The FAS Incoterm is one of the 11 trade rules set by the International Chamber of Commerce (ICC). It is used in specific shipping agreements where buyers need control over freight from the start.
These rules help businesses set clear terms in trade deals. They outline who handles costs and risks at each stage. FAS works best in certain situations, making it important to understand its role before using it.
This guide covers what buyers and sellers need to know, including when FAS is a good choice and how it compares to other Incoterms.
What Does FAS Mean in Shipping Terms?
Free Alongside Ship (FAS) is one of the trade terms in Incoterms 2020. It applies only to goods transported by sea or inland waterways. Under FAS, the seller delivers the goods to the port of departure and places them next to a ship. At that moment, all costs and risks transfer to the buyer.
The buyer handles everything from that point forward. This includes loading the goods, arranging freight, and covering all costs until the shipment reaches its final destination. The seller’s job ends once the goods are placed alongside the vessel.
FAS is not common in modern shipping. Most businesses prefer terms like FOB (Free on Board) or CIF (Cost, Insurance, and Freight). But FAS still works for bulk cargo, oversized equipment, and shipments needing direct transfer to a vessel.
Buyer & Seller Responsibilities
| Responsibility | Seller’s Obligation | Buyer’s Obligation |
|---|---|---|
| Packaging | Seller ensures goods are properly packed for export. | None. |
| Export Clearance | Seller handles all export formalities, including licenses, duties, and inspections. | Buyer provides any necessary documents or approvals to assist export clearance if required. |
| Named Port Specification | Seller ensures goods are delivered alongside the vessel at the port of departure. | Buyer clearly specifies the port of shipment and provides loading instructions. |
| Carrier Coordination | None. | Buyer selects and arranges a carrier or freight forwarder to transport the goods. |
| Delays or Failures | Seller notifies the buyer if goods cannot be delivered alongside the ship as agreed. | Buyer informs the seller of any changes in vessel arrival or loading schedule. |
| Delivery | Seller delivers goods alongside the vessel at the agreed port. | Buyer ensures the goods are accepted and arranged for loading onto the vessel. |
| Risk Transfer | Seller bears all risks until the goods are placed alongside the ship. | Buyer assumes all risks once goods are alongside the ship, including loss or damage. |
| Loading | None. | Buyer is responsible for loading goods onto the vessel, including handling and crane costs. |
| Documentation | Seller provides documents such as the commercial invoice, packing list, and export permits. | Buyer ensures all documents are valid for customs clearance at the destination. |
| Freight & Transportation | None. | Buyer arranges and pays for ocean freight and any further transportation beyond the port. |
| Import Clearance | None. | Buyer handles all import formalities, including duties, taxes, and customs requirements. |
| Unloading | None. | Buyer manages and pays for unloading at the destination port and final delivery. |
| Insurance | None, but seller provides information if requested. | Buyer decides whether to insure the shipment and bears the cost. |
Advantages and Disadvantages for the Buyer
Advantages
- More control over freight costs – The buyer selects the shipping company and negotiates better rates.
- Lower seller markup – Buyers avoid inflated shipping costs often included in seller-arranged freight.
- Best for bulk or oversized cargo – Works well for shipments that require direct loading onto vessels.
- Flexibility in logistics – The buyer controls insurance, loading, and transport beyond the port.
- Clear division of responsibilities – The seller delivers to the port, and the buyer takes over from there.
Disadvantages
- Higher risk after goods are alongside the ship – The buyer is responsible for any loss or damage from that point forward.
- Loading costs fall on the buyer – Cranes, labor, and port handling fees must be arranged separately.
- Requires strong logistics expertise – Buyers must coordinate vessel loading, customs clearance, and transport.
- Not suitable for containerized cargo – Most container shipments use FOB or FCA instead.
- Port delays can increase costs – If the vessel is late, buyers may face unexpected storage or handling fees.
How Does FAS Influence the Landed Cost?
FAS affects the total cost of goods by shifting most transportation expenses to the buyer. The seller covers costs up to the port but does not pay for loading, freight, or delivery beyond that point. Buyers and sellers must plan carefully to avoid unexpected costs at the port and beyond. Each step in the process directly impacts the final landed cost.
TIP: Use the IncoDocs Landed Cost Calculator to work out your landed costs, sell pricing and profit amounts for each shipment.
Export Clearance Costs
The seller is responsible for export duties, customs clearance, and documentation. This includes licenses, inspections, and security checks. These costs are included in the seller’s pricing. The buyer does not have to pay for export clearance.
Packaging Costs
The seller must pack the goods so they are ready for export. Proper packaging is important, especially for bulk goods or oversized items. This cost is covered by the seller and added to the product price.
Transportation to the Port
The seller arranges and pays for transport to the port of shipment. Once the goods arrive at the port, the seller delivers them alongside the vessel, not loaded onto it. The buyer must ensure the port and timing are correct to avoid delays or extra charges.
Loading and Freight Costs
The buyer pays for loading the goods onto the ship, which may include crane fees, port handling, and labor costs. The buyer also pays for ocean freight and chooses a carrier. Freight costs depend on distance, cargo type, and shipping rates. Since the seller does not handle these costs, the buyer has full control over carrier selection and pricing.
Import Duties and Taxes
Once the goods arrive, the buyer is responsible for import duties, customs clearance, and regulatory fees. These costs vary depending on the country and type of goods. The buyer must budget for these expenses when calculating the final landed cost.
Unloading and Final Delivery Costs
After customs clearance, the buyer must pay for unloading, storage, and final delivery to the destination. These costs include port storage fees, handling charges, and inland transportation. If delays occur, extra fees may apply.
Insurance Costs
FAS does not require the seller or buyer to purchase insurance. The buyer must decide if coverage is needed to protect against damage or loss during transit. If the buyer does not insure the shipment, they take on all risk once the goods are placed alongside the ship.
Key Takeaways
- Sellers handle costs up to the port but do not cover freight or delivery.
- Buyers must pay for loading, freight, and all costs beyond the port.
- Freight costs are flexible, allowing buyers to choose the best rates.
- Uninsured shipments carry higher risk if damage or loss occurs.
- Unexpected delays can increase costs, so careful planning is needed.
When is it Best to Use FAS Incoterm?
FAS works best for bulk shipments that need direct loading onto a vessel. It is often used for raw materials like coal, minerals, and grain. Since the buyer handles freight and loading costs, FAS is a good choice when they have the expertise to manage shipping logistics.
This Incoterm is not suitable for containerized cargo. Containers are usually handled at terminals where goods are placed in stacks, not directly alongside a ship. For containerized shipments, FOB or FCA is a better option.
Example:
A metal recycling company in Canada buys scrap aluminum from an Indonesian supplier. Under FAS, the supplier transports the metal to the Port of Surabaya and places it alongside a bulk carrier. The buyer arranges for a chartered vessel to transport the shipment to Vancouver. Since the buyer controls the freight, they secure better shipping rates and manage customs clearance on arrival. The seller’s responsibility ends once the goods are alongside the ship.
FAS vs. FOB vs. CIF vs. FCA
| Incoterm | Risk Transfer Point | Who Pays for Freight? | Best Used For |
|---|---|---|---|
| FAS (Free Alongside Ship) | When goods are placed alongside the vessel | Buyer | Bulk cargo, oversized items |
| FOB (Free on Board) | When goods are loaded onto the vessel | Buyer | General sea freight, better for buyers who want seller responsibility until loading is complete |
| CIF (Cost, Insurance, and Freight) | When goods arrive at the port of destination | Seller | Works well for buyers who prefer an all-inclusive shipping cost with insurance and freight handled for them |
| FCA (Free Carrier) | When goods are handed to the carrier at the agreed location | Buyer | More flexible for all transport modes, including containerized shipping and inland deliveries |
Which Incoterm Is Better in Comparison?
- FOB is a safer option when buyers want the seller to handle loading. This removes the risk of damage before the goods are loaded onto the vessel.
- CIF is better for buyers who want less responsibility. The seller arranges freight and insurance, making it a good choice for businesses that don’t want to deal with shipping logistics.
- FCA offers more flexibility because it applies to any transport mode, not just sea shipments. It is a better fit for containerized goods or when shipping through multiple carriers.
