destination. This process involves a detailed understanding of import regulations to ensure compliance and avoid delays.
Given these complexities, buyers have the option to hire the services of freight forwarders. These professionals can significantly simplify the process by providing assistance with managing shipping operations, orchestrating logistics, securing cargo insurance, handling customs procedures, and coordinating the shipment’s arrival at its final destination. By outsourcing this service, business owners can remain focused on their core business operations while knowing that their shipments will be handled professionally.
What Are the Advantages and Disadvantages of Using FAS for International Trade?
Using the FAS Incoterm in international trade offers advantages and disadvantages for both the buyer and seller. One key advantage is its simplicity and clarity in defining responsibilities. FAS specifies a precise delivery point, which is “alongside the ship,” where the risk and responsibility typically transfer from seller to buyer. This clarity helps both parties have a clear understanding of their responsibilities and obligations.
Sellers might appreciate maintaining control over the goods until they are placed alongside the ship, ensuring their condition and readiness for shipment. However, their responsibility effectively ends at this point, leaving any subsequent costs, risks, or damages with the buyer.
Under FAS, buyers manage the complex and expertise-demanding task of loading goods onto the vessel. Disputes can arise if there’s uncertainty about the exact “alongside the ship” point or if goods are damaged during loading (as FAS doesn’t cover loading damage). Additionally, buyers may incur additional costs related to loading, handling, and transportation, impacting the overall cost of the goods.
Ultimately, while FAS offers sellers simplicity and control, it can present complexities and added responsibilities for buyers. Choosing the right Incoterm requires considering both advantages and disadvantages based on the specific needs and preferences of both parties.
FAS Vs. FOB: What is the Difference Between Them?
FAS (Free Alongside Ship) and FOB (Free On Board) are both widely used Incoterms in international trade, each with its distinct characteristics and responsibilities. The primary difference between the two lies in the point of delivery and the allocation of responsibilities.
In FAS, the seller’s obligations and associated risks conclude when the goods are placed alongside the ship at the named port of shipment. This means the seller is responsible for ensuring the goods are ready for loading but not for actually loading them onto the vessel. In contrast, FOB places the seller’s responsibility on delivering the goods onto the vessel named by the buyer, including the actual loading process. In addition, while FAS is often used for bulk cargo or commodities, FOB is more commonly used across various international trade scenarios.
The choice between FAS and FOB should match the specific requirements and preferences of the parties involved in the trade transaction, taking into account the differences in delivery, risk transfer, loading responsibilities, control over shipping, and applicability of each Incoterm.
Why is the FAS Incoterm Frequently Used in Shipments of Bulk Commodities?
FAS Incoterms are frequently employed in shipments of bulk commodities for several compelling reasons, especially when considering the characteristics of such cargo.
Firstly, FAS’s clear definition of the delivery point as “alongside the ship” at the named port of shipment makes it an ideal choice for bulk commodities. This precision is crucial when dealing with bulk cargo, where the loading process may involve large volumes and specialized equipment. The unambiguous designation of where the goods should be placed simplifies logistics and minimizes the risk of disputes.
Secondly, FAS is appreciated for its simplicity and ease of understanding. This simplicity is a significant advantage in bulk commodity shipments, where efficiency and clear communication are paramount. Bulk cargo often involves complex logistics, and having straightforward terms helps streamline the trade process.
Furthermore, FAS’s suitability for charters, heavy-lift ships, boat carriers, or scenarios where loading the vessel poses challenges due to space constraints underscores its practicality in the context of bulk commodities. In situations where the goods can be delivered directly to a loading dock by the seller, FAS may be the logical choice, as it ensures that the goods are ready for loading onto the vessel at the specified port.
In simple words, the FAS Incoterm is commonly used for bulk commodity shipments due to its precision, simplicity, and alignment with the unique requirements of this industry. Whether dealing with large volumes of cargo, specialized loading procedures, or deliveries to loading docks, FAS offers a reliable and well-established framework for managing transactions involving bulk commodities.