FOB vs FAS in International Trade: Full Explanation & Key Differences

What is FOB?

Conditions of FOB

• FOB applies only to ocean or inland waterway transport.

Key Influencing Factors

Features

• FOB is very commonly used with T/T payment terms to control risks.

• Many buyers in Europe and the United States prefer FOB terms.

Obligations of Buyer & Seller

• The seller bears all risks and costs until the goods are loaded on board the vessel.

• The buyer bears all risks and costs once the goods pass the ship’s rail.

• The seller is responsible for export customs clearance.

FOB Calculation Formulas

• FOB (RMB) = {1 – [Export tax rebate rate / (1 + VAT rate)]} × RMB price including tax / Spot buying rate

• FOB (USD) = [FOB (RMB) × (1 + Customs duty rate)] / USD spot buying rate (when export duties apply)

Common Misunderstandings

• FOB only covers the cost of goods loaded on the vessel at the port of shipment.

• It does NOT include international freight or insurance.

• Many buyers mistakenly assume FOB includes all logistics costs, leading to unexpected charges.

What is FAS?

Conditions of FAS

• FAS applies only to ocean transport.

Key Influencing Factors

Features

• Risk and cost divide at the ship’s side.

• After delivery, all risks, freight, and charges are the buyer’s responsibility.

• Many sellers choose FAS to limit their obligations.

Obligations of Buyer & Seller

• The seller handles export customs clearance.

• The seller has no obligation for import clearance, duties, or import procedures.

• The seller arranges the contract with the carrier to ensure the vessel arrives on time.

Common Misunderstandings

• FAS: Delivery occurs at the ship’s side.

• FCA: Delivery occurs to the carrier.

  These two terms are often confused but have completely different risk points.

Why Understanding FOB & FAS Matters