Free Alongside Ship (FAS) is an Incoterm that defines the seller’s responsibilities for delivering goods to a specific port and placing them alongside the vessel for loading. This term signifies that the seller’s obligations cease once the goods are positioned alongside the ship, and from that point onward, the buyer takes on all responsibilities, costs, and risks associated with the shipment.
Key Aspects of FAS Incoterms
1. Delivery Point:
Under FAS terms, the seller’s primary responsibility is to deliver the goods to a named port, typically the departure port, and ensure that they are placed alongside the ship. The specific port must be clearly identified in the sales contract.
2. Loading Responsibility:
One of the distinguishing features of FAS is that the seller is not responsible for loading the goods onto the vessel. Instead, the seller’s responsibility is to make the goods available for loading by placing them alongside the ship.
3. Risk Transfer:
The critical moment in an FAS transaction occurs when the goods are positioned alongside the ship. At this point, the risk of loss or damage to the goods shifts from the seller to the buyer. Therefore, it is essential for both parties to be aware of the precise location where the risk transfer occurs.
4. Transportation and Costs:
FAS requires the seller to cover the costs associated with delivering the goods to the named port. However, the seller is not responsible for any subsequent costs, such as ocean freight, insurance, unloading, or customs clearance at the destination port. These costs and responsibilities become the buyer’s domain once the goods are placed alongside the ship.
5. Applicability:
FAS terms are often utilized in scenarios where the buyer has expertise in arranging for ocean freight, unloading, and handling customs procedures at the destination port. It is suitable for various modes of transportation, including sea freight.
Advantages and Considerations of FAS Incoterms
Understanding the advantages and considerations of using FAS Incoterms is crucial for both buyers and sellers:
Advantages:
- Clear Responsibility: FAS provides a clear delineation of responsibilities. Sellers are responsible for getting the goods to the port of shipment, while buyers take over from there.
- Cost Savings: Buyers can exercise greater control over shipping, potentially negotiating better freight rates and optimizing the shipping process to minimize costs.
- Flexibility: FAS allows for flexibility in choosing carriers and shipping schedules, as these decisions are in the hands of the buyer.
Considerations:
- Risk Management: Buyers must be diligent in managing the risks associated with transportation, including arranging insurance coverage and ensuring proper handling at the destination port.
- Expertise Required: Buyers should have the necessary knowledge and resources to handle international shipping logistics, customs procedures, and unloading.
- Communication: Clear communication between the parties is essential to avoid misunderstandings about the exact location where risk transfers and responsibilities shift.
FAS Incoterms, or “Free Alongside Ship,” offer a clear and defined framework for international trade transactions involving the delivery of goods at a specific port. While it places greater responsibility on the buyer for transportation, costs, and risks, it also provides flexibility and cost-saving opportunities. However, for FAS to work effectively, both parties must communicate clearly and understand their respective roles and responsibilities, ensuring a smooth and efficient international trade transaction.
Seller’s Responsibility Under FAS
- Goods delivery
- Preparing all documents required
- Packaging and marking
- Transportation in the county of origin
- Customs handling fees and charges in the country of origin
Buyer’s Responsibility Under FAS
- Goods payment
- Charges in the country of origin
- Charges in the destination country
- Customs handling fees and charges in the destination country
- Transportation in the destination country
- Payment of taxes and customs duties
- Customs formalities
- International freight and main carriage
Cargo Insurance in FAS
Under FAS, insurance is not a mandatory necessity. It is normal practice, however, for both the buyer and the seller to get coverage to cover the parts of the cargo’s transportation that they are each responsible for.
As a buyer or seller using the FAS Incoterm, you have the option of accepting responsibility for acquiring cargo insurance for the complete shipping procedure from beginning to end. Make sure to include insurance terms in your sales contract, no matter what you chose.
