Differences between FOB and FAS (incoterms full guide 2021)
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.
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.
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.
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.
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.
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.
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.
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.