What is the FAS Incoterm (Free Alongside Ship)?
The FAS terms incoterms is a trade term used in international shipping contracts.
Under FAS terms, the seller is responsible for delivering the goods alongside a named vessel at a specified port.
Once the goods are placed beside the vessel, the risk transfers from the seller to the buyer.
The buyer then assumes responsibility for loading the goods onto the vessel, as well as any costs and risks associated with transportation from that point onward.
When should you choose FAS?
FAS (Free Alongside Ship) is an Incoterm suitable for scenarios where the buyer desires to manage the main carriage of goods by sea and possesses the necessary infrastructure for loading onto vessels. Here are situations where opting for FAS may be fitting:
Buyer Control Over Shipping:
If the buyer prefers to handle shipping arrangements independently, FAS Incoterm offers flexibility. The buyer can choose carriers, methods, and routes as per their preferences.
Minimizing Transportation Costs:
By undertaking loading responsibility, the buyer can potentially negotiate better shipping rates or select more economical options, reducing overall transportation expenses.
Seller Facility Limitations:
If the seller lacks facilities for loading onto vessels, such as docks or crane equipment, FAS terms incoterms allows the buyer to manage this aspect, ensuring smooth shipping.
Buyer Expertise in International Shipping:
Buyers experienced in international trade may opt for FAS Incoterm , feeling confident in handling loading procedures and associated risks.
Control Over Shipment Timing:
With FAS terms incoterms , the buyer can coordinate loading timings directly, ensuring adherence to their shipping schedule and preferred timeline.
Prior to selecting FAS or any other Incoterm, it’s essential for both parties to assess their roles, capabilities, and responsibilities.
Consulting logistics experts or trade professionals can offer valuable insights into choosing the most suitable Incoterm for a particular transaction.
What are the Seller’s Responsibilities?
The seller’s responsibilities vary depending on the specific Incoterm being used in a transaction.
However, in general, the seller’s responsibilities may include:
- Ensuring that the goods are in conformity with the contract specifications and any applicable regulations.
- Packaging the goods adequately for transport, taking into account the nature of the goods and the mode of transportation.
- Arranging for the transportation of the goods to the specified delivery location or point, as outlined in the chosen Incoterm.
- Obtaining any necessary export licenses or permits required for the export of the goods.
- Handling export customs formalities, including preparing and submitting export documentation.
- Providing the buyer with any required pre-shipment inspection certificates or other documentation.
- Assuming responsibility for the goods and any associated risks up to the point specified in the chosen Incoterm.
- Notifying the buyer in a timely manner of any information necessary for the importation of the goods, such as shipment details and documentation.
- Cooperating with the buyer and their representatives to facilitate the smooth transportation and delivery of the goods.
These responsibilities may vary depending on factors such as the chosen Incoterm, the terms of the contract, and any specific agreements between the buyer and seller. It’s essential for both parties to clearly understand and agree upon the seller’s responsibilities in a transaction to ensure smooth and efficient trade operations.
What are the Buyers Responsibilities?
- Providing the seller with accurate information regarding the goods required, including quantity, specifications, and any special requirements.
- Paying the agreed-upon price for the goods, as specified in the contract.
- Arranging for the transportation of the goods from the point of delivery specified in the chosen Incoterm to the final destination.
- Bearing the costs and risks associated with the main carriage of the goods, as outlined in the chosen Incoterm.
- Handling import customs formalities, including clearing the goods through customs and paying any applicable duties or taxes.
- Obtaining any necessary import licenses or permits required for the importation of the goods.
- Ensuring compliance with any regulations or requirements related to the importation of the goods in the destination country.
- Providing the seller with any required documentation or information necessary for the importation of the goods.
- Notifying the seller in a timely manner of any information necessary for the exportation of the goods, such as shipping instructions and documentation.
- Inspecting the goods upon arrival to ensure they meet the contract specifications and are in acceptable condition.
As with seller responsibilities, buyer responsibilities may vary depending on factors such as the chosen Incoterm, the terms of the contract, and any specific agreements between the buyer and seller. Clear communication and understanding of buyer responsibilities are essential for ensuring the successful completion of international trade transactions.
FAS and Other Incoterms
Free Alongside Ship is among the Incoterms widely used in global trade.
These terms detail the responsibilities of buyers and sellers regarding goods delivery.
Here’s a brief look at FAS and some other common Incoterms:
Delivered Ex Ship (DES), Delivered Ex Quay (DEQ), and Ex Works (EXW) are unique Incoterms, each outlining specific duties for buyers and sellers:
Delivered Ex Ship (DES):
Under DES, sellers cover all risks and costs until goods reach the named destination port. Once goods are available to the buyer on the arriving vessel, sellers’ obligations end. DES is suitable when sellers handle transportation to the destination port, leaving unloading to buyers.
Delivered Ex Quay (DEQ):
DEQ requires sellers to deliver goods to the quay at the destination port, bearing risks and expenses until unloading. After unloading, buyers manage further transportation, duties, and clearance. DEQ is common for maritime transactions with sellers arranging delivery to ports.
Ex Works (EXW):
EXW places minimal responsibility on sellers, who only need to provide goods at their premises or another named location. Buyers assume all risks and costs from this point, including transportation and clearance. EXW is favored by sellers seeking to reduce obligations.
In summary, DES, DEQ, and EXW are distinct Incoterms with specific implications for buyer and seller responsibilities. Understanding these terms is vital for successful international trade negotiations and agreements.”
Delivered Ex Ship, Delivered Ex Quay, and Ex Works
The constraints of FAS Incoterm (Free Alongside Ship) conclude when goods are set beside the ship at the specified port of shipment.
At this juncture, the seller fulfills their duties under FAS terms.
Upon positioning the goods next to the vessel, the seller’s responsibilities, encompassing risks and expenses, shift to the buyer.
Thus, FAS limitations end when goods are ready for loading onto the ship, with subsequent responsibilities, like loading and transportation, falling on the buyer.
What is the difference between FOB and FAS?
The difference between FOB (Free On Board) and FAS (Free Alongside Ship) lies in the point at which the seller’s responsibility ends and the buyer’s responsibility begins in terms of goods delivery:
FOB (Free On Board):
Under FOB terms, the seller’s obligation concludes when the goods are loaded onto the vessel at the specified port of shipment. Once the goods pass over the ship’s rail, the risk and responsibility transfer to the buyer. FOB is typically used for sea or inland waterway transportation.
FAS (Free Alongside Ship):
In contrast, under FAS terms incoterms , the seller fulfills their responsibility by delivering the goods alongside the ship at the designated port of shipment. The seller’s obligations end once the goods are positioned adjacent to the vessel, with the risk and responsibility transferring to the buyer at that point. FAS is suitable for transactions where the buyer wants to handle the main carriage of goods by sea and has the infrastructure for loading onto vessels.
In summary, while both FOB and FAS terms incoterms specify the point at which seller responsibility ends and buyer responsibility begins, the key difference lies in where this handover occurs: at the ship’s rail for FOB and alongside the ship for FAS.