FAS (Free Alongside Ship)

What Is the Incoterm FAS (Free Alongside Ship)?

What Is FAS (Free Alongside Ship)?

FAS is an incoterm rule for international trade set by the International Chamber of Commerce (ICC). The term “Free Alongside Ship” signifies that all costs and risks until the goods are placed alongside the vessel are borne by the seller.

Under FAS, the seller is responsible for delivering the goods to the named port of departure. This can be a loading dock or a barge, not a container terminal. After that, the buyer takes on all risks and costs associated with delivery to the final destination.

Key Features of FAS

Here are the core principles of the FAS incoterm:

Seller’s Obligations Under FAS

Under FAS, the seller is responsible for preparing the goods for export, including packaging and marking. They must bear the cost of loading the goods onto a carriage and transporting them to the buyer’s named port of departure.

The seller should also provide a commercial invoice and secure an export license. They have to handle all export customs formalities, including documentation and duties. They must also provide proof of delivery and cover all pre-shipment inspection costs. Their role ends as soon as the goods are placed alongside the vessel.

Buyer’s Responsibilities

Under FAS, the buyer’s responsibilities include paying for the goods as stipulated in the sales contract, loading the cargo onto the vessel, and delivery to the destination country. They must bear the costs of the main carriage, including insurance and handling, and undertake all import formalities and duties.

After arrival at the destination port, the buyer also handles the discharge, onward carriage, and pre-shipment inspection charges (for import clearance).

FAS does not require the seller to cover insurance for the main carriage. So, it is the buyer’s responsibility.

Designated Place for Delivery and Risk Transfer

The FAS incoterm dictates that the designated delivery place is the named port of origin specified by the buyer. The risk of loss or damage transfers from the seller to the buyer once the goods are delivered alongside the ship at that location. After that, the buyer must bear all risks and costs.

Advantages of FAS

Here are the plus points of using FAS for buyers and sellers:

For the Seller

Clear delineation of responsibility once the goods are at the vessel’s side
Little to no involvement in the transport process post-placement
Greater cost and planning efficiency due to the flexibility of delivering at a mutually convenient initial location
Reduced overall financial risk as the buyer bears most of the transport responsibility

For the Buyer

Flexibility in selecting a suitable carrier and negotiating transport costs
Enhanced oversight of international transportation and logistics
Main carriage responsibility, contributing to better control over the condition of goods
Easier to ensure compliance with all handling requirements

Disadvantages of FAS

Here are some potential drawbacks of using the FAS incoterm:

Challenges for the Seller

Limited control over shipping once the goods are alongside the vessel
Coordination issues with the buyer’s carrier regarding when and where to deliver
Retaining the risk of loss or damage until the goods are alongside the vessel
Covering the costs of obtaining the proof of delivery, such as a bill of lading
Undertaking all export customs formalities, including documentation and fees

Challenges for the Buyer

Bearing the responsibility of import customs clearance and related costs
Undertaking all transport risks and costs once goods are alongside the vessel
Ensuring the proper handling of goods throughout the transport
Paying additional fees and withstanding delays in case of mishaps, such as the carrier failing to arrive at the right time
Dealing with various intermediaries to ensure timely delivery from the port to the final point

When to Use FAS

FAS is only suitable for ocean and inland waterway transportation. Buyers should choose this arrangement when they seek flexibility in choosing a carrier. Additionally, this rule is suited for non-containerized, bulk cargo as it can be loaded directly onto vessels. Since the initial point of delivery under FAS is not a terminal but alongside the ship, it can present complications for containerized cargo. In that case, the FCA incoterm would be more appropriate.

FAQ

What is the difference between FAS and CIF?

FAS and CIF (Cost, Insurance, and Freight) are two incoterms exclusive to sea and ocean freight. Here are the primary differences between them:

In FAS, the seller’s responsibility ends when the goods are placed alongside the ship at the named port. In CIF, the seller must also arrange for the main carriage.
In FAS, the risk transfers once the goods are alongside the vessel, while in CIF, the transfer occurs after the goods pass the “ship’s rail.”
In FAS, the buyer bears the cost of insurance during the main carriage, while in CIF, the seller covers maritime insurance.

Who bears the risk of loss or damage under FAS?

Under FAS, the seller bears the risk of loss or damage to the goods until their delivery alongside the vessel. After that, all risk and liability fall on the buyer.

Can FAS be used for any mode of transportation?

FAS is among four of the 11 incoterms that apply exclusively to ocean or inland waterway transportation. It cannot be used for any other mode of transport.