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Differences between FOB and FAS (incoterms full guide 2023)

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    Introduction

    In general, the fundamental difference between the FOB and the FAS Incoterms is in the amount of export transfer risk between the buyer and the seller. In the FAS system, defines as ALONGSIDE and in FOB the cargo sets as ONBOARD according to the buyer’s request. But in general, in this article, we want to examine the fundamental differences between FAS and FOB along with incoterms.

    FOB and FAS

    What is Incoterms

    In general, incoterms, also known as international commercial terms, set the basic rules for exporting and importing a product between buyer and seller internationally. Base on Incoterms, transactions regulate and international trade agreements apply. To start an international business, you first need Incoterms contracts to be able to trade.
    Due to the existence of new, porous laws from 1936 and the increase in global transactions, international laws and flexible agreements need to regulate world trade regularly. The ICC launched the Incoterms to regulate global trade and international trade. These rules use as the main reference of trade between buyer and seller in the world.

    Understanding the Basics: FOB vs FAS Incoterms

    In the vast landscape of international trade, Incoterms play a crucial role in establishing a common understanding of responsibilities between a buyer and seller. Two of these key terms are Free Alongside Ship (FAS) and Free On Board (FOB). In an FAS agreement, the seller’s responsibilities end once goods are placed alongside the ship at the nominated port. However, under FOB, the seller must load the goods on board the ship chosen by the buyer. This distinction significantly influences the allocation of risks, costs, and responsibilities in the supply chain, affecting both parties’ logistics strategies.

    What is FAS

    As we explained, FAS and FOB show the risk of transporting the product at the time of shipment. The FAS refers to the risk of transporting the product when the cargo is on board the ship. It now wants to be at the port this time.
    In this case, it is up to the buyer to decide how long the transport risk will be adjusted. For FAS, the buyer must specify exactly which port choose to transport the cargo to the ship.
    Note that all cargo is the responsibility of the seller before reaching the port. Therefore, the faster the cargo ship prepares to transport the product, the better for the seller.

    FOB and FAS

    FAS Advantages

    One of the advantages of FAS is that the seller only has to place the cargo next to the ship to send the cargo to the buyer. Therefore, the seller’s responsibility is less in this case. On the other hand, the buyer is responsible for the cargo ship and can have direct supervision over the purchased product after loading its cargo. In this case, the choice of the transport ship and the type of cargo is the responsibility of the buyer, and in this case, controls from the beginning of shipping to the destination.

    FAS Disadvantages

    Disadvantages of this method include lateral damages based on the time of stay in the port. Sometimes it is possible that the seller and the buyer do not plan to load the cargo and the ship arrives at the port later than scheduled. Therefore, the products remain in the port and damages.
    On the other hand, the dock receipt and the sales document not set up due to a lack of coordination with the buyer, and the seller must personally go to set up this document. Therefore, more time takes from the seller and it has more problems and overhead costs.

    What is FOB

    FOB is the risk of transporting cargo ONBOARD. This means that all cargo liability starts from the time that loads on the ship, and in this case, the port or dock not considers. In both cases, the delivery time of the product to the ship was very important for the seller because at this time all the responsibility of the cargo is with the seller.

    FOB Advantages

    This incoterm has many benefits for the buyer. In this way, first of all, the shipping structure and the transport risk of loading and choosing the type of cargo ship and even the method of transportation are the responsibility of the seller, so there is no need for the buyer to involve himself in the challenges of choosing the ship and cargo method.
    In this case, even customs and freight costs calculate in advance, so the buyer can be safe in terms of additional costs. However, in the FOB method, the buyer is also free to choose the shipping company and can choose the process himself.

    FOB Disadvantages

    In general, because all the costs of sending the product in this method pay with the product itself, so the initial cost of buying products in this type of shipping risk or Incoterms gets higher.
    On the other hand, because the carrier and the type of transportation are chosen by the seller, it is also more difficult to determine the final cost for the international transaction and it will probably face higher costs for the buyer.

    FOB and FAS incoterms comparison
    There are major differences between FOB and FAS for shipping from china, which we will examine in general below.
    Keep in mind that there are two types of shipping methods for products. Container and without a container. If you want to load the products in containers, the best way is to use FOB. this helps the buyer in this situation so that the products send to the containers from the beginning and then the containers load directly from the terminal to the ship. Therefore, the FAS method is not recommended in this case.


    In the second method for shipping from china, if the container is not available, the type of loading can be done more flexibly than before. For example, determining the type of ship or loading methods can be determined in this case with the FAS by the buyer himself and any situation that the buyer intended.
    In general, in comparing FOB and FAS, several options are considered, including the type of transport. Determine the total freight price. The amount of buyer control over products and responsibilities after the purchase and the type of delivery.

    Seller and buyer responsibilities

    Compare both Incoterms the seller has responsibilities that he must assume according to the routing of Incoterms: sending the product to the ship based on Incoterms. Receive customs confirmations to send the product. Receive all cargo documents related to the buyer and submit them to customs.
    On the other hand for shipping from china, in comparing FOB and FAS incoterms, the buyer also has responsibilities, including paying all costs for the purchase of the product. Manage customs clearance and receipt at the destination.

    Decoding the Seller's Responsibility in FOB and FAS Incoterms

    Under both FOB and FAS Incoterms, the seller has distinct responsibilities. With FAS, the seller is responsible for bringing the goods to the port, clearing the goods for export, and leaving them alongside the ship. The risk transfers to the buyer when the goods are alongside the ship at the agreed port. On the other hand, in FOB transactions, the seller’s obligations don’t just end at the port; they extend to loading the goods onto the ship. Only after the goods are onboard does the risk transfer to the buyer. Therefore, the seller has greater responsibilities under FOB compared to FAS.

    Enhancing International Trade with DDPCH's FAS and FOB Services

    As a leading provider in the transportation industry, DDPCH is well-versed in both FAS and FOB Incoterms, offering tailored solutions based on your specific needs. Whether you are a buyer seeking greater control over the shipping process under FAS, or a seller looking for a more streamlined FOB method, our expert team can provide guidance and execution at each step. With a strong focus on quality, security, and safety, our services aim to simplify and enhance your international trade experience. For more information, please feel free to reach out to us via our website contact section.

    Key Comparisons of FOB and FAS Incoterms in 2023

     FAS (Free Alongside Ship) FOB (Free On Board)
    Risk Transfer Point When goods are placed alongside the ship at the export port When goods are loaded on board the ship at the export port
    Seller's Responsibilities Deliver goods to the port and clear for export Deliver goods to the port, clear for export, and load onto the ship
    Buyer's Responsibilities Arrange for loading onto the ship, sea freight, insurance, and import customs clearance Arrange for sea freight, insurance, and import customs clearance
    Transport Costs Until Risk Transfer Point Borne by the seller Borne by the seller
    Loading Costs Borne by the buyer Borne by the seller
    Customs Clearance Seller clears for export Seller clears for export
    Main Carriage Borne by the buyer Borne by the buyer
    Insurance Borne by the buyer (if required) Borne by the buyer (if required)
    Unloading Costs at Destination Borne by the buyer Borne by the buyer
    Import Customs Duties/Taxes Borne by the buyer Borne by the buyer

    Our services

    DDPCH is one of the leading services in the transportation industry from China and we provide you with the services of Incoterms in a completely professional way. In this regard, you can use our DDP services to send products and determine sales internationally from China. Also, the services provided by us are of high quality, security and safety. for more information please contact us from the website contact section.

    FAQ

    Yes, but any modifications should be clearly stated in the sales contract.

    FAS generally provides the buyer more control over shipping as they select the vessel and handle loading.

    FOB terms allow the seller to maintain control of the goods until they’re loaded onto the ship, reducing potential risk of damage during the loading process.

    FAS generally provides the buyer more control over shipping as they select the vessel and handle loading.

    Technology enhances operational efficiency, improves tracking and transparency, and can reduce costs in the freight forwarding industry.

    They can be suitable but understanding the responsibilities under these Incoterms is crucial. Inexperienced traders should seek advice to fully understand the implications.

    Under both FOB and FAS Incoterms, the buyer is responsible for import duties and taxes.

    Although they can be used, FAS and FOB are less commonly used for containerized goods. FCA (Free Carrier) is usually more suitable for containers.

    The buyer is responsible for all costs from the time the goods are loaded on board, including freight, insurance, unloading, and transportation from the destination port to the final place of delivery.

    FOB and FAS are specific to sea or inland waterway transport.

    The FOB Incoterm can simplify the process for the buyer because the seller is responsible for loading the goods, which can potentially reduce handling costs and risks of damage.

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