Free Alongside Ship (FAS) Explained: What is Free Alongside Ship (FAS)?
Clear communication and a shared understanding of responsibilities are essential for a smooth and successful transition. Free Alongside Ship (FAS), abbreviated as FAS, is a commonly used incoterm in international trade, specifically for ocean freight.
Incoterms, a standardized set of international commerce terms developed by the International Chamber of Commerce (ICC), play a vital role in achieving this clarity.
One such incoterm is Free Alongside Ship (FAS), which specifically applies to ocean freight and outlines the specific obligations of both sellers (exporters) and buyers (importers) with regards to the delivery and associated costs of the goods being shipped.
What is Free Alongside Ship (FAS)?
FAS incoterm defines the specific responsibilities of both the seller (exporter) and the buyer (importer) regarding the delivery and costs associated with the goods being shipped.
When a sales contract includes the incoterms FAS, it signifies that the seller’s obligation is to deliver the bulk or non-containerized cargo alongside the vessel nominated by the buyer at a designated port of departure.
What is Included in Free Alongside Ship (FAS)?
Under FAS incoterms, the seller is responsible for the following:
Export Clearance: The seller must ensure all necessary customs documentation is completed for the goods to be exported legally.
Delivery to the Port: The seller is responsible for transporting the goods to the named port of departure and placing them alongside the vessel within reach of the ship’s loading gear. This may involve costs associated with terminal handling or docking fees.
Loading Costs on the Vessel: While the seller is not responsible for physically loading the goods onto the vessel, they may lead to higher costs associated with this process depending on the specific port and contractual agreements.
Pros and Cons of FAS
The pros of FAS Incoterms is it potentially offers cost advantages for sellers by limiting their responsibilities to deliver the goods alongside the vessel at the port.
This excludes the costs associated with loading the cargo onto the ship and the subsequent ocean freight charges.
This can be beneficial for sellers who may not have experience or expertise in arranging ocean freight or dealing with complex port logistics.
Additionally, by retaining control of the goods up until the point they are placed alongside the vessel, sellers can potentially mitigate the risk of damage during this initial phase of the shipping process.
The cons of using FAS shipping is that buyers assume greater responsibility under FAS incoterms, which translates to increased complexity.
This includes arranging and paying for loading the goods onto the vessel at the port, as well as all transportation costs from the time the goods are alongside the ship.
Additionally, since the seller’s responsibility ends at the port, buyers may face higher marine insurance premiums to cover the goods for the entire ocean journey.
Seller’s Obligations with FAS
The seller’s obligation of free alongside ship incoterm is responsible for ensuring the goods can be legally exported from their country and delivered alongside the buyer’s nominated vessel at the port of departure.
This includes obtaining all necessary export licenses, permits, and documentation for customs clearance.
The seller also arranges for inland transportation of the goods to the port, covering any associated costs, and handles terminal handling charges or docking fees.
Crucially, the seller must deliver the goods alongside the vessel within the reach of the ship’s loading gear, typically on the quay or dock, facilitating easy loading onto the ship.
The specific location for placing the goods may be further defined in the sales contract.
Finally, the seller is responsible for ensuring the goods are properly packed and marked to withstand international shipping and meet any destination country requirements, and for obtaining a document acknowledging receipt of the goods upon delivery alongside the vessel, which serves as proof of delivery and fulfills the seller’s obligations.
Buyer’s Obligations with FAS
The buyer is responsible for arranging and paying for the labor and equipment required to load the goods onto the ship’s deck.
This may involve hiring stevedores (dock workers specializing in loading and unloading ships) and securing any necessary lifting equipment.
The buyer bears all costs associated with transporting the goods by sea from the port of departure to the final destination. This includes freight charges payable to the ocean carrier, as well as any port charges or terminal handling fees incurred at the destination port.
Although not mandatory under FAS, it’s highly recommended for buyers to obtain marine insurance. This insurance protects the buyer against financial loss due to damage or loss of the cargo during ocean transportation.
Since the seller’s responsibility ends at the port of departure under FAS, marine insurance becomes crucial for the buyer to mitigate risk during the sea voyage.
The buyer is responsible for completing all import formalities and obtaining necessary permits or licenses required by the authorities in the destination country to allow the goods to be cleared through customs.
The Difference Between Free Alongside Ship and Free Carrier
FAS and Free Carrier (FCA) are both incoterms used for international trade, but they have distinct difference:
Delivery Location: Under FAS in shipping, the seller delivers the goods alongside the vessel. With FCA, the seller only needs to deliver the goods to a designated location at the port, such as a terminal or container yard, not necessarily next to the specific ship.
Loading Responsibility: FAS incoterms do not include loading the goods onto the vessel, whereas FCA can encompass loading the goods onto the buyer’s chosen mode of transport (typically a truck at the port).
What Is the Difference Between Free Alongside Ship (FAS) and Cost Insurance and Freight (CIF)?
When it comes to the difference between Free Alongside Ship shipping and Cost Insurance and Freight (CIF), the following differ in significant ways:
Delivery Location and Risk Transfer
Under FAS incoterms, the seller’s responsibility ends once the goods are delivered alongside the buyer’s nominated vessel at the port of departure. The buyer assumes responsibility for loading the goods onto the ship and all risks associated with the cargo from this point onward.
With CIF, the seller takes on a greater role, delivering the goods across the ship’s rail at the destination port. This includes arranging and paying for the ocean freight and obtaining minimum level marine insurance coverage for the goods during transport.
Cost Allocation
By using FAS, the seller is responsible for costs associated with inland transportation to the port departure, export clearance documentation, and potentially terminal handling charges at the port. The buyer shoulders all costs from the time the goods are placed alongside the vessel including loading onto the ship, ocean freight, marine insurance (recommended but not mandatory under FAS), import clearance, and any destination port charges.
The seller’s costs under CIF included in FAS, with the added expense of arranging and paying for ocean freight and minimum marine insurance coverage. The buyer is responsible for import clearance and any destination port changes.
Who Should Use Free Alongside Ship (FAS)?
If you’re hoping to choose FAS Free Alongside Ship, know that it is suitable for specific situations in international trade, particularly ocean freight.
It can be particularly advantageous for sellers who prefer a simpler role in the transaction, limited to delivering goods alongside the buyer’s chosen vessel at the port of departure.
This is especially beneficial for sellers who lack experience or expertise in arranging ocean freight and dealing with complex port logistics.
Additionally, FAS can be useful if the buyer has a preferred shipping line or specific requirements for the ocean freight, as it allows the seller to fulfill their obligation without being involved in selecting the carrier or negotiating the freight contract.
