Introduction to Basic Shipping and Transportation Terminology
Shipping and transportation can be confusing, especially when you encounter industry-specific jargon. This basic glossary in shipping and transportation is designed to help you grasp the essential terms that drive the industry.
1. Bill of Lading (B/L)
A bill of lading is a document issued by a carrier or its agent to confirm that cargo has been received for shipment. Nowadays, bills of lading can be used not only in shipping but also to confirm transportation in all types of logistics.
The bill of lading is an important document for international trade and serves three main functions: ensuring payment to the exporter, guaranteeing that importers receive their goods, and providing evidence in case of disputes.
In ocean shipments, two types of bills of lading are used: 1. Original Bill of Lading 2. Express BL – also known as Waybill.
In air shipments, only one type is used: Air Waybills (AWB).
2. Freight Broker
Acts as an intermediary between shippers/importers and carriers, arranging the transportation of goods from the point of origin to the final destination and handling various aspects of the shipping process such as customs clearance, documentation, and insurance.
3. Incoterms
International Commercial Terms (Incoterms®) are a set of internationally recognized standards that define the responsibilities of exporters and importers in the sale of goods in international transactions, including the arrangement of shipments and the transfer of responsibility at various stages of the transaction.
Incoterms® are published by the International Chamber of Commerce (ICC) and are accepted worldwide by governments, legal authorities, and practitioners for the interpretation of the most commonly used terms in international (and domestic) trade. They are periodically updated, with the latest version published in 2020.
This version includes seven rules for any mode of transport:
EXW – Ex Works, FCA – Free Carrier, CPT – Carriage Paid to, CIP – Carriage and Insurance Paid To, DAP – Delivered at Place, DPU – Delivered at Place Unloaded, and DDP – Delivered Duty Paid.
Additionally, there are four rules for sea and inland waterway transport:
FAS – Free Alongside Ship, FOB – Free on Board, CFR – Cost and Freight, and CIF – Cost Insurance and Freight.
So if you are seeking guidance on how to document, insure, or transport goods, the Incoterms rules can be helpful.
4. FOB (Free On Board)
FOB (Free on Board) is an Incoterm that places the responsibility on the seller for clearing the goods for export, transporting them to the designated ocean vessel, and loading them onto the ship. The transfer of cost and risk occurs once the goods pass the ship’s rail. It is important to note that FOB is most suitable for shipments where goods are transported directly from the seller’s facility to the ship for ocean transport. For LCL (Less than Container Load) and other containerized shipments delivered to a carrier at a Container Freight Station (CFS) or Container Yard, FCA (Free Carrier) is a more appropriate Incoterm.
5. Container Freight Station (CFS)
At a CFS, goods from multiple shippers are consolidated into containers for LCL (Less than Container Load) shipments or deconsolidated from containers for delivery to individual consignees. A CFS also handles processes such as customs inspections, documentation, and temporary storage. It plays a crucial role in efficient logistics management for shipments that do not fill an entire container.
6. TEU (Twenty-foot Equivalent Unit)
TEU is based on the dimensions of a shipping container approximately 20 feet long, 8 feet wide, and 8 feet high.
TEU is a standard unit used to measure the capacity of container ships. It is also used by shipping lines and terminals as a metric to calculate cargo capacities on individual vessels.
7. Demurrage
Demurrage refers to a fee incurred when a container remains at the terminal longer than the agreed free time.
8. Customs Broker
A customs broker acts as a liaison between the importer/exporter and government officials, such as customs officers, to ensure that all legal requirements for the shipment of goods are met. The customs broker processes the documentation related to the customs process and ensures that all duties, taxes, and fees are paid correctly. They also provide guidance on trade agreements, tariff classifications, and other relevant matters that may affect the cost and logistics of international trade.
Customs brokers can work independently or as part of a larger customs brokerage firm or a shipping agency and are often licensed by government agencies.
9. Port of Loading (POL)
The port where cargo is loaded onto a vessel for shipment is called the Port of Loading. The export process typically begins here.
10. Port of Discharge (POD)
The Port of Discharge is where the cargo is unloaded from the vessel. It is often the final destination or the place where goods are transferred to another mode of transport for delivery to the consignee.
