Glossary Of International Shipping Terms
While shipping your goods might seem a fairly straightforward task, there’s much more to it than meets the eye. With various shipping types, there’s a whole range of international shipping terms to go with them – all to ensure your goods are in the right place at the right time throughout their journey. International shipping is a complicated industry with its terminology and language. But the more shipping terms and abbreviations you understand, the better prepared you’ll be. This guide will give you a comprehensive international shipping glossary to explain the terms and abbreviations that are most commonly used in the industry so you can transport your freight efficiently and affordably.
What are international shipping terms?
Depending on your shipment size, what it contains, where it’s going, how it’s travelling, and who’s paying for it, you can expect to see a wide range of terms and abbreviations covering it. The volume of terms used in the industry can be overwhelming, especially to the customer. But the purpose of international shipping terms means that everyone involved in the shipping process – not just shipping containers – in different countries can recognise what’s what.
These international shipping terms have been collated by the International Chamber of Commerce into a set of internationally recognised guidelines called Incoterms Rules. First published in 2010 and revised and updated in 2020, the guidelines give clarity over meanings, expectations, and responsibilities between buyers and sellers in the shipping and other transport industry around the world.
The 11 Incoterms Rules
The Incoterms Rules are a set of 11 terms and their abbreviations that are relevant for sea shipping and other modes of shipping transport that are split into two categories, as follows:
Rules for sea and inland waterway shipping
FAS – Free Alongside Ship
Free Alongside Ship (FAS) means the seller has delivered the freight goods when they’re cleared for export, placed next to the ship, and ready for loading in the named port of shipment. This is when the risk of loss or damage to the goods passes from seller to buyer. The buyer is now also responsible for any costs after that.
FOB – Free On Board
Like FAS (above), Free on Board (FOB), also known as ‘Freight on Board,’ means the seller has delivered the freight goods when they’re cleared for export and loaded onto the ship in the named port of shipment. Again, this is when the risk of loss or damage to the goods passes from the seller to the buyer. The buyer is now also responsible for any costs after that.
CFR – Cost And Freight
Cost and Freight (CFR) means the seller has arranged and paid the freight goods to be delivered, cleared for export, and loaded in the named port of shipment. The risk of loss or damage to the goods passes from the seller to the buyer only when the goods are on board the vessel. The seller isn’t responsible for insurance of the goods on board.
CIF – Cost, Insurance, And Freight
One step further than CFR (above), Cost, Insurance, and Freight (CIF) means the seller takes responsibility for the shipping costs, insurance, and transportation of the goods to the named port of shipment. CIF includes the seller being in charge of all insurance to ensure complete protection for the goods rather than the buyer.
Rules applying to all modes of transport
EXW – Ex Works
Shipping ex-works (EXW) puts the lowest level of responsibility on the seller and is a frequent rule between sellers and buyers. EXW means the buyer is responsible for insurance, export fees, shipping, and import fees, and arranging for the transport of the goods. Alternatively, the buyer can arrange for a third party to collect, transfer, and ship the goods to the buyer’s address.
FCA – Free Carrier (named place)
A Free Carrier agreement (FCA) means the seller will arrange to pay and deliver the goods to an assigned shipping company at the point of dispatch chosen by the buyer. The seller’s part of the contract is then complete. The buyer is responsible for all subsequent import and export shipping fees, goods protection, and transportation.
DAP – Delivered At Place
Delivered At Place (DAP) means the seller is responsible for and accepts all charges and costs for delivering goods to a ‘place’ specified by the buyer. This is typically a terminal port (DAT) or other final destination address. With DAP, the buyer is solely responsible for paying any unloading fees, customs clearance, or duty on the goods.
DPU – Delivered At Place Unloaded
With Delivered At Place Unloaded (DPU), it’s the seller’s responsibility to deliver the goods to a named destination point already agreed on (quay, yard, warehouse etc.), plus all transportation costs. The buyer then takes over responsibility once the goods are received and unloaded at the agreed point and is responsible for all customs charges and subsequent transportation costs to the final destination. In previous Incoterms rules, this was known as DAT – Delivered At Terminal.
DDP – Delivered Duty Paid
Delivery Duty Paid (DDP) terms mean it’s the seller’s responsibility to deliver the goods to the buyer at a pre-agreed, named place of delivery, usually a port terminal or another destination. The critical difference between DDP and DAT (above) is that the seller – not the buyer – is responsible for all import and export customs charges and subsequent transportation costs to the final destination.
CPT – Carriage Paid To
For Carriage Paid To (CPT) terms, it’s the seller who arranges delivery and is responsible for any export documents and paying for transportation of the goods to a pre-agreed, named destination. Once the goods arrive, the risk transfers to the buyer, who is responsible for import documents and insurance.
CIP – Carriage And Insurance Paid To
While similar to CPT (above), in that the seller arranges delivery and is responsible for any export documents and paying for transportation of the goods to a pre-agreed, named destination, the main difference with CIP is the seller – not the buyer – is also responsible for all insurance costs to the final destination during transportation.
What Incoterms rules don’t cover
The Incoterms Rules, updated every 10 years, are used in contracts worldwide and should be considered before any delivery starts its journey between buyer and seller. They’re accepted and understood by global governments and authorities and save time and reduce misunderstandings and errors at all points along the chain. However, they don’t cover everything. Here are a few things Incoterms rules don’t cover. They don’t cover the following:
• the conditions of the sale of goods
• what goods are being sold or the price of sale
• the timeframe or method of payment between buyer and seller
• any breach of contract, force majeure events, or property rights
• any documentation needed for customs clearance
• delays or disputes
Shipping container terms
While the above terms are crucial ones to remember according to the Incoterms rules, they’re not the only ones that are worth remembering. Here are some other key terms used for a 20 or 40-ft shipping container that may be useful.
LCL – Less Than Container Load
Less Than Container Loads (LCL) are full shipping containers that contain goods of multiple customers rather than just one customer. Also known as a ‘part container load’ or a ‘groupage load’. Despite the name, LCL does not refer to a half-empty or less than a full container.
FCL – Full Container Load
A Full Container Load (FCL) is a single shipping container that’s loaded with goods for the same customer. FCL will generally be delivered more quickly than LCL, and the customs process will also be quicker as the goods are from a single supplier rather than many.
Other shipping terms
An international Carnet is a customs document that allows you to import goods duty-free and tax-free if you re-export them within 12 months. This document is also known as an ATA Carnet, a merchandise passport, or a goods passport. For example, a carnet could be in use to import showcases for a trade show or to transfer hardware and equipment for an international tour by a band or theatre company.
In Bond Shipment
A shipment in bond is stored, handled, or transferred before it encounters customs. The importer buys an indemnity bond, which guarantees the government gets its duties and taxes. If you’re shipping a container from Europe to a US port, you may send it by rail, in bond, to another port without payment of duty.
Another example could be that you’re shipping a container from Portugal to Ukraine (which is not part of the EU’s borderless Schengen Zone). With many borders to pass through, the shipment would be transported by truck, in bond, to the Ukraine border through the EU countries and cleared by Ukrainian Customs.
Transhipment is off-loading a shipping container from one cargo ship and loading it onto another to complete a journey. Typically, this entails transferring from a big transoceanic vessel to a similar or smaller vessel or vice versa. Sometimes, a container may pass through more than one transhipment port before arriving at its final destination.
A customs-bonded warehouse is a restricted or secured storage area where you can store products without any duty payments for up to 5 years. A bonded warehouse might be used to store a container load of high-value goods, but you might only need a quarter of it now, the rest in three months. Instead of paying duty on the entire cargo, you pay duty only on the items you remove. Your products will need to be transported from the port to the bonded warehouse.
Demurrage and Storage Charges
Demurrage and storage charges are similar but do have specific differences. A shipping line or terminal company will charge demurrage when you keep your loaded container on their property for too long. You have 5-7 business days (or two days for cold storage) to retrieve your container before demurrage applies. If your container is stationary at the port or terminal, you’ll incur demurrage fees if any documentation is incorrect or errors prevent your container from sailing. You’ll also have to pay to store the container at the port or terminal while the issue is resolved.
Storage charges refer to the payment charged by the port or terminal to store your container beyond any free demurrage days. With many ports having limited storage space, the charges are intended to incentivise customers to move their shipments out of any storage facility as soon as possible to avoid excess fees.
International shipping with UPakWeShip EU
International shipping is a complicated process, and the international shipping terms that go with it can be just as difficult to get to grips with. This glossary guide of international shipping terms will give you a good understanding of specific terms and their meaning so you can have more confidence going forwards when you ship internationally.
If you’re considering shipping goods internationally, we can help you with advice on the best and most cost-effective way to do. Contact us today by calling +31(0)6 21 61 76 19 or emailing firstname.lastname@example.org to get your free quote.