In every line of work, sooner or later you have to deal with some confusing industry-specific terminology. Here we’ve put together a selection of the most common shipping trading terms, to help you to better understand the legal vernacular you might come across when arranging your shipping.
1. Incoterms (International Commercial Terms)
With the same word having a different meaning in other languages, there is always the risk in overseas trading of misinterpretation of one important word. In order to minimise this risk, International Commercial Terms are an international set of rules devised to bypass language barriers.
2. Ex-Works (EXW)
Shipping ex-works is a common arrangement between the seller and the buyer. In this instance goods are sold on the understanding that the buyer also pays for the shipping. This could mean the buyer arriving at the seller’s place of business and collecting the goods, or arranging for a third party to collect, transport and ship the goods to the buyer’s address. The buyer is also liable for any customs duty.
3. Free Carrier (FCA)
Under a Free Carrier agreement, the seller is responsible for delivering the goods to a designated shipper at an airport or port, both chosen by the buyer. The seller’s part of the contract is then complete, and the buyer is responsible for all shipping costs and the security of goods thereafter.
4. Free On Board (FOB)
Free on Board (or sometimes Freight on Board) is an international commercial term which normally does not include containerised transport. It specifies when responsibility passes from the seller to the buyer. For example, the seller could be responsible for having the goods transported to a specified port. Once the cargo has been lifted on board the carrier, liability for the goods, including costs and insurance, passes to the buyer.
5. Cost Nett Freight (CNF)
Cost Nett Freight is a shipping agreement whereby the seller is responsible for the cost of having the goods delivered to the buyer’s nearest home port. However, it is the buyer who is responsible for insuring the goods, from collection to the point of delivery.
6. Cost Insurance and Freight (CIF)
Under a CIF agreement, the seller usually takes full responsibility for the remaining shipping and transportation in the country of destination up until the point of delivery. This includes being responsible for all road and marine insurances to ensure full protection for the goods. In other contracts, the seller’s CIF arrangements might end at the goods point of entry.
7. Delivered At Terminal (DAT)
Delivered at terminal specifies that the seller is responsible for all transportation, shipping, and insurance costs into the destination port. The buyer then assumes responsibility, and is liable for all customs charges and onward transport costs.
8. Delivered At Place (DAP)
DAP is an arrangement between seller and buyer in which the seller assumes all costs for delivering the goods to a ‘place’ specified by the buyer, usually a port (DAT), or place of business. The buyer assumes all responsibility for any customs clearance or duty on the goods.
9. Full Container Load (FCL)
A full container load refers to a 20ft or 40ft container which is fully loaded with goods or merchandise from the same seller. Full loads usually attract better freight rates than loose cargo or part loads.
10. Less Container Load (LCL)
Finally, a less container load, often referred to as a part container or groupage load, refers to goods loaded into a shared container with others shipping smaller loads - an excellent way for those exporting smaller volumes to keep their freight costs as low as possible.
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