Shipping terms explained

Incoterms 2020

Incoterms are rules from the International Chamber of Commerce that say who arranges and pays for each part of a delivery, and where risk passes from seller to buyer. The 2020 edition has eleven rules. Always name the place with the rule, for example "FOB" followed by a port.

Rules for any mode of transport

EXW Ex Works

The buyer collects the goods from the seller's premises and bears nearly all cost and risk from there.

FCA Free Carrier

The seller hands the goods to the buyer's carrier at a named place.

CPT Carriage Paid To

The seller pays carriage to a named destination, and risk passes to the buyer when the goods are handed to the first carrier.

CIP Carriage and Insurance Paid To

As CPT, and the seller also arranges insurance cover.

DAP Delivered at Place

The seller delivers to a named place, ready to unload, and pays carriage but not import clearance.

DPU Delivered at Place Unloaded

As DAP, and the seller also unloads at the named place.

DDP Delivered Duty Paid

The seller delivers to the named place and pays import clearance and duties as well.

Rules for sea and inland waterway transport only

FAS Free Alongside Ship

The seller delivers the goods alongside the vessel at the named port.

FOB Free on Board

The seller loads the goods on the vessel named by the buyer, and risk passes once they are on board.

CFR Cost and Freight

The seller pays carriage to the named port, and risk passes once the goods are on board.

CIF Cost, Insurance and Freight

As CFR, and the seller also arranges insurance cover.

Glossary

FCL (full container load)

A container that carries only one shipper's cargo.

LCL (less than container load)

Cargo that does not fill a container and travels with other shippers' cargo in a shared container.

Consolidation

Combining several small shipments into one container or load. The shared container is opened at a destination point and each shipment is released to its owner.

B/L (bill of lading)

The document a carrier issues for sea cargo. It is a receipt for the goods, evidence of the contract of carriage, and in its original form can be a document of title.

Sea waybill

A sea transport document that is a receipt and contract evidence but is not a document of title. The goods are released to the named receiver without surrendering an original.

HS code (Harmonized System code)

An international number that classifies goods for customs. Duties and rules depend on it.

Reefer

A container with its own cooling or heating, for temperature-controlled cargo.

Breakbulk

Cargo shipped piece by piece, not in a container.

Out-of-gauge

Cargo that exceeds the size of a standard container.

DG / IMDG (dangerous goods / International Maritime Dangerous Goods Code)

Dangerous goods are cargo that can harm people, ships or the environment. The IMDG Code sets the rules for carrying them by sea. Not every carrier accepts them.

Draft survey

A measurement of how deep a ship sits in the water before and after loading, used to work out the weight of bulk cargo on board.

Voyage charter

Hiring a whole vessel for one trip between named places.

Time charter

Hiring a whole vessel for a set period, with the charterer directing where it goes.

Demurrage

A charge by the shipping line when a container stays inside the port or terminal longer than the free time allowed.

Detention

A charge by the shipping line when a container is kept outside the port, for example at your site, longer than the free time allowed.

PPJK (Pengusaha Pengurusan Jasa Kepabeanan)

A licensed customs broker in Indonesia, who files customs declarations for importers and exporters.