What it means
FAS is one of the Incoterms, the standard trade rules that define who pays for what and where risk passes between seller and buyer. Choosing the right one avoids arguments when cargo is damaged or a charge appears that nobody expected.
Under FAS the seller must deliver the goods alongside the ship the buyer has nominated, at the quay or on a barge, by the agreed date. Everything after that point, including loading, ocean freight, insurance and import formalities, belongs to the buyer.
Export clearance is the detail people most often get wrong. Under the current rules the seller handles export clearance while the buyer handles import clearance, so a seller quoting FAS still has to complete its own country's export paperwork.
FAS suits commodities such as grain, ore, timber and heavy machinery, where the buyer charters the vessel and wants control of the loading operation. For containerised goods it is a poor fit, because containers are handed to a terminal rather than placed beside a ship, and Free Carrier is the better rule.
The risk transfer point also drives the accounting. Revenue is recognised and the sale recorded when the goods are placed alongside, which can fall in a different reporting period from the moment the vessel actually sails.
In practice
Real-world examples.
Example
A grain trader buys 20,000 tonnes of wheat on FAS terms at a river port. The seller barges the cargo to the loading berth on time, the buyer's chartered vessel arrives three days late, and because risk has already passed the buyer absorbs $18,000 of storage and demurrage.
Example
A wind turbine manufacturer sells three nacelles FAS to a developer that has chartered a heavy-lift vessel. Because the developer controls the lifting gear and the stowage plan, FAS lets it manage the loading operation itself rather than relying on the manufacturer's freight forwarder.
Example
A mining company quotes FAS $214,000 per shipment while a rival quotes $242,000 on a cost, insurance and freight basis. The buyer adds its own loading, freight and insurance of $13,300 to the FAS quote for a comparable $227,300, and takes the FAS offer because it lands $14,700 cheaper.
Formula
Calculation
FAS price = cost of goods at the factory gate + export packing + inland transport to the port + charges to place the goods alongside the vessel
A fictional exporter sells a consignment of steel coil. The goods cost $200,000 at the factory gate, export packing and strapping cost $4,000, inland haulage to the port costs $6,500, and quay handling to position the coil alongside the ship costs $3,500.
The FAS price is $200,000 + $4,000 + $6,500 + $3,500 = $214,000.
The buyer then adds its own costs: loading on board of $2,800, ocean freight of $9,000, marine insurance of $1,500 and import documentation of $1,200. That brings the value at the destination port to $214,000 + $2,800 + $9,000 + $1,500 + $1,200 = $228,500.
At an import duty rate of 5%, duty adds $228,500 x 0.05 = $11,425, so the landed cost before inland delivery is $228,500 + $11,425 = $239,925.Case study
Seen in the real world.
Tallowbridge Timber is a fictional hardwood exporter used purely for illustration. It agrees a $480,000 cargo on FAS terms and places the stacked timber on the quay alongside the buyer's nominated vessel two days before the ship is due.
A storm sweeps the port overnight and $52,000 of timber is water damaged while it waits on the quay. Because risk passed at the moment of placement alongside, the loss belongs to the buyer, an invented importer called Harrowgate Interiors, rather than to Tallowbridge.
Harrowgate discovers that its marine cargo policy attached only from the moment of loading on board, leaving the quayside period uninsured, so it carries the $52,000 itself. It rewrites the policy to attach at the alongside point, which is the practical lesson of this illustrative case: the insurance trigger must match the Incoterm's risk transfer point.
Watch out
Common mistakes.
- Using FAS for containerised cargo, where goods are handed to a terminal rather than placed alongside a named ship.
- Assuming the seller pays to load the goods on board, when under FAS loading is the buyer's cost and risk.
- Buying insurance that attaches only once goods are on board, leaving a gap while the cargo sits on the quay.
Questions
People also ask.
Who clears the goods for export under FAS?
The seller does, and the buyer handles import clearance and duty at the destination.
When exactly does risk pass?
Risk passes when the goods are placed alongside the nominated vessel at the named port, not when they are loaded and not when the ship sails.
How does FAS differ from Free on Board?
Under Free on Board the seller's responsibility continues until the goods are on board the vessel, so that rule pushes loading cost and risk back onto the seller.
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