What is Free Alongside Ship Incoterm (FAS)
Free Alongside Ship (FAS) is one of eleven Incoterms used in ocean freight to clearly assign responsibility to the buyer and seller. A FAS contract stipulates that the seller is responsible for delivering the goods to a point of departure, but not a container terminal. Once the goods arrive, the buyer is responsible for loading, unloading, and all import costs.
Understanding the Role of Free Alongside Ship in the Maritime Industry
FAS is a commonly used Incoterm for bulk or non-containerized cargo where the goods can be easily delivered and left next to a vessel. It simplifies the export process for the seller, as they are only responsible for costs and risks up to the point where goods are delivered to the loading dock and placed alongside the ship. After this point, the buyer assumes all subsequent responsibilities, including but not limited to loading the goods onto the vessel, covering freight charges, and unloading at the destination port.
- Goods, commercial invoice, and documentation: providing the goods along with the necessary shipping documents, ensuring that all information is accurate for customs and handling
- Export packaging and marking: packaging the goods so they meet the standards for international shipping, including marking the packages for identification
- Pre-carriage to terminal: tasked with delivering the goods to the terminal near the port of shipment, covering all associated costs and risks
- Delivery alongside the vessel at the port of shipment: the most important aspect of FAS –the goods must be placed alongside the designated vessel at the agreed-upon port of shipment
- Proof of delivery: providing evidence that the goods have been properly delivered alongside the ship
- Loading charges: all costs related to loading the goods after they’re placed alongside the vessel
- Main carriage: arranging and covering the cost of loading the goods on the vessel
- Discharge and onward carriage: unloading the goods from the vessel and arranging onward carriage to the final destination
- Import formalities and duties: complete all import-related paperwork and pay all duties and taxes for bringing the goods to the final destination.
- Cost of pre-shipment inspection (for import clearance): should any inspections be required for import clearance, the buyer is responsible for those costs unless otherwise stipulated in the contract
Advantages and Disadvantages of Using FAS
FAS has a well-defined framework that clearly outlines the respective responsibilities and costs for both buyers and sellers. But, before entering a FAS contract, it’s important to understand its advantages and disadvantages.
Advantages of FAS
- Limited seller responsibility: the seller has a limited scope of responsibility, which ends once the goods are placed alongside the named vessel
- Buyer’s control over shipping: the buyer has complete control over the shipping process once the goods are delivered alongside their nominated vessel. This allows for more flexibility in choosing shipping companies, negotiating freight rates, and managing logistics
- Clear demarcation of risks and costs: both parties have a clear understanding of who is responsible for what, reducing ambiguities and making it easier to manage risks and costs.
Disadvantages of FAS
- Dependency on buyer’s vessel: the seller’s responsibility ends when the goods are placed alongside the buyer’s nominated vessel. Delays due to heavy traffic, weather conditions, or other unforeseen circumstances affecting the buyer’s vessel could mean that the seller’s goods remain waiting, affecting inventory management and possibly incurring extra costs
- Documentary responsibilities: the seller is required to assist the buyer in getting the transport documents, adding an additional responsibility that isn’t included in other Incoterms
- Complexity for the buyer: adds a wide range of responsibilities and costs, such as loading costs, insurance, and handling import formalities
When to Avoid FAS
Sellers might want to avoid Free Alongside Ship when goods are destined for a container yard, rather than directly alongside a nominated vessel at a specified port. In such cases, the FAS term may not be appropriate and Free Carrier (FCA) could serve as a more suitable alternative, especially when containerized cargo is involved.
FAS is generally not recommended for liner services operating out of smaller ports. These services often have streamlined logistics and handling processes that may not align well with the requirements of FAS, potentially complicating the shipping arrangements.
The Difference Between Free Alongside Ship and Free Carrier
Free Alongside Ship and Free Carrier Arranged mainly differ in regards to the points of delivery and risk transfer between buyer and seller. In FAS, the seller is responsible for delivering the goods alongside the buyer’s nominated vessel at a named port, at which point the risk transfers from the seller to the buyer. This makes FAS more appropriate for bulk or non-containerized shipments where the goods can be easily placed alongside a vessel.
Under FCA terms, the seller’s obligation is to deliver the goods to a specified place, often a terminal, where they are unloaded from the truck. The risk of loss or damage to the goods transfers from the seller to the buyer once the goods are handed over, typically at this designated place. FCA is generally more versatile and better suited for containerized shipments, particularly when these are to be delivered to a terminal rather than directly alongside a ship.
Sellers shipping containerized goods or utilizing a terminal for transfer will likely find FCA to be a more fitting Incoterm. Meanwhile, those dealing with bulk or non-containerized cargo may prefer FAS.