The “Free Alongside Ship” (FAS) Incoterm is used in international trade to spell out the buyer’s and seller’s responsibilities and duties when it comes to delivering goods. Both buyers and sellers need to be aware of the terminology because it applies to both bulk and containerized goods.
When the buyer has chosen for the things to be sent by ocean and the seller’s obligation terminates at the port of shipment, the FAS phrase is typically used. This expression is widely used to refer to both products that are shipped in containers and those that are shipped in bulk, such as grains, ores, and coal.
What Exactly Is An Incoterm?
International Commercial Terms, or Incoterms, are a set of rules made by the International Chamber of Commerce (ICC) that tell buyers and sellers what their duties and responsibilities are when doing business across borders. In business contracts, these rules are often used to define the terms of the sale, especially when it comes to the delivery of goods, the transfer of risk, and how the costs are split between the parties.
Incoterms are meant to create a common language and structure for international trade. This helps to avoid misunderstandings and disagreements between partners in different countries. Currently, there are 11 Incoterms, each with a unique definition and set of responsibilities. Among these are EXW (Ex Works), FOB (Free on Board), CIF (Cost, Insurance, and Freight), and DDP (Delivered Duty Paid).
Buyers and sellers must choose the right Incoterm for their transaction based on the nature of their business, the needs of their customers, and any legal requirements that may be in place.
What Does Free Alongside Ship (FAS) Mean?
The “Free Alongside Ship” (FAS) Incoterm is often used in international trade to spell out the buyer’s and seller’s responsibilities and duties when it comes to delivering goods. According to the FAS agreement, the seller is in charge of shipping the products to the designated port and loading them onto the ship that will transport them.
The risk of loss or damage during loading is one of the risks that the customer takes on once the items have been positioned alongside the ship. Also, all expenditures for stevedoring and putting the items on the vessel are the buyer’s responsibility.
The FAS phrase is usually used when the buyer has set up for the items to be shipped by ocean and the seller’s responsibility ends at the port of shipment. This phrase is frequently used to refer to both items that are shipped in containers and those that are shipped in bulk, such as grains, ores, and coal.
Both the buyer and the seller need to know what FAS means and what rules and laws apply to the transportation of goods in the countries involved in the transaction, as well as what their specific duties and responsibilities are.
Incoterms and Free Alongside Ship (FAS)
What Is the Difference Between Free Alongside Ship (FAS) and Free On Board (FOB)?
Both “Free Alongside Ship” (FAS) and “Free On Board” (FOB) are common Incoterms used in international trade to define the buyer’s and seller’s responsibilities and duties when it comes to the delivery of goods. Even though both FAS and FOB mean that goods are delivered at the port of shipment, there are some big differences between the two:
1. In contrast to FAS, which simply requires the seller to place the goods alongside the vessel, FOB requires the seller to load the goods into the vessel. Thus, the seller’s obligation under FOB ends when the products are put aboard the ship, whereas under FAS, the seller’s obligation ends when the goods are positioned next to the ship.
2. In a FOB agreement, the seller is in charge of all expenses related to loading the products onto the ship, whereas in a FAS agreement, the buyer is in charge of all expenses related to loading the goods onto the ship. So, under FOB, the seller pays for the cost of loading the items onto the ship, including any labor or equipment that is needed. Under FAS, these costs are paid for by the buyer.
3. Whereas FAS is often used for items that are carried in bulk, such as grains, ores, and coal, FOB is typically used for goods that are shipped in containers.
In either scenario, once the commodities are carried onto the vessel, the buyer takes all responsibility and risk for them. When choosing between FAS and FOB, buyers and sellers must carefully look at the details of their transaction and understand the exact responsibilities and obligations that come with each term.
What Is the Difference Between Free Alongside Ship (FAS) and Cost Insurance and Freight (CIF)?
Cost Insurance and Freight (CIF) and Free Alongside Ship (FAS) are both Incoterms used in international trade, although they have different responsibilities and obligations:
1. FAS is an Incoterm in which the seller is in charge of shipping the products to the designated port and docking them next to the ship. Once the goods are next to the ship, the customer is responsible for all risks and costs, such as the cost of loading the goods onto the ship and any fees for customs clearance, export procedures, and other costs.
CIF, on the other hand, is an Incoterm that says the seller is responsible for getting the goods to a certain port and paying for the freight, insurance, and any other costs related to getting the goods to the port of destination. To protect the items during shipping, the seller must buy and pay for marine insurance.
Once the products are delivered to the port of destination, the buyer is responsible for them.
The main difference between FAS and CIF is that with CIF, the seller has to pay for shipping and marine insurance, which is not the case with FAS. CIF is often used when the buyer wants the seller to set up these services but doesn’t already have a relationship with a carrier or insurer.
When choosing between FAS and CIF, buyers and sellers must carefully look at the details of their transaction and understand the exact responsibilities and obligations that come with each term.
Who Should Use Free Alongside Ship (FAS)?
Under certain conditions, both sellers and buyers can use the Incoterm “Free Alongside Ship” (FAS) in international business deals. FAS is often used when the buyer has arranged for the goods to be shipped by sea and when the goods are being sent out in bulk or without packaging.
Here are some scenarios where FAS may be a wise decision:
- The buyer has made plans for the products to be sent by ocean, and he or she works with a certain carrier or freight forwarder.
- Bulk products like cereals, ores, or coal are being shipped.
- Unpacked items or items with a high volume-to-value ratio are being sent.
- The buyer has a local representative to manage customs clearance and other relevant processes, and is familiar with the port of shipment.
- Because the seller doesn’t have the tools or knowledge to load the goods onto the ship, it makes more sense to put the goods next to the ship.
When selecting an Incoterm, such as FAS, both buyers and sellers must carefully consider their own needs and situations. Also, they should know about any costs and risks that come with the Incoterm they choose and make sure they have the knowledge and resources they need to follow its rules.
Which Incoterm Is Right For Your Company?
If you want to know what your obligations are and avoid taking unnecessary risks, you should know the most common Incoterms used in international shipping contracts. Yet, if you’re still unsure of what you need to begin conducting business internationally, you can always contact Forceget for assistance.
Forceget, which knows a lot about international shipping, tells exporters and importers to choose the Incoterm that works best for them.