The seller bears all charges until the goods reach the destination port, and after that, the buyer becomes responsible for the costs.
2. Risks and responsibilities involved in FAS shipping
After arranging the ordered goods, the seller had to make sure they safely took the goods to the port of shipment alongside the vessel.
The buyer is responsible for loading goods, their transport, unloading at the destination port, customs clearance, and export charges.
The delivery of goods in FAS is not physical as the risk and responsibilities transfer to the buyer as soon as the seller places them alongside the vessel for shipment.
The risks and responsibilities are transferred from the seller to the buyer as soon as the goods reach the port of shipment.
The seller places the goods alongside the vessel at the port of shipment, and the risks and responsibilities get transferred to the buyer before the loading occurs.
3. Uses of FAS incoterm
FAS shipping is not used commonly for small shipments, and it is more suitable for shipping bulk cargo such as those oil, grains, etc.
Every port does not provide the facility of shipping your goods alongside the vessel except for some underdeveloped ports.
So, FAS is best suited for super heavy cargos and oversized or out of gauge cargos. This is because such cargo does not fit into a sample container.
Now it is an unsaid rule that FAS shipment is used for OOG cargos or when dealing with special transportation of goods.
At some points, the seller wants to use the FAS shipping because he has to take the responsibility only for a short time (until goods reach the shipment port).
On the other hand, the buyer wants to avoid FAS shipping because he becomes liable to pay charges right from the port of shipment.
4. Transportation modes used in FAS shipping
All incoterms are divided into categories according to their transportation mode.
The companies can easily choose the incoterms by considering its transportation method.
FAS is unique from other incoterms in the way that it can only use sea transport or inland waterway transportation mode.
FAS incoterm provides you with the opportunity to transport goods through sea routes.
The main reason for this is that FAS shipment is used to transport bulk loads.
Keeping in mind the weight of the shipment, one can guess that FAS cannot be carried out using air shipping or by road.
Chapter 2: FAS incoterm; The essential information
Before making any decision about FAS incoterms and trade, you must know about the cost distribution, fee and customs, and the new updates regarding incoterms.
In this chapter, you will find all the essential information about the FAS incoterm that you need to start off your journey.
1. Cost distribution of FAS incoterm for buyer and seller
After the buyer places the order, the seller has to arrange goods and pay for them.
The seller is obligated to pay all costs until the goods are delivered (reached the shipping port).
The seller also pays the prices of proof of goods delivery, export duties and taxes, and the costs related to documents.
The buyer first pays the cost of the ordered goods, and the buyer also has to pay all charges once the shipment is marked delivered from the seller’s end.
These costs may include insurance costs, delivery charges, documentation fees, import duties, customs, and carriage charges.
Additional costs can also be adjusted in exceptional cases.
2. Distribution of Import and export customs clearance
The FAS incoterm is unique and does not have a physical delivery system.
The seller delivers the goods besides a vessel and marks the delivery successful.
The buyer has to take responsibility for the cargo from the port of shipment to the destination port.
The import and export customs are distributed among the buyer and the seller in such a way that both of them have to pay their part for a successful transfer of goods.
The seller takes responsibility for the payments when the goods are in the country of origin.
The seller pays export customs and charges, and the buyer pays the import customs.
In this way, the customs charges are equally distributed among two parties, and the process can go smoothly.
3. FAS incoterm and containerized cargo
FAS shipping is not suitable for the export of containerization cargo.
The reason is that the containerized cargo is delivered to the terminal/container yard before loading; however, in non-containerized cargo shipping, the goods are placed right next to the vessel before loading.
For containerized cargo, you can use FCA shipping that is better suited for it and fulfils all the needs of the container’s shipments.
4. 2020 update of FAS incoterm
Incoterms were first introduced in 1939, and since then, the rules have been updated after every ten years.
After the 2010 update, the incoterms were re-evaluated in September 2019.
The most recent update of incoterms was released on the 1st of January 2020.
The incoterms communicate the new changes in obligations, costs, and risk factors to the buyer and the sellers.
The update also includes information about risk factors involved in shipping.
According to the 2020 update of FAS incoterm, the seller is obligated to pay for the export formalities, pre-carriage, delivery at a named place or terminal, and landing goods alongside the vessel.
The buyer had to make sure he pays and covers all risks related to onboard shipping, main carriage, discharge of goods to the destination port, onward carriage of goods, all import formalities, and final unloading.
5. Delivery of goods in FAS incoterm
Delivery in FAS is not the same as in other incoterms. In FAS, the shipment is marked delivered when the seller places them alongside the shipment.
The seller does not have to take the shipment to the port of delivery himself.
The buyer becomes liable for any damage to the shipment after it has been loaded in the carrier ship.
In FAS, the buyer and the seller clearly negotiate and define the loading point.
Doing so helps the seller and buyer estimate charges and calculate the total costs, profits and losses.
Chapter 3: FAS incoterm from sellers’ and buyers’ perspectives
Understanding the whole concept of FAS incoterm, it is recommended to know the things that are happening on the buyer’s and the seller’s end.
In this chapter, we have discussed the duties of both parties along with the advantages and disadvantages of them will come along.
1. Obligations of the buyer in FAS incoterm
The buyer is obligated to pay for the goods and loading charges as per the contract.
He has to take care of the main carriage, discharge, and onward carriage of goods.
Once the seller has completed his part, the buyer had to fulfill the import formalities and pay the duties.
It is the buyer’s responsibility to pay the charges linked to the loading of the freight and also pay the unloading fee once the shipment reaches the destination port.
Payment of the freight charges, import duties, taxes, and customs clearance come under the wing of the buyer.
The insurance of goods is a concern if the seller until the goods reach the agreed location (the destination port), and after that, the buyer has to take charge of insurance.
In case of any damage to the goods after they have reached the destination, the buyer has to pay the costs.
2. Obligations of a seller in FAS incoterm
The seller has to make arrangements for the goods, and it involves connecting to the manufacturer and negotiating the price of goods.
The goods packaging, arrangements for the commercial invoice, and necessary documentation are the next steps of the seller.
The seller pays the OTHC once the goods reach their destination.
According to FAS, the responsibilities of customs clearance formalities, export licensing, shipping goods, and shipment inspection are also placed on the seller.
The seller pays all charges needed for transporting goods to the port of destination and hands over the goods to the seller.
3. Advantages of using FAS incoterm
Everything has a few benefits and a few drawbacks, and they balance each other.
The FAS incoterm is beneficial for the seller because, according to the terms and conditions, he is only responsible for unloading goods and placing them alongside the shipment.
FAS incoterm is more suitable for the buyers because of the wide range of benefits it provides them.
The buyers have complete control of the shipment, starting from the loading of goods to the time when they reach the destination.
The buyer can ask the seller to provide additional documents like the certificate of origin if needed.
4. Disadvantages of using FAS incoterm
FAS incoterm does not have any potential disadvantage for the buyer.
The drawbacks that concern the seller include the following points;
-In FAS incoterm the goods are not transported in any dedicated ship; instead, assorted/combined shipments are used.
-The shipment may get delayed due to unforeseen circumstances like bad weather, heavy traffic, etc.
Regardless of the reason for the delay, the goods remain the buyer’s responsibility. Any damage to goods can cause loss for the buyer.
-The seller has to assist the buyer in getting the necessary documentation, and such situations add extra load to the seller.
-The nomination of a carrier is very crucial to decreasing the risk factors.
-If the buyer fails to do so in time, the shipment may face high-end risks and thus result in loss.
5. Considerations for FAS incoterm
In FAS incoterm, the buyer and the seller have to consider a few things for smooth shipment.
The seller should fulfill his responsibilities and also keep the buyer updated about them.
If they communicate about the date, time, and place of cargo, it will help quickly transfer goods from one party to the other.
It must be known that the seller has the responsibility only till the loading of goods.
After the ship leaves the starting port, the buyer becomes liable to pay for damage and other costs.
So, early or late departure of the vessel can cause a lot of unnecessary hassle if not communicated timely.
Chapter 4: Frequently asked questions about FAS Incoterm
1. When do we use FAS incoterm?
FAS incoterm is used for overseas shipping of goods to the destination port in trading.
It is advantageous when the buyer gets direct access to bulk cargo and ships to load his goods.
The seller offloads the shipment at the destination port and clears the export customs.
As soon as the goods reach the buyer, the delivery is marked successful.
Most people who want to keep the charge of export clearance costs and unloading prefer FAS incoterm.
It is most suitable for exporting bulk goods and those packed in a container.
2 . Why are incoterms like FAS used?
The incoterms are a type of contract between the seller and the buyer. Incoterms define boundaries for both parties.
We can use incoterms to decide the liability of goods and expenditures related to trading.
Incoterm is a complete set of rules pertaining to which the seller and buyer define their roles.
You can decide the mode of shipment, liability, shipment costs, risks and, responsibilities in case of damage with the help of incoterms like FAS.
3. Is there any difference between FAS and FOB?
FAS and FOB are two essentially different Incoterms that provide different benefits to the users.
In FOB, the seller is responsible for loading goods at the destination port, and the responsibility shifts to the buyer.
Insurance is not the buyer’s responsibility in FOB, so it depends upon the terms of FOB decided between the seller and the buyer.
FAS incoterm, unlike FOB, puts the responsibility of loading at the destination port on the seller, and the insurance of goods is the buyer’s responsibility.
Both FOB and FAS have restrictions on any other mode of shipment except inland waterways and sea.
4. Who has to pay for insurance of FAS shipping?
In FAS incoterm, no one is responsible for buying the insurance of goods.
The buyer and the seller have no obligation to make arrangements for goods insurance, but they can add it to their contract after negotiation.
Most of the time, the seller pays the insurance costs at the buyer’s risk because, in case of any misfortunate loss of goods, he will have to pay for the makeup of the loss to the buyer.
5. How much does FAS shipment cost?
The cost of FAS incoterm depends upon the distance of travel, the nature of goods, and the documentation charges.
Some fragile goods need extra packaging and care, so the seller has to pay insurance charges as well. Hence, there is no specific cost of FAS incoterm.
The total cost of FAS incoterm includes transportation costs, insurance charges, cost of packaging and loading of goods, and customs clearance charges.
The seller has to bear all the costs till the goods reach the destination port.
After that, the buyer becomes liable to pay the dues, and the seller has to pay extra charges for the insurance of goods.
6. Can I still use 2010 shipping incoterms?
Yes, you can still use 2010 shipping incoterms. The primary purpose of any incoterm is to provide a framework to the seller and the buyer to efficiently complete the shipping process.
If both parties agree to terms and conditions, there is no restriction on the use of incoterm.
The only requirement is that the seller and the buyer must consider the correct documentation process for a successful trade.
FAS incoterm is a contractual term that helps you ship goods safely to your country.
It makes the seller liable to pay for shipping costs and the loss in case of any damage to the goods.
This blog introduced you to all the essential aspects of FAS shipping. If you still have any queries, contact us at https://www.ejet.com/.