Our world has always been relying on trade to fulfill its needs and wants throughout history. Since ancient times, different forms of trade have been practiced however, the goal has always been the same, which is to acquire something that fulfills your needs and requirement s in the best manner and to trade something against it that you don’t need or already have in abundance.
Now, in the early days, barter trade was practiced, which means that goods were exchanged for other goods. However, now trade has evolved over time and people or business entities trade goods and services against paper money. This evolution in trade took hundreds of years.
Furthermore, trading has also been influenced due to the advancements in technology. Over the years, businesses have gained access to better technology and are putting it to good use as far as production, marketing, transportation and sale of good and services is concerned.
What is Free Alongside Ship (FAS)?
Moving on to the concept of free alongside ship (FAS), you need to understand that before you get into the advantages and disadvantages of free alongside ship (FAS) you need to have a basic understanding of international trade and free alongside ship (FAS).
International Trade:
When you talk about international trade, what is the first thing that comes to your mind? Two countries involved in trading? Well, to some extent this concept is right however, this is not all there is to it. Now, you need to comprehend that this world is governed on the basis of certain rules, regulations and laws, same is the case with international trade. International Chamber of Commerce is an authoritative body that looks after and facilitates all the commercial activities across the planet. To manage all these commercial activities, the international chamber of commerce has provided us with a set of trade regulations, which are known as the international commercial terms.
Now, these international commercial terms are recognized on a global level and are there for the guidance and help of the parties, which are involved in international trade. These terms help eliminate and minimize any confusions they may arise during any international commercial activity. The international commercial terms clearly specify how buyers and sellers should act when dealing internationally. These terms further provide the buyers and sellers with the information that tells them about what their obligations are to the other parties. Most of the international commercial terms, which traders usually comes across are their rules concerning transportation of goods, which may include the medium of transportation and other intricacies as well.
Key Points For Understanding International Commercial Terms:
- They apply to all the traders who are willing to trade internationally.
- They are rules & regulations, made to clear out any confusions for both the parties.
- They provide specific information that helps the buyers and sellers to know about their obligations towards each other.
- These international commercial terms are updated on a regular basis so that they can cater to the changing business practices.
- They may relate to any particular aspect of trading for example transportation.
Free Alongside Ship (FAS)
Now, that we possess a basic idea of what international trade is, let’s move onto the concept of Free Alongside Ship (FAS). It is basically, a term that is referred to, when dealing with international clients or customers. It points out to the fact that the selling party or the seller is responsible for arranging the transportation for the goods being traded, alongside a particular ship or vessel to a certain port so that it is ready for being transferred to a waiting vessel or ship. Now, free alongside ship (FAS) is, also one of the terms, which are listed in the international commercial terms.
When you are dealing internationally, the paperwork usually include details about where the goods will be delivered, what time will the goods be delivered and the party responsible to pay for the charges of the transportation.
Key Points For Better Understanding:
- The goods are transported alongside the buying party’s vessel.
- Ex works is a term, which is referred to a scenario where the buyer picks up the goods from the seller’s warehouse.
Advantages & Disadvantages Of Free Alongside Ship (FAS)
Advantages:
- The seller is only responsible to get the goods to the buyer’s vessel.
- It reduces the risk on the buyer’s part as the buyer has the control of the goods as soon as the goods are on the vessel.
- It minimizes the seller’s risk as the loading is the buyer’s responsibility therefore, any damages that may occur are not the seller’s responsibility.
- It reduces any problems as the seller is obligated to assist the buyer for any paperwork or documentations, which allows for the process to be smooth.
Disadvantages:
- It can be risky for the seller as the vessel might not arrive on time and the seller may transport the goods to the dock or port only to find out that the vessel is not present. This increases the risk of loss and damages that may come to the goods till the time the vessel reaches the designated place.
- In-case of no agreement made for the seller to get any transportation then it is the seller’s obligation to assist the buyer to in getting the documents required for the transportation of the goods. This may increase the workload and a hassle for the selling party.
Which are the modes of transportation used in transportation of goods internationally?
Typically, there are 3 ways through which goods can be transported internationally.
- By land: This includes the use of both trucks/vehicles and trains.
- BY Sea: This includes the transportation of goods done through ships or vessels.
- By Air: This is mainly the transportation done through airplanes.
Which mode of goods transportation is the fastest?
Normally, international transportation of goods and services is done through sea as ships can carry large volumes of goods and cost less. However, it may also be the slowest form of transportation. The fastest mode of transportation is by air but, the downside to this mode of transportation is that the volume of goods transferred is quite low and the cost of transportation is quite high.
