Shipping Definitions

 ‘Incoterms’

Trade terms, published by the International Chamber of Commerce (ICC), that are commonly used in international contracts

Air Way bill

The forwarding agreement or carrying agreement between shipper and air carrier and is issued only in nonnegotiable form.

BAF

Abbreviation for “Bunker Adjustment Factor.” Used to compensate steamship lines for fluctuating fuel costs. Sometimes called “Fuel Adjustment Factor” or FAF.An extra charge sometimes added to steamship freight rates; justified by higher fuel costs.

Bill Of Lading

A legal document between the shipper of a particular good and the carrier detailing the type, quantity and destination of the good being carried. The bill of lading also serves as a receipt of shipment when the good is delivered to the predetermined destination. This document must accompany the shipped goods, no matter the form of transportation, and must be signed by an authorized representative from the carrier, shipper and receiver.

Bill of Exchange

In the United States, commonly known as a “Draft.” However, bill of exchange is the correct term.

Clean Bill Of Lading‘

A bill of lading issued by a carrier declaring that the goods have been received in an appropriate condition, without the presence of defects. The product carrier will issue a clean bill after thoroughly inspecting the packages for any damage, missing quantities or deviations in quality.

Import’

A good or service brought into one country from another. Along with exports, imports form the backbone of international trade. The higher the value of imports entering a country, compared to the value of exports, the more negative that country’s balance of trade becomes.

Export

A function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation’s gross output. If used for trade, exports are exchanged for other products or services. Exports are one of the oldest forms of economic transfer, and occur on a large scale between nations that have fewer restrictions on trade, such as tariffs or subsidies.

Logistics’

The overall management of the way resources are obtained, stored and moved to the locations where they are required. Logistics management entails identifying potential suppliers and distributors; evaluating how accessible and effective they are and establishing relationships and signing contracts with the companies who offer the best combination of price and service. A company might also choose to handle its own logistics if it is cost-effective to do so.

Cash On Delivery – COD’

A type of transaction in which payment for a good is made at the time of delivery. If the purchaser does not make payment when the good is delivered, then the good will be returned to the seller.

Payment can be made by cash, certified check or money order, depending on what is stipulated in the shipping contract.

Contract For Differences – CFD’

An arrangement made in a futures contract whereby differences in settlement are made through cash payments, rather than the delivery of physical goods or securities.

Cash Transaction

A transaction that is settled with cash on the same day as the trade.

Cost and Freight – CFR

A trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier. Under CFR, the seller does not have to procure marine insurance against the risk of loss or damage to the goods during transit.

Cost, Insurance and Freight – CIF

A trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier.

Countervailing Duties

A duty placed on imported goods that are being subsidized by the importing government. This helps to even the playing field between the domestic producers and the foreign producers receiving subsidies.

Currency Adjustment Factor – CAF

A type of charge applied on top of freight costs by carriers servicing trade between the United States and Pacific Rim countries. The charge was developed due to costs that carriers incur from constantly changing exchange rates between the U.S. dollar and other foreign currencies.

Consolidation

Cargo containing shipments of two or more shippers or suppliers. Containerload shipments may be consolidated for one or more consignees.

Consolidator

A person or firm performing a consolidation service for others. The consolidator takes advantage of lower full carload (FCL) rates, and savings are passed on to shippers.

Delivered Ex Ship – DES

A trade term requiring the seller to deliver goods to a buyer at an agreed port of arrival. The seller remains responsible for the goods until they are delivered.

Delivered At Frontier – DAF

In international trade, a contract specification requiring the seller to deliver goods to a named destination, usually a border location, by a predetermined time. Up to the border, the seller is responsible for all risks and expenses associated with the delivery.

Delivered Duty Paid – DDP

A transaction in which the seller must pay for all of the costs related to transporting the goods and is responsible in full for the goods until they have been received and transfered to the buyer. This includes paying for the shipping, the duties and any other expenses incurred while shipping the goods.

Embargo

Order to restrict the hauling of freight.

Ex Works – EXW

A trade term requiring the seller to deliver goods at his or her own place of business. All other transportation costs and risks are assumed by the buyer.

Free Alongside – FAS

A trade term requiring the seller to deliver goods to a named port alongside a vessel designated by the buyer. “Alongside” means that the goods are within reach of a ship’s lifting tackle.

When used in trade terms, the word “free” means the seller has an obligation to deliver goods to a named place for transfer to a carrier.

Free Carrier – FCA

A trade term requiring the seller to deliver goods to a named airport, terminal, or other place where the carrier operates. Costs for transportation and risk of loss transfer to the buyer after delivery to the carrier.

When used in trade terms, the word “free” means the seller has an obligation to deliver goods to a named place for transfer to a carrier.

Free On Board – FOB

A trade term requiring the seller to deliver goods on board a vessel designated by the buyer. The seller fulfills its obligations to deliver when the goods have passed over the ship’s rail.

Exchange Rate

The price of one country’s currency expressed in another country’s currency. In other words, the rate at which one currency can be exchanged for another. For example, the higher the exchange rate for one euro in terms of one yen, the lower the relative value of the yen.

Transaction

An agreement between a buyer and a seller for the exchange of goods or services for payment.

Tariff

A tax imposed on imported goods and services. Tariffs are used to restrict trade, as they increase the price of imported goods and services, making them more expensive to consumers. They are one of several tools available to shape trade policy.

Quota’

In the context of international trade, this is a limit put on the amount of a specific good that can be imported.

War RiskInsurance coverage for loss of goods resulting from any act of war.

Weights and Measures

Measurement ton	40 cubic ft or one cubic meter.
Net ton, or short ton	2,000 lbs.
Gross ton/long ton	2,240 lbs.
Metric ton/kilo ton	2,204.6 lbs.
Cubic meter	35.314 cubic ft.