Incoterms: FCA vs FAS vs FOB - How to choose between these options?

After successfully finding a buyer and negotiating a deal, the next steps involve clarifying logistics and addressing concerns about potential damage during transportation. Questions like "Will the seller handle the shipping, or is it the buyer's responsibility to make the arrangements?", "In the event of damage during transportation, is it the seller’s responsibility or buyer's responsibility?"? are common queries that Incoterms, a set of standardised international trade terms, can provide clear answers to.

International Commercial Terms, commonly known as Incoterms, emerges as a critical factor for success. Incoterms provide a universal language for buyers and sellers, facilitating smoother trade processes and minimising the risks associated with international transactions. There are 11 Incoterms which are categorised based on costs, risks, and delivery locations. These categories are E, F, C, and D. Every Incoterms explicitly outlines the respective responsibilities of the seller and buyer in?terms of delivering goods.?

Today, we will focus on the F category: FCA, FAS, and FOB. In these terms, the seller is responsible for the goods until they reach a specific delivery point, typically a port or airport. After reaching this point, the buyer takes on the risks and costs associated with the goods.

FCA - Free Carrier

The seller is in charge of transporting the cargo to the named destination, within the seller’s country. After the cargo arrives at the agreed destination, all of the costs and responsibility is transferred to the buyer.

FAS - Free Alongside Ship

The seller is responsible for transporting the goods to the ship's quay at the port. Until the goods reach the area next to the ship, the seller pays for all transportation costs and risks. The buyer takes over the job of loading the ship and the risks involved. Also, the buyer is responsible for handling the import and export clearances of the goods.

FOB - Free on Board

The seller is responsible for transporting and loading the goods onto the ship. Until all goods are on board the ship, the seller bears all costs and risks of transport. The seller must also arrange the export clearance under these Incoterms. Once the goods are loaded on the ship, the buyer bears all costs, risks, and responsibilities.

As companies venture into new opportunities worldwide, it's crucial to understand and use Incoterms for ongoing success in the intricate realm of global business. By combining this understanding with a partnership with a trusted logistics company, your business will be ready to handle the challenges of the global market confidently and successfully.