International Shipping Terms – Glossary For Beginners

Did you know that over 300,000 people leave the United Kingdom every year to begin a new life elsewhere? According to recent estimates, up to 4.7 million British citizens now reside abroad. To live abroad, one typically ships their items and goods. 

Shipping items appears to be a simple task, doesn’t it? Simply package the item and ship it. But did you know that there are various types of shipment?

International shipping is a complicated industry with its terminology and language. The more shipping terms and abbreviations you understand, the better prepared you will be to transport your freight efficiently and affordably.

Shipping products appears to be a simple task, doesn’t it? Simply package the item and ship it to your customer. But did you know that there are various types of shipment?

This guide will serve as an international shipping glossary for the terms that are most commonly used.

Incoterms or International Commercial Terms

With the same word having multiple definitions in languages, there is always the risk of misunderstanding a critical word in international trading. International Commercial Terms are an international set of guidelines designed to overcome language barriers to reduce this risk.

Bonded Warehouse 

A restricted storehouse for products awaiting duty payment. A bonded warehouse might be used, for example, to import a container load of high-value goods, but you only need a quarter of it now, the rest in three months. Instead of paying duty on the entire cargo, you pay duty on the items you remove. Your products will need to be transported from the port to the bonded warehouse.

Cost Nett Freight or CNF

Cost Nett Freight is a shipment contract in which the seller bears the cost of having the goods delivered to the buyer’s nearest home port. However, it is the buyer’s responsibility to insure the goods from that point to the end delivery address.

Cost Insurance and Freight or CIF

A CIF agreement typically requires the seller to assume full responsibility for the shipping and transportation in the country of destination until the point of delivery. This includes being in charge of all insurances to ensure complete protection for the goods. In other contracts, the seller’s CIF arrangements may end at the point of entry of the goods.

CFS or Container Freight Station 

A CFS is a warehouse that centralised and decentralised container cargo. This is often a bonded warehouse. On the export side, shippers and forwarders send LCL (Less than Container Load) freight to a CFS, consolidating numerous shipments into a container. It then either delivers or makes available to recipients’ trucks the whole container of LCL shipments.

Demurrage or Storage Charge

A terminal company charges 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.  Demurrage may apply, for example, when you deliver a container to the port but then encounter documentation issues. Incorrect errors prevent your container from sailing. You’ll have to pay to store the container at the port while the issue is resolved.

Delivered At Terminal or DAT

The supplier is responsible for all costs at the destination port if the item is delivered at the terminal. The buyer then takes over responsibility and is responsible for all customs charges and subsequent transportation costs.

Delivered At Place or DAP

DAP is a seller-buyer agreement in which the seller accepts all costs for delivering goods to a ‘place’ specified by the buyer. This is typically a port (DAT) or other address. The buyer is solely liable for any customs clearance or duty on the goods.

Ex-Works or EXW

Shipping ex-works is frequent between sellers and buyers. In this case, the buyer pays for shipping. Alternatively, the buyer can arrange for a third party to collect, transfer, and ship the goods to the buyer’s address. The buyer also pays any customs duties.

Free Carrier or FCA

A Free Carrier agreement requires the seller to 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 shipping fees and goods protection.

Free On Board or FOB

Free on Board, also known as ‘Freight on Board,’ is an international commercial term that does not typically include containerized transport. It specifies the point at which responsibility shifts from the seller to the buyer. For example, the seller could arrange for the transport of the goods to a specific port. Once the cargo is loaded onto the carrier, the buyer assumes responsibility for the goods, including all costs and insurance. 

Full Container Load or FCL

A full container load is a 20 or 40-foot container that is completely loaded with goods from the same seller. Full loads typically command higher freight rates than partial loads.

In Bond

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 are shipping a container from Europe to a port in the US, you may choose to send it by rail, in bond, to another port because you know the Customs officers there.

Another example, let’s say you are shipping a container from Portugal to Ukraine (which is not part of the EU’s borderless Schengen Zone). There are many borders to pass through. This shipment would be transported by truck, in bond, to the Ukraine border through the EU countries and cleared by Ukrainian Customs.

International Carnet

An international Carnet is a Customs document that allows you to import goods duty-free if you re-export them within 12 months. This document is also referred to as an ATA Carnet, a merchandise passport, or a goods passport. For example, a carnet could be used to import showcases for a trade show or to transfer hardware for an international tour by a band or theatre company.

Less Container Load or LCL

A less container load is also known as a part container load or groupage load. It is goods loaded into a container shared with other smaller loads.  

Trans Shipment as per International Shipping Glossary

The practice of transporting a container from one cargo ship to another to complete a journey. Typically, this entails transferring from a big transoceanic vessel to a feeder vessel or vice versa. In some cases, a container may pass through more than one transshipment port before arriving at its final destination.

Shipping From Point A to Point B!

Hopefully, you now have a better grasp of the nitty-gritty details of the terms in the international shipping glossary. 

Don’t hesitate to get in touch with us if you are considering shipping goods, get accurate advice on the most cost-effective method of shipping your items.