Incoterms 2010 – FAS (Free Alongside Ship)

Free Alongside Ship (FAS) is, like FOB (Free on Board), an Incoterm which should only be used for sea or inland waterways transport, but is not suitable for container traffic since containers are normally delivered to a terminal and not to a location beside a vessel.  Please note that the word “Free” in this phrase means that the buyer is free from responsibility, risk and any additional costs until the goods are in position beside a vessel.  Up to this point, the seller is responsible for all risks and costs of delivering the cargo to the nominated point at the nominated time.  This responsibility includes the export customs clearance, all export documentation and relevant export licences (if required), as well as the costs of physically delivering the goods to the location specified in the contract.

The difference between FOB and FAS is that with FAS the seller “delivers” the goods once they are positioned alongside the sea-going or inland waterways vessel that will transport them from the port of departure.  (With FOB the seller “delivers” the goods once they are physically loaded on board the sea-going or inland waterways vessel.)  Hence the seller meets their FAS obligations when they deliver to a quay or dock beside a vessel nominated by the buyer, at a time specified by the buyer.

FAS is commonly used with bulk shipments of commodities such as grain and oil.  However, there is an argument that FAS might be a better term to use than FOB for other types of shipments as well, especially under the ICC’s 2010 definitions of the FOB term.

As mentioned in my previous article about the FOB Incoterm, I pointed out that there was room for misunderstanding precisely when a shipment was “delivered” when it was loaded on board a vessel.  Are the goods delivered when they are placed on deck, under deck; when the first item is loaded or the last item is loaded?  My recommendation was that this should be clearly stated in the written contract between buyer and seller.

However, what happens when the contract is part of a ‘string sale’?  A ‘string sale’ is a chain of contracts between successive organisations, which successfully transfers title to the same goods, from one to another of these organisations.  A potential risk in this scenario is whether the agreement on when a product is “delivered” in full can be transferred to successive parties under their respective local jurisdictions.  Hence, avoiding this potential for misunderstanding (and possible future legal wrangling) is a definite point in favour of using the FAS Incoterm.

However, it might be useful to the seller to consider offering FAS contracts for types of shipments other than bulk commodity shipments or ‘string sales’, in order to avoid the risk, under the FOB term, that the seller and buyer disagree at a future stage about when, or when not, the goods were “delivered”.  The possible downside to the buyer, is that they might find it difficult to arrange the loading and handling at the port of export, but this is a matter that can be discussed with the shipping company they nominate to ship the goods on their behalf.

There are other risks to the seller as well, but these risks are related to both the FOB and FAS terms.  Problems can arise if the vessel fails to arrive in time, or is unable to accept the goods or closes for cargo earlier than the stipulated time, thereby preventing the seller from completing their obligation.  Bearing these risks in mind, it would be useful to state in the contract who is responsible for the cargo (and the respective costs) if any of these circumstances occurred.

Maria Narancic from Point to Point Export Services is an independent international trade adviser who assists organisations world wide with their international trade projects, documentation, Documentary Credits and import/export training.  She is based in the United Kingdom.  If you require any further assistance with the matters mentioned above, please do contact us by e-mail on info@point-point.com or check out the Point to Point Export Services website at www.point-point.com for more information on International Trade matters.

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