Free Alongside Ship (FAS) and Free On Board (FOB)
This article is part of our blog series on the Incoterms® Rules, helping importers and exporters understand international trade terms. C J International is a full-service Customs broker and Freight Forwarder.
Meaning of FAS and FOB
Free Alongside Ship (FAS) and Free on Board (FOB) are the first two terms on the list that only apply to sea and inland waterway transport. We will consider them together due to the simple difference between them.
Both terms place primary responsibility on the buyer to assume costs and risks, unlike the last term considered which placed nearly all responsibility on the seller (DDP).
The Difference Between FAS and FOB
Under FAS, the seller is responsible for delivery of the goods up until they are “alongside” the ship — meaning, at the point of loading and ready to be loaded onto the vessel for departure. The loading point and vessel at the port of shipment are named by the buyer, and the buyer is responsible for all costs and risks after this point, including carriage of the goods to the port of entry and final destination.
Under FOB, the seller is responsible for the goods up until they have been loaded on the vessel for departure, at which point the buyer assumes all costs and risks of carriage to the port of entry and final destination.
I have seen the term FOB used incorrectly a lot. The proper use should be FOB (named port of shipment). However, the named location used is often not a port. The origin of the goods is used quite frequently. — Johanna Lively, CES | Corporate Export Manager
Unlike DDP, where the seller is responsible for both export and import clearance, under FAS and FOB, the seller must take care of export clearance and the buyer import clearance.
Example of Free Alongside Ship and Free on Board
The buyer is a sporting goods store in Los Angeles, CA, purchasing $10,000 in athletic wear from a manufacturer in Spain. If the shipment is FAS, the seller must arrange for the goods to be delivered to the point of loading indicated by the buyer at the Port of Algeciras, where the goods will be shipped out. If the shipment is FOB, the seller must also assume responsibility of loading the goods onto the ship, at which point costs and risks of carriage to the Port of LA transfer to the buyer.
More Resources on the Incoterms® Rules
The International Chamber of Commerce (ICC) has provided a very helpful illustration of the Incoterms® Rules that you can download for free. It shows how in working down the list of terms, risk progressively changes from the buyer’s responsibility to the seller’s responsibility.
The Incoterms® Rules consist of a total of 11 trade terms, which are divided into two groups.
Terms that can be used for any mode of transportation:
- EXW Ex Works
- FCA Free Carrier
- CPT Carriage Paid To
- CIP Carriage and Insurance Paid To
- DPU Delivered at Place Unloaded
- DAP Delivered at Place
- DDP Delivered Duty Paid
Terms that apply to sea and inland waterway transport only:
- FAS Free Alongside Ship
- FOB Free on Board
- CFR Cost and Freight
- CIF Cost, Insurance, and Freight
This blog series is intended to be a helpful introduction to international trade terms, not a comprehensive resource. C J International recognizes that the ICC is the only official source of definitions and explanations surrounding the Incoterms® Rules, and encourages our clients and the shipping community to consult iccwbo.org and their educational materials for further details.
Incoterms® and the Incoterms® 2020 logo are trademarks of ICC. Use of these trademarks does not imply association with, approval of or sponsorship by ICC unless specifically stated above. The Incoterms® Rules are protected by copyright owned by ICC. Further information on the Incoterms® Rules may be obtained from the ICC website iccwbo.org.