FAS Incoterms 2020 rule – what does Free Alongside Ship mean?

fasInternational trade is governed by clear rules that facilitate cooperation between business partners operating in different countries and subject to different legal systems.

One such standardised set of rules is Incoterms 2020, which defines the obligations of the parties to a transaction in terms of transport, costs and risks.

Among them is the FAS rule, or Free Alongside Ship, also known as FAS Incoterms.

Although at first glance it seems like a simple rule, its significance in practice is crucial, especially in the case of maritime transport and trade in raw materials.

What does FAS mean in Incoterms 2020?

FAS Incoterms 2020 means that the seller delivers the goods and places them alongside the ship at the designated port of loading. From that moment on, the buyer bears the full risk and costs of maritime transport.

In other words, the goods are delivered by the seller to the quay (alongside the ship). The transfer of risk to the buyer takes place even before the goods are physically loaded on board.

This rule applies primarily to sea and inland waterway freight. The seller must ensure that the goods are delivered in accordance with the sales contract and are in the right place – next to the ship, in the designated port. From this point on, the buyer is responsible for further costs, including insurance of the goods, freight and any damage to the goods during loading or the voyage.

In short: FAS means that the seller’s obligations end when they place the goods alongside the ship at the designated port of loading. Further risk of loss or damage to the goods and all transport costs are transferred to the buyer.

Why were Incoterms created and who created them?

Incoterms were created to standardise the rules of international trade and clearly define the responsibilities of the parties to a transaction. They were created by the International Chamber of Commerce (ICC), a global association of entrepreneurs from different countries.

Their main purpose is to eliminate misunderstandings that arise from linguistic, cultural and legal differences. Thanks to Incoterms, sellers and buyers can be sure when the risk is transferred, who is responsible for transport costs and how customs formalities are divided.

Incoterms rules are a common language for international business – they standardise sales contracts and reduce the risks associated with global trade.

You can read more about Incoterms 2020 in the article: What are Incoterms? International sales terms in practice >>>

What is the FAS Free Alongside Ship rule?

The FAS Free Alongside Ship rule means that the seller delivers the goods and places them alongside the ship at the designated port of loading, according to the buyer’s instructions. From that moment on, responsibility passes to the party purchasing the goods.

This means that the seller fulfils their obligation by physically delivering the goods to the quay, next to the ship designated by the buyer.

Once the goods have been delivered to the correct location, the buyer bears both the costs of further transport and the risk of loss or damage to the goods.

The moment of delivery of goods in the FAS Incoterms rule

The moment of delivery of goods in the FAS rule is when the goods are placed alongside the ship at the designated port. It is at this point that the risk is transferred from the seller to the buyer, even before the actual loading on board.

This is crucial because any damage to the goods is transferred to the buyer as soon as the goods are on the quay next to the ship. This means that from that moment on, the buyer must be able to pay the costs associated with sea transport, insurance of the goods and further transport to the country of destination.

Seller’s obligations under the FAS Incoterms 2020 rule

The seller’s obligations under the FAS rule boil down to delivering the goods alongside the ship at the designated port of loading and ensuring that the goods have been delivered in accordance with the sales contract.

This means that the seller must complete a number of formalities and control activities before responsibility passes to the buyer.

The key tasks of the seller include:

• preparing and delivering the goods to the ship’s quay,
• ensuring that the goods are properly marked and packaged,
• covering the costs until the goods are delivered to the designated port,
• completing and paying for customs formalities related to export and fulfilling other necessary customs formalities,
• providing the buyer with proof that the goods have been delivered in accordance with the FAS rule (e.g. the relevant transport document or commercial invoice in accordance with the sales contract),
• ensuring that the goods are delivered in a condition suitable for further sea transport.

Buyer’s obligations under the FAS Incoterms 2020

The buyer’s obligations begin when the goods are delivered alongside the vessel – from that moment on, the buyer bears the costs and risks of further transport. The buyer is responsible for the further stages of transport, insurance and settlement.

The buyer’s obligations include:

• concluding a contract of carriage and covering all costs of sea transport and any transport to the destination,
• paying for insurance of the goods if they want to protect themselves against the risk of loss or damage,
• providing the seller with advance information about the name of the ship, the date of collection and the place of loading,
• collecting the goods,
• bearing the risk from the moment the goods are handed over by the seller,
• loading the goods onto the ship and covering the costs of unloading, internal transport and import clearance in the country of destination.

When to use the FAS rule?

The FAS rule is primarily used for sea and inland waterway transport, mainly for trade in raw materials. It is particularly useful where the buyer has better access to shipowners, more favourable sea freight rates or greater control over onward transport.

FAS works best in situations where:

• the subject of the transaction is bulk goods, e.g. grain, oil, coal or metal ores,
• the goods will be delivered to the ship at a designated port of loading,
• the buyer wants to manage the transport and insurance of the goods themselves,
• the parties to the transaction have clearly defined the time of delivery of the goods and the buyer’s obligations in this regard.

However, this rule is not recommended for general cargo shipments in containers, where other terms, such as FCA, are more suitable.

Summary

The FAS Incoterms 2020 rule clearly defines the moment of delivery of the goods and the transfer of risk from the seller to the buyer. The key point is that responsibility changes hands when the goods are placed alongside the ship at the designated port of loading.

These rules make it easier to avoid misunderstandings in international trade, especially in the raw materials industry, where it is important to precisely define the moment of transfer of responsibility. Incoterms, created by a global association of entrepreneurs from different countries, provide a common language for contractors operating on a global scale.

FAS is a practical tool for parties involved in the import and export of goods by sea or inland waterways, allowing for a clear division of responsibilities and costs in a transaction.

Frequently asked questions

What is FAS in transport?

FAS in transport is an Incoterms condition in which the seller delivers the goods alongside the ship, and from that moment on, the buyer bears the costs and risks. This rule applies only to sea and inland waterway transport.

What are the FAS delivery terms?

FAS delivery terms are based on the delivery of the buyer’s goods to a designated port before they are loaded onto the ship. The buyer then assumes responsibility for transport, insurance and any risks.

What does FCA Incoterms mean?

FCA Incoterms stands for Free Carrier – the seller transfers the goods to the carrier at the agreed place, and from that moment on, the risk is transferred to the buyer.

Unlike FAS, here the transfer of goods to the carrier takes place earlier and may involve various modes of transport, not just sea transport.

Read more about FCA Incoterms: FCA Incoterms 2020 – what does the Free Carrier rule mean? >>>

What are the differences between FAS and FOB?

FAS and FOB differ in terms of the moment of risk transfer. In FAS, the goods are delivered to the quay (along the ship’s side), while in FOB – on board. This determines who is responsible for loading the goods and the risk of damage during this operation.

What are the obligations of the parties in FAS?

The seller’s obligations end when the goods are delivered to the buyer – along the ship’s side. The buyer’s obligations begin when the goods are loaded on board. The buyer is responsible for freight, insurance and further transport arrangements.