Freight Terms, Freight Terminology

Freight Terms, Freight Terminology

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3PL	All Risk	Bill of Lading	Bonded Warehouse
Breakbulk Vessels	BAF	CAF	Clean Bill of Lading
Commercial Invoice	Consignee	Consignment	C&F (CFR)
CIF	DDP	DDU	Delivery Instructions
Demurrage	Duty	EXW	FCL
Flat Rack Containers (FR)	FEU	Free Alongside Ship (FAS)	Free Carrier (FCA)
FOB	Freight /Carriage... paid to…	Freight Carriage & Insurance paid to…	Freight Forwarder
Incoterms	Insurance Certificate	Intermediate Consignee	Intermodal
LCL	Letter of Credit	Net Weight (NW)	NVOCC
Packing List	Packing Slip	Pro Forma Invoice	Project Cargo
RORO	Shipping Documents	TELEX	Through Bill of Lading
Ultimate Consignee	Value for Customs Purposes Only	War/Strike Clause	Wharfage

3PL (Third Party Logistics)

Third party logistics companies are often outsourced by large companies to perform some various functions in logistics for them. Some commonly outsourced logistics functions include public warehousing, inbound freight, distribution, order fulfillment, and the management of outbound shipments to the company’s customers.

All Risks Coverage is the most encompassing kind of insurance coverage, however excludes damage caused from war, strikes, or riots.

Bill of Lading (B/L)

A bill of lading is a contract between the owners of the cargo and the carrier. There are two kinds of bill of lading. A straight bill of lading is non-negotiable. A negotiable or shippers bill of lading could be bought, sold or traded while the goods are in transit, and is often used when financing transactions. In order for the consignee to take possession of their cargo they will usually need an original bill of lading, however many countries will accept a TELEX release, in lieu or original documents.

Bonded Warehouse

Customs Services may authorize bonded warehouses to store cargo where which payment of duties is deferred until the cargo has entered the Customs Territory. The goods will not be subject to duty if they are being transited to another country.

Break-Bulk Ship

Normally a large cargo ship designed to effectively handle un-containerized cargo, such as logs, coal, sulfur, and many other substances. These ships are usually self-sustainable in that they have their own equipment for loading and unloading these kinds of goods.

Bunker Adjustment Factor (BAF)

BAF is an increase or decrease in shipping costs to offset some price changes in the cost of bunker fuel.

Currency Adjustment Factor (CAF)

Usually a freight surcharge imposed by ocean freight carriers to offset fluctuations in foreign currencies. In rare cases there will be an Emergency Currency Adjustment Factory (ECAF) which is when a rate has been originally quoted in a currency that has experienced sustained and rapid decline. CAF is given in terms of a percentage of the freight cost.

Clean Bill of Lading

A Clean Bill of Lading is issued by a carrier when information suggests that the cargo was received in good condition, without sustaining any damage or showing any obvious defects.

Commercial Invoice

A commercial invoice is an official document given by the seller to the consignee (buyer). Commercial invoices are usually used by customs officials from the consignee’s country in order to determine the real value of the goods in order to assess duties.

A consignee is a person or company which has been named by the bill of lading to be the recipient and owner of the goods once they have arrived in his country.

Consignment is the delivery of merchandise from the consignor (exporter) to the consignee (agent) under the agreement that the agent must sell the products for the account of the consignor. The consignor will remain the owner of the goods until they have been sold. The consignee then sells the products for a commission and returns the net proceeds to the consignor.

Cost and Freight (C&F) (CFR)

Under the term “Cost and Freight”, the seller will quote the buyer a total price for the goods which includes the cost of transportation to the named place for debarkation. Insurance, if any, is to be paid by the buyer. CFR is normally used for ocean freight shipments only. Carriage paid to (CPT) is a term used for shipments by methods other than sea shipment. It is also a way for some countries’ governments to determine the valuation of the shipment which includes the freight charges and insurance together with the cargo’s value.

Cost, Insurance and Freight (CIF)

Under the term “Cost, Insurance, and Freight” (CIF) the seller is quoting a price for the goods and the insurance, and all transportation and various other charges all the way to the point of debarkation. CIF is usually used for ocean freight shipments only. CIP (carriage and insurance paid to) is a term used for transportation modes other than ocean shipment.

Deliver Duty Paid (DDP)

The term DDP (Deliver Duty Paid) denotes the seller’s maximum obligation in delivering the shipment. It requires the seller to be responsible for delivery to the final destination, including payment for customs clearance and applicable duties in the consignee’s country. If the buyer and seller agree that the seller should be responsible for clearing the shipment and paying duties, but that some costs, for example, Value Added Tax (VAT) and/or similar taxes, should be paid for by the consignee, this must be made clear by adding words specifying this arrangement. (eg., “exclusive of VAT and/or related tax).

Deliver Duty Unpaid (DDU)

Delivery Duty Unpaid (DDU) is the same as DDP, however the consignee is responsible for paying the import duties.

Delivery Instructions

The Delivery Instructions give specific instructions to the inland carrier regarding how to deliver the goods to a particular pier or shipping line. This is different than the “Delivery Order” which is used when importing goods.

Demurrage is the extra time needed for loading or unloading a cargo ship, thereby delaying its scheduled departure. This only applies in situations when the shipper or charter, and not the ship’s operator, is at fault.

Duty

A duty is a tax on imported goods which is imposed by a country’s customs authorities. Duties are based on the value of the cargo according to the commercial invoice, and sometimes other factors such as quantity or weight, or a combo of cargo value and various other factors, which is known as compound duties.

Ex works is a term of sale which denotes only the quoted price, the goods are only available at the seller’s factory, or place of business, and this price does not include delivery to anywhere else. This trade term requires the buyer to take responsibility for any kind of transport for the goods. Ex works is often used for quotation purposes when the buyer wants to know the price of the goods, without including any sort transportation costs they will need.

FCL (Full Container Load) & CY (Container Yard)

FCL means “Full Container Load”, which means shipping is needed for an entire container, as opposed to LCL, which is only a particular amount of space inside a given container. FCL can also be known as CY, which stands for “Container Yard” When using the term CY, it means the FCL will go all the way from the beginning origin to final destination.

Flat Rack Containers (FR)

Flat Rack Containers are for very heavy load and cargo with oversized dimensions. These kind of containers do not have a top or sides. Fork-lifts and cranes can easily access cargo on these containers.

Forty Feet Equivalent Unit (FEU)

Twice the size of a TEU. A forty foot container contains one FEU.

Free Alongside Ship (FAS)

Free Alongside Ship (FAS) to a named port. With FAS, the seller gives a price for the goods which includes delivery cost alongside the vessel at the POD. The seller will cover the unloading and wharfing cost, while the ocean transport, loading and insurance are the responsibility of the buyer. FAS is another way to valuate in import and export.

Free Carrier (FCA)

Free Carrier (FCA) replaces the earlier term (FOB named inland port) to depict the seller’s responsibility for the loading cost of cargo at a named shipping place. This term can be used in various kinds of transportation including container stations, air freight, and multi-modal transport.

Free On Board (FOB)

Perhaps the most commonly used term in international trade, FOB describes a price which includes the seller’s responsibility for delivering the cargo to the point of loading on the deck of a vessel or aircraft. The risk is transferred to the buyer from the point the vessel has left the port of loading. The term FOB will be given together with a sea or airport, e.g. “FOB Shanghai”.

Freight /Carriage... paid to…

This term is similar to C&F and denotes the seller should pay the freight cost for the cargo to a named place. The risk to the cargo such as loss or damage is transferred from the seller to buyer once the goods have been sent into the possession of the first carrier, not at the rail of the ship. “Freight/Carriage… paid to” could be used for many modes of transport such as multimodal operations, container shipping, and RORO transport by vessels such as trucks or ferries.

Freight Carriage & Insurance paid to…

The same as "Freight/Carriage… Paid to..." however the seller has to arrange insurance against loss or damage to the cargo while it is being transported.

Freight Forwarder

A Freight Forwarder is a third party business, separate from a carrier, which can arrange the exportation of international shipments. The Freight Forwarder will take instructions from the shipper’s booking order, and make the necessary arrangements to expedite their shipments to its’ required destination. A forwarder has an exportation right in their country, and will create all of the documentation needed to transport the shipment to the place specified by the shipper. A forwarder can arrange insurance for the cargo, coordinate with the importation department of another freight forwarder in the destination country, and give advice to the shipper on things such as shipping marks, etc.

Incoterms (International Commercial Terms) were created by the ICC (International Chamber of Commerce), to clarify terminology in foreign trade and to standardize commonly used terms to avoid miscommunication between the different parties. See Freight Forum’s Incoterms page to learn more.

Insurance Certificate

An insurance certificate shows that the cargo is protected against loss or damage while it is in transit.

Intermediate Consignee

Intermediate consignees work as agents for the selling party (exporter) in the purchaser’s (ultimate consignee) country. Their goal is to enable smooth and efficient delivery of the cargo to the ultimate (final) consignee. The intermediate consignee may be a forwarder, bank, or other kind of intermediary.

Intermodal denotes when cargo is to be moved by more than one way of transportation. For example, if a container were to be delivered by sea freight to Long Beach, CA, and after unloading be placed onto a truck for further inland forwarding, this would constitute as intermodal.

LCL

LCL stands for “Less than Container Load”, which denotes a shipment which is only using part of a 20’ or 40’ container. The rest of the container will be filled with LCL shipments from other shippers.

Letter of Credit

This is a financial document which is issued by the bank as per request by the consignee, which guarantees payment to the shipper the products bought if certain terms and requirements have been met. An L/C will usually contain a description of the goods, the required documents, a shipping date, and an expiry date after which a payment will no longer be made. An Irrevocable Letter of Credit obligates the bank to pay the seller once all of the terms and requirements of the L/C have been met. The terms and conditions cannot be changed without prior consent of both parties as it pertains to the L/C. A Revocable Letter of Credit may become subject to potential recall or amendment according to the consignee, without prior approval of the seller.

Net Weight (NW)

Net weight is the weight of the actual merchandise or cargo, without counting any weight from its packaging such as boxes or crates it may be held inside.

NVOCC (Non-Vessel Operating Common Carrier)

NVOCC’s can help smaller shippers with LCL shipments reduce their costs by being associated with a bigger shipper. Non-vessel operating common carriers (NVOCC’s) book space on container ships in large quantities and at lower rates, and then sell the space to shippers in smaller amounts. NVOCC’s consolidate small shipments into full container loads that are sent under one bill of lading. In this way, the shipper can acquire more favorable rates for their shipment. NVOCCs are not limited to only making LCL shipments.

A packing list is a document made by the shipper, and given to the carrier, customs officials, and consignee, for the purpose of detailing the information on the shipment such as number of boxes, product count, package measurements, weight, and total cubic meters.

The packing slip contains detailed information about the exact contents of each of the cartons in the shipment. It will show the carton numbers, which products and what quantity of them are in each carton, as well as the size and weight of each product, and the total weight of each carton.

Pro Forma Invoice

A Pro Forma Invoice is issued by the supplier prior to shipment of the products, an informs the buyer about the type product to be sent, its quantity, value, and some specifications such as size, weight, etc. If the importing party applies for a letter of credit, as a means to pay for the merchandise, a Pro Forma invoice will be required from the bank as a part of the procedure of setting up the Letter of Credit.

This can refer to cargo to be shipped by sea or air, which is considered to be oversized, or too high of cargo, to be shipped by normal methods. It may need Flat rack or other type of shipping method, and may require special equipment to load and unload.

RORO (Roll-on Roll-off)

RORO is a kind of ship which was made to load and unload cargo which has wheels or rolls off using tracks.

Shipping Documents

Shipping documents are a package of documents, which will at least include the commercial invoice and packing list, and usually also includes a packing slip as well.

TELEX release (Express B/L)

An "Express Bill of Lading" can also be known as a "Telex Release" Bill of lading. Here, the shipping company issues an Original but they do not give the original to the supplier. They will stamp the Original with "Telex Release" and "SURRENDERED" and then fax it to the supplier, who in turn faxes or emails a copy to the consignee. The consignee then forwards this electronic or fax to their clearing agent, who will clear the customs without an original copy of the bill of lading. The shipping company then sends a "telex" to their agent at the destination port, and advises them they are holding the original copies, and to release the goods to the consignee without the original bill of lading.

Through Bill of Lading

A through bill of lading is a single B/L which will be used from the point of origin, all the way until delivery to ultimate consignee. During the carriage there will be more than one mode of transportation.

Ultimate Consignee

The final consignee of the cargo, who will finally take possession of the cargo once it has reached his country and has already passed through the intermediary consignees.

Value for Customs Purposes Only

This term denotes the value submitted on the documentation from the importers, but may or may not reflect an accurate price as specified by the manufacturer, and in no way is reflective of what a customs appraising agent may consider to be the value of the cargo.

War/Strike Clause

The War/Strike Clause is a provision inside an insurance contract which will cover any financial losses due to war or strike.

Wharfage is a charge appropriated by a dock for their handling of cargo.

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