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Incoterms are international commercial terms, a set of 11 rules by the International Chamber of Commerce (ICC). They lay down the terms describing the responsibility of buyer and seller. To understand international shipping, you must know about terms like FOB and FOS. FOB stands for Free On Board, and FAS stands for Free Alongside Ship. These terms differ based on how much and when there is a transfer of liability between the buyers and sellers, particularly in sea freight.
This blog will discuss FOB and FAS, as well as their uses, advantages, and critical differences. It will also help you choose the most suitable incoterm for your shipping and describe import-export regulations.
Understanding Free On-Board
FOB (Free On Board) is an incoterm which indicates who will handle the expense of shipping goods from one place to another. This term shows when the risk, ownership, and expense transfer from the seller to the buyer. Let’s discuss what FOB in some brief points:
- The seller is responsible for delivering the goods to the container port of origin, where the cargo loading will take place.
- The seller bears all the loading expenses and the risk of transporting it to the port of origin.
- The responsibility and expense are transferred to the buyer when the cargo is loaded into the smart shipping container.
- The buyer handles all responsibility and expenses after loading and delivery points in shipping.
- Containerized goods that need 20-foot and 40-foot shipping containers are best suitable for FOB incoterm.
Understanding Free Alongside Ship
FAS (Free Alongside Ship) Illustrates the risk and expense of transporting cargo transfers from seller to buyer at what moment. In this agreement, the buyer is the most responsible for the costs and risks. Understand the FAS incoterm in some bullet points:
- Here, the seller is also responsible for delivering the goods to the port of origin, but they are not responsible for loading.
- The seller is responsible for providing goods to the buyer at the port of origin and bears all the expenses and risks.
- When the goods reach the port, the buyer handles the risk, insurance costs, and other expenses of getting them to their assigned location.
- Before the loading and after the delivery of cargo at the port, buyers are responsible.
- Bulk commodities like oil, grain, and coal or containerized cargo use this incoterm.
What are the main differences between FOB and FAS shipping terms?

FOB and FAS are two different terms that describe the buyer and seller’s obligations for global trade practices. Let’s understand the main differences between FOB and FAS:
1. Point of risk transfer: FOB and FAS are the terms where the risk transfer in shipping is the primary basis of difference. Under FOB, the risk transfers from the seller to the buyer exactly when there is a loading of goods on the container at the port of origin. The buyer only has to bear all the responsibilities from that point on.
Under FAS, the ownership of cargo shifts from seller to buyer when the goods are delivered to the buyer near the container at the port. Loading is not the seller’s responsibility; risk transfer takes place only before that.
2. Cost allocation: FOB and FAS involve risk transfer, and expenses shift from seller to buyer. These expenses include transportation, insurance, shipping charges, and import and export duties. Under FOB, the seller bears the cost of loading and transporting the cargo to the port. The buyer bears all the other insurance, import, and export expenses per international shipping rates.
Under FAS, the seller manages the cost of getting cargo to the port. After that, the buyer bears all the expenses, including loading, unloading, import-export documentation processes, or insurance.
3. Contractual obligations: FOB and FAS are pricing agreements between the buyer and seller, so they need documents as proof of their terms and conditions. For FOB contract terms, the primary documents required are:
- Export license
- Bill of lading
- Packing list
- Commercial invoice
- Insurance certificate
For FAS contract terms, essential documents required when shipping cargo from one place to another are as follows:
- Bill of lading
- Packing list
4. Use cases: FOB and FAS would prove more beneficial in some situations. FOB would be the most suitable when transporting containerized goods as the liability and risk are shifted to the buyer when the container reaches the port. After that, the buyer must manage the loading or any problem with the cargo.
Non-containerized goods, such as bags, drums, and barrels that cannot be loaded into the shipping container, are the most suitable for FAS. Under this, the buyer will decide the best loading option and the container type in which the cargo would be loaded.
Let’s discuss these trade terms comparison in tabular form:
Difference | FOB | FAS |
Point of risk transfer | When the goods are loaded into the shipping container. | When the goods are placed at the port. |
Cost allocation | The seller must bear the cost of transporting products to the port and the loading expense. | The seller does not have to bear the loading expense. |
Contractual obligation | Export license, Bill of lading, Packing list, Commercial invoice, and Insurance certificate. | Bill of lading and packing list |
Practical examples
Under FOB, if a buyer in India buys some crockeries from China, the seller must pay for the transportation costs from the seller’s store to the port, the expense of loading the crockeries into the ship, and all the costs of bringing the material to their store. The expense, risk, import, and export responsibilities are transferred to the buyer in India from the point where the goods are loaded into the ship.
Under FAS, in a similar situation, the seller from China only has to bring the pottery to the port; after that, they are not responsible for any tasks. Buyers from India would be responsible from that point on, from loading to unloading.
Advantages and disadvantages of FOB and FAS
FOB and FAS, the two pricing agreements, have some advantages and disadvantages that you must be aware of to understand the complex environment of the global shipping industry. So, let’s explore the advantages and disadvantages of both FOB and FAS:
FOB advantages
FOB is advantageous for the seller as they only have to put the cargo next to the ship. The seller is less burdened with responsibilities. On the other hand, the buyer has direct control over the goods; they can personally supervise the journey, be it the type of transport or the cargo to be transported.
FAS advantages
FAS shipping agreements offer benefits to the buyer. The seller is responsible for selecting the type and method of transportation, so the buyer is free from this whole process of choosing the ship and method. The cost of customs and goods is calculated in advance, so there are no worries for the buyer.
FOB disadvantages
Under the FOB shipping agreement, the costs of redirecting the products combine with the product’s price, so the expense of buying them using this method is relatively high. In addition, the seller is responsible for choosing the carrier and transportation so that the cost can be higher for the buyer.
FAS disadvantages
Suppose a seller needs to take the dock receipts or sales documents promptly due to a lack of coordination. In that case, there can be problems and extra expenses for the additional cargo stay until the seller fulfills the formalities. The more time the cargo stays at the port, the more the charges. If the ship reaches the port after or before the scheduled time, this can cause different types of damage to the cargo.
Common misconceptions
You must be aware of misconceptions about FOB and FAS to avoid some mistakes in shipping agreements and contracts. Let’s discuss the misconceptions of both incoterms :
Misconception of FAS
Under the FAS shipping term, people think the seller is responsible for all the expenses and duties after the goods are placed at the port. In reality, the seller has responsibilities until the port only; the buyer is responsible for all the risk and expenses. Most people think that FOB applies to all modes of transport, but it limits to water transport.
Misconception of FOB
Under the FOB shipping term, most people perceive that the seller’s responsibility finishes once the goods leave the port. In reality, the seller has to handle all the risks and expenses until the goods are provided to the buyer, besides the cost of the port of shipment. The most common misconception is that under FOB, the sellers manage the loading. The buyer has to manage the loading process.
FOB and FAS are two of the 11 incoterms pricing agreements between the buyer and the seller. These terms have advantages and disadvantages that you should know to choose the best agreement for your shipping. Understand the differences; be clear about the point of risk transfer. Choose between FOB and FAS after having a precise knowledge of the terms.
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