Shipping terms / A-Z
Shipping terms explained
Trade has its own vocabulary. These are the terms you will see on quotes, contracts and shipping documents, in alphabetical order. This is general information, not legal advice. Your contract and the current rules decide any real case.
About the Incoterms rules
Incoterms 2020 are rules published by the International Chamber of Commerce. They set out who arranges and pays for transport, who handles export and import clearance, and when risk passes from seller to buyer. Eleven rules apply. Four of them (FAS, FOB, CFR, CIF) are for sea and inland waterway transport only. The other seven suit any mode. For containers, the seven any-mode rules are usually the better fit.
- Air waybill (AWB)
- The transport document for air cargo. It records the shipper, the consignee, the cargo and the route. It is a receipt and a contract of carriage. It is not a document of title.
- Bill of lading (B/L)
- The transport document for sea cargo. It is a receipt for the goods, evidence of the contract of carriage and, in its original form, a document of title.
- Bonded warehouse
- A licensed warehouse where goods are held under customs control before duties are paid or the goods are re-exported.
- CBM (cubic metre)
- The unit used to measure cargo volume. One CBM is a cube one metre on each side.
- CFR (Cost and Freight)
- Sea rule. The seller pays to bring the goods to the destination port. Risk passes to the buyer once the goods are on board the vessel at origin.
- CFS (container freight station)
- A facility where LCL cargo is received, consolidated into containers, or unloaded and split out.
- Chargeable weight
- The weight used to price air freight. It is the greater of the actual weight and the volumetric weight, which is worked out from the size of the package.
- CIF (Cost, Insurance and Freight)
- Sea rule. Like CFR, but the seller also buys minimum insurance cover for the buyer's benefit.
- CIP (Carriage and Insurance Paid To)
- Any-mode rule. The seller pays carriage to the named destination and buys insurance. Under Incoterms 2020 the insurance must be at a higher level of cover than under CIF.
- Consignee
- The person or company named to receive the cargo at its destination.
- CPT (Carriage Paid To)
- Any-mode rule. The seller pays carriage to the named destination. Risk passes to the buyer when the goods are handed to the first carrier.
- Cross-docking
- Moving cargo from an inbound vehicle to an outbound one with little or no storage in between.
- Customs broker
- A licensed person or firm who prepares and submits customs declarations for importers and exporters.
- Dangerous goods (DG, IMDG)
- Cargo that can harm people, property or the environment. The IMDG Code is the international code for carrying dangerous goods by sea. Air and road have their own rules.
- DAP (Delivered at Place)
- Any-mode rule. The seller delivers the goods, ready for unloading, at the named place of destination. The buyer unloads and clears the goods for import.
- DDP (Delivered Duty Paid)
- Any-mode rule. The seller delivers the goods to the named destination, cleared for import, and pays import duties and taxes. It places the most responsibility on the seller.
- Demurrage and detention
- Charges from the shipping line when a container stays at the terminal (demurrage) or outside it (detention) longer than the free period allows.
- DPU (Delivered at Place Unloaded)
- Any-mode rule. The seller delivers the goods and unloads them at the named place. It replaced DAT in Incoterms 2020.
- EXW (Ex Works)
- Any-mode rule. The seller makes the goods available at its own premises. The buyer arranges and pays for loading, transport, and export and import clearance.
- FAS (Free Alongside Ship)
- Sea rule. The seller delivers the goods alongside the vessel at the named port of shipment. The buyer bears the cost and risk from there.
- FCA (Free Carrier)
- Any-mode rule. The seller delivers the goods, cleared for export, to the carrier or other party named by the buyer, at a named place.
- FCL (full container load)
- A whole container used by one shipper.
- FOB (Free On Board)
- Sea rule. The seller delivers the goods on board the vessel named by the buyer at the port of shipment. Risk passes to the buyer at that point.
- HS code
- The Harmonized System code, a standard number that classifies goods for customs. Importers and exporters use it on declarations to set duties and controls.
- Incoterms 2020
- The International Chamber of Commerce rules for the delivery terms of a sales contract. See the note above the list.
- LCL (less than container load)
- Cargo that shares a container with other shippers' cargo.
- Out-of-gauge
- Cargo too wide, too tall or too long for a standard container. It ships on flat racks, open-top containers or as breakbulk.
- Reefer
- A refrigerated container, used for cargo that must stay at a set temperature.
- TEU (twenty-foot equivalent unit)
- A unit of container capacity. One 20 ft container is one TEU. A 40 ft container is two.
- VGM (verified gross mass)
- The total weight of a packed container, including the cargo and the container itself. Under the international safety rules for sea transport (SOLAS) it must be declared to the carrier before loading.