FAS, disadvantages to Buyer under Incoterms 2020
When digging deeply into the pros and cons of each Inco terms, the following demerits are found for an importer when he agrees contract of carriage on FAS basis.
Such 08 disadvantages for buyer under FAS are stated below:
01. One of the main disadvantages under FAS for buyer is that he undertakes higher risks from seller’s named load port to his place for movement of goods.
02. Another disadvantage for importer under FAS is that initial investment to move goods from seller’s loading port to buyer’s premises is required to be met by the buyer under FAS delivery rules for movement of goods. This cost could be twice than the cost of manufactured goods for sale, if both exporter and importer situate far.
03. Rules and regulations of government in importing country against import customs clearance, duties and taxes involved and local on carriage transportation are required to be learned and experienced by the importer under FAS delivery terms. There are chances of unexpected costs than anticipated expenses. This is a demerit for importer when contract of carriage is under FAS delivery terms.
04. Another disadvantage for importer under FAS delivery term is that under FAS, the main carriage is undertaken by a shipping carrier who is a third party, and the safety is connected with insurance. Safety of goods can be directly taken care by the importer only after arriving goods from destination port of discharge although the seller delivers the goods at the barge/yard near the vessel berthing/berthed. This is a demerit for buyer under FAS terms. The risks during on carriage are also under the responsibility of importer under FAS.
05. One of the other demerits for buyer is that under FAS modes of delivery terms in export import business, ocean freight is contracted by the importer who is responsible for main carriage. Any port congestion or delay in arriving, berthing, cancellation of vessel, or any other unexpected incidents occurs; buyer is responsible to bear the risks and costs under FAS terms of delivery.
06Although, the buyer controls main carriage (ocean freight) he needs original bill of lading for import customs clearance for which he has to approach the exporter to release Bill of Lading at Seller’s country. This is a disadvantage for importer when contract of carriage is on FAS basis. (However, ICC under Incoterms 2020 suggests solutions for this demerits)
07.In an FAS delivery terms, the importer’s overseas business turnover (amount of foreign outward remittance) would be lesser up to the level of cost of movement of goods which may affect the importers for import finance up to that extend. This is also another demerit for importer under FAS.
08. Another disadvantage for importer under FAS delivery terms is that the importer is held responsible for unloading the goods under FAS delivery rules at his final destination named place contracted. He is responsible for any damage or loss of goods when unloading at final destination. So the importer has to pay good attention and make sure that goods are intact before unloading goods.
We hope the above information about drawbacks for importer when he contracts FAS delivery terms helps you.
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