Understanding Common Shipping Terms: A Guide to International Shipping

If your business involves international shipping or exporting goods overseas, understanding common shipping terms is crucial for smooth and efficient logistics operations. Misinterpreting these terms can lead to delays and disputes that could affect your business operations and customer satisfaction. 

From securing insurance when exporting products internationally to determining responsibility for delivery, knowing what each shipping term means will help you avoid setbacks that get in the way of running your business.  

Whether you're new to the industry or a seasoned professional just looking to brush up on your knowledge, this shipping glossary will get you up to speed on the essential shipping definitions and abbreviations commonly used in international shipping. 

1. Bill of Lading (B/L or BOL) 

Definition: A legal document issued by a carrier to a shipper, detailing the type, quantity, and destination of the goods being shipped. It serves as a contract between the carrier and shipper and also as a shipment receipt when the carrier delivers the goods at a predetermined destination. 

2. Incoterms 

Definition: International Commercial Terms are standardized trade terms published by the International Chamber of Commerce (ICC). They are used worldwide to define the responsibilities of buyers and sellers in the delivery of goods. 

Key Incoterms: 

• FCA (Free Carrier): The seller delivers the goods to a carrier or another party nominated by the buyer at the seller’s premises or another named place. The seller is responsible for export clearance, while the buyer assumes all risks and costs from that point onward. 

• EXW (Ex Works): The seller makes the goods available at their premises, and the buyer assumes all risks and costs from that point, including loading the goods for transport. 

• DPU (Delivered at Place Unloaded): The seller is responsible for delivering the goods and unloading them at a designated place. Formerly known as DAT (Delivered at Terminal). 

• CPT (Carriage Paid To): The seller pays for carriage to the named destination. Risk transfers to the buyer once the goods are handed over to the first carrier. 

• CIP (Carriage and Insurance Paid To): Similar to CPT, but the seller also pays for insurance. The risk transfers to the buyer once the goods are handed over to the first carrier. 

• DAP (Delivered at Place): The seller delivers the goods to a named place, ready for unloading. The buyer is responsible for unloading and any subsequent costs. 

• DDP (Delivered Duty Paid): The seller is responsible for delivering the goods to the buyer’s location, including payment of all duties and taxes. 

• FAS (Free Alongside Ship): The seller delivers the goods alongside the ship at the port of shipment. The buyer is responsible for loading, shipping, and all subsequent costs. 

• FOB (Free On Board): The seller's responsibility ends when the goods pass the ship’s rail at the port of shipment. The buyer assumes all costs and risks from that point onward. 

• CFR (Cost and Freight): The seller pays for the cost and freight to bring the goods to the port of destination. Risk transfers to the buyer once the goods are on board the vessel. 

• CIF (Cost, Insurance, and Freight): Similar to CFR, but the seller also pays for insurance. Risk transfers to the buyer once the goods are on board the vessel. 

3. Container Freight Station (CFS) 

Definition: A facility where cargo is consolidated or deconsolidated, and where customs inspections can be conducted. It’s typically used for less-than-container load (LCL) shipments. 

4. Full Container Load (FCL) 

Definition: A shipment in which a full container is used exclusively for one shipper's cargo. It is more cost-effective and faster than LCL for large volumes. 

5. Less than Container Load (LCL) 

Definition: A shipment that does not fill a full container, so it is consolidated with other shipments to fill a container. This method is more cost-effective for smaller shipments. 

6. Freight Forwarder 

Definition: A company that arranges the shipment of goods on behalf of shippers. They handle the logistics of shipping, including documentation, customs clearance, and transportation. 

7. Customs Broker  

Definition: A professional who helps importers and exporters clear goods through customs. They ensure that shipments comply with all relevant regulations. 

8. Harmonized System (HS) Code 

Definition: A standardized numerical method of classifying traded products. It is used globally to identify goods and apply appropriate tariffs and duties. 

9. Customs Bond 

Definition: A financial guarantee required by customs authorities that ensures the payment of import duties and taxes. It can be obtained through a customs broker or insurance company. 

10. Duty Drawback 

Definition: A refund of customs duties, taxes, and fees paid on imported goods that are subsequently exported or destroyed. 

11. Importer of Record (IOR) 

Definition: The entity responsible for ensuring that imported goods comply with local laws and regulations, including filing the necessary customs entries and paying duties and taxes. 

12. Exporter of Record (EOR) 

Definition: The entity responsible for ensuring that exported goods comply with local laws and regulations, including filing the necessary export declarations and obtaining the required licenses. 

13. Tariff 

Definition: A tax or duty imposed on goods when they are moved across a political boundary. Tariffs are used to restrict imports by increasing the price of goods and services purchased from another country. 

14. Demurrage 

Definition: A charge applied to import cargo that is left in a container at a terminal beyond the allocated free time. It compensates the owner of the equipment for the use of their container. 

15. Detention 

Definition: A charge levied on the use of the container outside the terminal beyond the agreed free time, compensating the owner of the equipment for the extended use of their container. 

1. ETA (Estimated Time of Arrival): The projected date and time when a shipment is expected to arrive at its destination. 

2. ETD (Estimated Time of Departure): The projected date and time when a shipment is expected to depart from its origin. 

3. AWB (Air Waybill): A document issued by an air carrier that details the shipment of goods by air and serves as a receipt of goods and a contract of carriage. 

4. BAF (Bunker Adjustment Factor): A surcharge levied by shipping companies to account for fluctuations in fuel prices. 

5. ISF (Importer Security Filing): A U.S. Customs and Border Protection (CBP) requirement for importers to file specific shipment data before cargo is loaded onto a vessel bound for the United States. 

Conclusion

Understanding these key international shipping terms and abbreviations is essential for anyone involved in the import and export of goods.  

This shipping glossary provides you with the foundational knowledge you need to take on the complexities of global trade. Whether you're dealing with FCL, LCL, or navigating Incoterms, having a grasp of this shipping terminology will streamline your logistics operations and enhance your efficiency. 

For more comprehensive guidance to all things logistics, eShipper is your trusted partner. Whether you’re exporting goods out of the UAE or importing products into the country, our growing partnerships with the most reliable global carriers give you access to the best shipping rates and services. With dedicated support from our supply chain experts, you’ll ensure seamless, efficient, and cost-effective shipping solutions for your business. Contact us to get started on your shipping journey today.