FAS Incoterms: Meaning, responsibilities, and advantages

Among the 11 international trade terms, the FAS Incoterms agreement requires the supplier (exporter) to deliver the goods alongside the ship. It leaves the buyer (importer) to manage the loading and onward transport, often making a knowledgeable agent at the port a valuable asset.

To facilitate transparent international trade, Incoterms provide a common set of rules that are understood and recognized worldwide. This shared understanding helps to build trust and confidence between trading partners.

In this guide, you’ll learn:

• The meaning of FAS Incoterms
• Buyer’s and supplier’s responsibilities
• An example of FAS Incoterms
• Advantages and disadvantages
• Frequently asked questions about FAS

What are FAS Incoterms?

FAS Incoterms (Free Alongside Ship) rule is one of the 11 Incoterms published by the International Chamber of Commerce (ICC). Under FAS, the supplier fulfills their obligation once they place the goods alongside the ship at the designated port. From that point, the buyer assumes all risks and costs.

FAS benefits importers who want the exporter to handle the initial transport to the port but prefer to manage the loading and main carriage from the port of shipment onwards.

Key features of FAS Incoterms explained:

• Point of delivery: The delivery point is a specified port where the supplier places the goods alongside the ship.
• Modes of transport: Free Alongside Ship Incoterms rule is exclusively used for sea and inland waterway transport.
• Insurance coverage: Negotiable. The supplier doesn’t need to provide insurance.

💡 The ICC updates Incoterms rules every decade, with the latest editions being Incoterms 2010 and Incoterms 2020. When you incorporate FAS or any Incoterms into a contract, specify the edition to avoid misunderstandings or ambiguities.

Read more: What are the types and rules of Incoterms?

Supplier’s and buyer’s responsibilities under FAS Incoterms

To understand the implications of FAS Incoterms, it's essential to recognize the specific obligations they entail for both the supplier and the buyer.

Supplier’s responsibilities

• Export packaging: Making sure those goods are packed and ready for their international journey.
• Loading charges: Covering the cost of loading the products onto the first transport at the pickup point.
• Delivery to port/place: Getting the goods to the carrier or agreed-upon party at the named port or location in the contract.
• Export formalities: Handling all the paperwork for export – duties, taxes, customs clearance.
• Origin terminal charges: Taking care of any costs at the origin terminal, like handling fees.

Buyer’s responsibilities

• Loading onto carriage: Supervising the loading of the products onto the main mode of transport.
• Main freight charges: Paying for the main transport costs to get those goods moving to their destination.
• Destination terminal charges: Covering the costs at the destination terminal – unloading, handling – up to the agreed-upon delivery point.
• Delivery to the final destination: Assuming responsibility for the cargo once it reaches the specified place, port, or terminal, and arranging further transportation to the final destination (buyer’s premises or designated place).
• Unloading at destination: Managing the costs and responsibilities of unloading the goods.
• Import formalities: Handling all import procedures and associated expenses, including customs duties, taxes, and clearance in the destination country.

An example of FAS Incoterms

Imagine AutoParts Inc., a US-based automotive parts manufacturer, orders 2,000 units of precision-engineered gears from GearTech Ltd., a Japanese supplier. They agree to use Free Alongside Ship Incoterms, specifying delivery alongside the ship at the Port of Yokohama, Japan.

Supplier’s responsibilities (GearTech Ltd.)

GearTech Ltd. packages the gears, prepares all necessary export documentation, and clears export customs in Japan. They arrange and pay for transportation to the Port of Yokohama, ensuring they place the goods alongside the designated vessel.

Under FAS Incoterms, GearTech Ltd. assumes all risks and expenses until they place the gears alongside the ship at the Port of Yokohama. This includes managing the transport to the port and handling any port charges up to this point.

Buyer’s responsibilities (AutoParts Inc.)

AutoParts Inc. takes over all responsibilities and costs from the moment the products are placed alongside the ship. They oversee the loading of the gears onto the ship, cover the main sea freight to the United States, and manage any destination port charges.

Upon arrival in the United States, AutoParts Inc. handles import customs clearance, duties, and taxes. They arrange for the unloading of the gears from the ship and transport them to their manufacturing facility. AutoParts Inc. also conducts a quality check to ensure the shipment meets their order specifications.

This FAS Incoterms example demonstrates the division of responsibilities, with the supplier managing up to the port and the buyer handling the transport and import procedures.

Advantages and disadvantages of FAS Incoterms 

Recognizing the pros and cons of the FAS Incoterms agreement can help companies decide if FAS is the best choice for their transactions.

Advantages

• Control over the main carriage: Buyers can select their preferred carrier and potentially negotiate better freight rates for the main transport.
• Flexibility in shipping schedule: Buyers have more flexibility in choosing a sailing schedule that aligns with their inventory needs.
• International market appeal: FAS Incoterms can make exporters more attractive to importers who prefer to manage the primary transport themselves.

Disadvantages

• Limited to water transport: FAS Incoterms rule is only applicable to goods transported by sea or inland waterways.
• Earlier risk transfer: The risk transfers to the buyer earlier in the process compared to some other Incoterms, potentially exposing them to risks and costs associated with loading and the main carriage.
• Responsibility for loading and shipping: Importers are responsible for contracting and coordinating the loading of goods onto the vessel, which requires logistical expertise and potentially incurs additional costs.

💡 Remember, both buyers and suppliers must carefully evaluate advantages and disadvantages within the context of their specific business needs, risk tolerance, and international logistics capabilities.

Learn more: What is export finance and how can it help SMEs?

FAS Incoterms: Frequently Asked Questions (FAQs)

Who pays freight on FAS?

Under FAS, the buyer is responsible for contracting and paying for the freight to transport the goods from the port of shipment to their destination port. The seller only delivers the products alongside the ship at the named port of shipment.

What is the difference between FAS and FOB?

While both deal with sea freight, the key difference lies in the point of risk transfer. In FAS, the risk passes to the buyer when the goods are alongside the ship. In FOB (Free on Board), the risk transfers when the cargo is loaded onboard the vessel.

What is the difference between FAS and FCA Incoterms?

FAS Incoterms rule is specifically designed for sea transport, while FCA (Free Carrier) offers more flexibility. FCA can be used for any mode of transport and the risk passes to the buyer when the goods are handed over to the carrier at an agreed-upon point.

When to use FAS Incoterms?

FAS Incoterms rule works best when shipping bulk cargo or goods that require specific handling at the port. They suit buyers who prefer to manage the main leg of transportation and have established logistics capabilities. Sellers benefit by limiting their responsibilities and costs to the origin port.

The decision to use Free Carrier Incoterms will depend on specific business requirements, risk appetite, and familiarity with managing international shipments. It’s important to weigh the benefits and drawbacks, consider the details of the transaction, and consult with experts if needed.

By comprehending Incoterms and selecting the right one, businesses can effectively handle the intricacies of international trade and flourish in the global market.

Learn more about other Incoterms:

• EXW (Ex Works)
• FCA (Free Carrier)
• FOB (Free On Board)
• CFR (Cost and Freight)
• CIF (Cost, Insurance, and Freight)
• CPT (Carriage Paid To)
• CIP (Carriage and Insurance Paid To)
• DAP (Delivered at Place)
• DPU (Delivered at Place Unloaded)
• DDP (Delivered Duty Paid)

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