Free Alongside Ship (FAS) and Free on Board (FOB) are two Incoterms used for regulating international trade using sea freight transport. Differentiating FAS from FOB can be tricky because they share a lot of similarities, but we have put together this guide to help clear any confusion. Let us walk you through the differences between FAS and FOB shipping terms so you can choose the right Incoterm for your operations.
The main difference between FAS and FOB is the point at which the risk transfers from the seller to the buyer. Under FOB, the seller is responsible for loading the goods on the selected vessel; from that moment, the risk passes to the buyer. Under FAS, the seller only needs to make them available for loading alongside the ship, so the risk transfers to the buyer at this earlier stage, making the buyer responsible for loading the goods.
Both FOB and FAS Incoterms are meant to be used for maritime and inland waterway cargo transport. However, FOB is sometimes used for other types of transport as well, such as air freight.
Read more about each Incoterm:
Now that the main difference between FAS and FOB Incoterms is clear, let’s add another complexion to the matter. The FOB Incoterm has two variants: FOB Origin and FOB Destination. The main difference between them is the definition of the point at which the cargo must be delivered by the seller, which may be in the country of origin or destination, respectively.
Before signing the contract, it is important to define which version of the FOB Incoterm you will be using. Compared to the FAS Incoterm, FOB Destination has yet another difference: the responsibility of arranging and paying for the freight shipping falls on the seller instead of the buyer.
For the buyer:
Since the buyer is responsible for the freight shipping, they can have more control over how the cargo is loaded and which type of vessel is used for transport. However, it often happens that there is miscommunication between the buyer and the seller, and the goods are waiting at the port to be loaded, which can cause extra fees and damage to the cargo. Since the seller’s responsibility ends when the goods are delivered, these costs are borne by the buyer.
For the seller:
Shipping under FAS is easier for the seller as they have fewer responsibilities compared to FOB. But everything should be arranged with total coordination between both parties; otherwise, the seller may get complications when making the goods available at the port if not all documents are arranged beforehand.
For the buyer:
The buyer has fewer responsibilities and, if shipping under FOB Destination, gets the cargo delivered to the destination country, which means they are not liable for any damage during transport. However, the overall costs may be higher if the buyer is able to get better freight prices if arranging the transport themselves.
For the seller:
FOB is one of the most popular Incoterms, so if the seller is able to comply with the rules established under FOB, it may play in their favour when negotiating new clients. On the other hand, when FOB Destination is used, the seller has more responsibilities and needs to deal with international freight transport, being liable for anything that happens until the delivery.
Understanding how the customs procedures work for each Incoterm, FAS and FOB, is essential before agreeing to any shipping term. Fortunately for you, both FAS and FOB Incoterms have very similar terms when it comes to customs when exporting and importing:
|FAS||FOB Origin||FOB Destination|
|Type of transport||Sea freight||Sea freight||Sea freight|
|Transport to the port of origin||Seller||Seller||Seller|
|Loading the goods on the named vessel||Buyer||Seller||Seller|
|Unloading and handling upon arrival at the named place||Buyer||Buyer||Buyer|
|Domestic transport to the named destination||Buyer||Buyer||Buyer|
|Risk transfer||Once the goods are made available at the port of origin alongside the ship||When the goods are loaded onboard the selected vessel||When the goods are delivered at the selected destination|
As you have seen, the differences between FAS and FOB may seem slight, but they are very important to be understood before any contract is signed. Read our other Incoterms guides to get even more familiar with the topic:
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