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Free Alongside Ship (FAS) is an international trading term used to describe a delivery agreement between exporters and importers.
It is one of 11 Incoterms rules developed by the International Chamber of Commerce (ICC). FAS outlines the responsibilities of both parties in terms of costs, risks, and liabilities associated with shipping goods from one country to another.
By understanding FAS obligations, buyers and sellers can make informed decisions about their supply chain operations.
This article will provide an overview of FAS, including its obligations for both exporters and importers, as well as its point of risk transfer, benefits, drawbacks, and an example use case.
What is Free Alongside Ship (FAS)?
As indicated by its name, Free Alongside Ship (FAS) is an Incoterm that defines the seller’s responsibility in delivering goods to a specific location alongside or near a ship.
The FAS definition states that delivery occurs when the seller has made the goods available to the buyer on the quay (next to the vessel) at the named port of shipment.
From this point forward, the seller is absolved of any further obligation, and all costs and risks associated with transporting the goods will be handled solely by the buyer.
FAS Price Calculation: Product cost + packaging + loading charges + delivery to port/place + export customs charges + terminal charges + profit share
Obligations Under the FAS Incoterm
For Exporters
- Packaging and loading goods onto the designated transportation vehicle
- Commercial invoice and other documentation
- Export customs clearance and duties
- Paying for origin terminal handling fees
- Delivery alongside the vessel at the named port of shipment
For Importers
- Loading the goods onto the vessel
- Paying and arranging for transport on the main carriage
- Import customs clearance and duties
- Paying for destination terminal handling fees
- Unloading and delivery to the final destination
FAS Point of Risk Transfer
The point of risk transfer with FAS is the seller’s delivery of goods to the named port and alongside the vessel. Once this has occurred, all further costs and risks associated with transporting the goods are placed solely on the buyer.
FAS Example
For example, a US-based exporter agrees to sell 200 boxes of apples to a buyer in the UK under FAS terms.
The seller must package and load the apples onto a transportation vehicle, arrange for export customs clearance and duties, deliver them alongside the vessel at the designated port of shipment, then issue an invoice and other necessary documentation.
Once this has been completed, all costs and risks associated with transporting the goods are handled by the buyer, who must arrange for loading onto the vessel, main carriage, port handling fees, import customs clearance and duties, and delivery to the final destination.
Benefits and Drawbacks of FAS
While most Incoterms, like Delivery Duty Paid (DDP) or Delivered At Place (DAP), put most of the responsibility on the seller, FAS offers a more balanced approach.
However, given that the seller is absolved of responsibility only when they deliver the goods alongside the vessel, problems arise if the ship is delayed or unavailable. This can lead to additional costs and require the exporter to find alternative arrangements. Another disadvantage is that the exporter needs to assist with any additional documentation, such as a Bill of Lading or a Certificate of Origin.
The primary benefit of FAS for importers is that they have total control over their goods once the seller has delivered them alongside the vessel.
Is FAS the Right Choice for Your Business?
Free Alongside Ship is a great way to facilitate international trade, providing a relatively balanced approach to risk and cost-sharing.
However, its limitations in terms of ensuring timely transportation may be too great a risk for certain industries. Furthermore, the additional documentation required by FAS should not be underestimated.
If you are considering FAS as an Incoterm, it is essential to consider your business’s goals, needs, and potential risks. That way, you can make an informed decision on whether FAS is the right choice for you.
When it comes to international trade, getting reliable advice on incoterms and shipping solutions is essential. Cargoflip is a trusted source for all your freight needs, helping you get the most out of your imports and exports. Contact us today for expert advice.
FAS FAQ
Who is responsible for insuring goods under FAS terms?
The responsibility for insuring goods lies both with the buyer and the seller. The buyer must insure the goods for any risks associated with transportation, while the seller should ensure that they are covered by their own insurance policy up until they deliver them alongside the vessel.
What is the difference between Free on Board (FOB) and Free Alongside Ship (FAS)?
The main difference between FOB and FAS is when the risk transfer occurs. With FOB, the seller transfers all responsibility at the loading point on board the vessel. Whereas with FAS, the seller absolves themselves of responsibility only when they deliver goods alongside the vessel at a designated port.
What is the difference between Free Carrier (FCA) and Free Alongside Ship (FAS)?
The primary difference between FCA and Free Alongside Ship (FAS) is where the seller has to deliver the goods. With FCA, they must do so at a specified point agreed upon by both parties, such as an airport or railway station. With FAS, they need to deliver the goods alongside the vessel at a designated port of shipment.
What is the difference between Cost, Insurance, and Freight (CIF) and Free Alongside Ship (FAS)?
The key difference lies in responsibility. With FAS, the seller has to deliver goods alongside the vessel at a designated port of shipment but does not have to arrange for the main carriage or cover insurance for it. With CIF, the seller must arrange for the main carriage and also cover insurance costs up until delivery to the buyer’s destination.
Other Incoterms:
EXW|CIF|DPU |DDP |FCA |FOB |CPT |CIP |DAP
