In international transportation, you will be exposed to many terminologies related to shipping, documents, customs declaration, and so on. You may be puzzled by these shipping terms composed of several English words because you do not know what they really mean and when you need them. Therefore, here is a list of some common shipping terms to help you master more trade knowledge:
Incoterms
Incoterms are the most common shipping terms. It is published by the International Chamber of Commerce (ICC) and is also called trade terms, delivery terms, and price terms. It internationally defines the responsibilities, risks, and costs of the buyers and sellers under various trade molds, such as EXW, FOB, CIF, DDP, etc.
Shipper, Carrier & Consignee
The shipper, carrier, and consignee are the people who do the transaction. They are the basis of trade. But in actual communication, we usually do not use these words.
In practice, the shipper is generally the seller or supplier who arranges cargo transportation.
Carrier refers to transportation enterprises, such as shipping companies, railway or road transportation companies, airlines, etc. In practice, it generally refers to freight forwarders, who are responsible for shipping goods. Freight forwarders are agents of these shipping companies.
As a buyer, if you collect the cargo by yourself, the consignee is yourself. If you entrust someone else to receive the cargo for you, such as your agent or your local freight forwarder, then the consignee is the person you designate.
Bill of Lading
Bill of lading, or B/L or BOL, is a document in international sea shipping. Generally, it is issued by your freight forwarder to your supplier. After you pay for your order, your supplier will transfer the B/L to you. The person who has the B/L will get ownership of the cargo. You should take the B/L to pick up your cargo at the destination.
Certificate of Origin
The certificate of origin (CO) is used to prove that the goods are originally produced by the exporting country. It is a necessary document for import customs clearance.
There are several types of CO. The general certificate of origin can be used in most countries. And between some countries, there are preferential certificates of origin, because they have trade agreements.
For example, when importing from China to ASEAN (Thailand, Vietnam, etc.), there is a special certificate of origin, Form E. When importing from China to Europe, there is Form A, which can be used by most EU countries. And if importing from China to Australia, you can use FTA.
By using these preferential certificates of origin for import customs clearance, you can pay fewer duties and taxes, or even be free. Thus, as a buyer, you’d better know what type of certificate of origin you can use and ask your supplier for that.
FCL & LCL
FCL and LCL are related to how you use a container to ship your cargo. FCL (Full Container Load) means that your cargo can fill the entire container and you don’t need to share the container with others. In other words, all goods in the container are yours.
LCL (Less than Container Load) means your cargo is not very much and you just need some space in a container to load it. So you can share one container with others.
According to our experience, if your cargo volume is larger than ≥17 CBM, it is generally more cost-effective to choose FCL shipping. FCL is charged per container, for example, $1500 per 20GP container, and $1600 per 40HQ container. If you have two 20GP containers of goods,
Freight = 2 containers * $1500 per container = $3000
If your cargo volume is between 1-13CBM, LCL is a better choice. LCL is charged according to the CBM of the goods, such as $70/CBM. So, if your cargo is 3 CBM,
Freight = 3 CBM * $70/CBM = $210
But when your cargo is between 13-17CBM, you can choose either FCL or LCL. Then, you’d better ask your freight forwarder and estimate both prices, because LCL is not always the cheaper one. Sometimes, the expensive sorting labor expense at the port will make the LCL price higher than the FCL price.
Weight
In the transaction, whether it is calculating the freight, declaring to customs, or preparing some transport documents, the weight of the goods needs to be displayed. There are some commonly used weighing methods:
Net Weight
Net Weight refers to the weight of the product itself, excluding all weight of the packaging. For example, if a cup is 0.5kg, then the Net Weight of the cup is 0.5kg.
Gross Weight
Different from Net Weight, Gross Weight is the total weight of the product plus packaging. For example, if a cup of 0.5kg is placed in a box of 0.2kg, and there is also a foam of 0.05kg in the box to protect the cup, then Gross Weight = 0.5kg + 0.2kg+0.05kg = 0.75kg. Generally, the gross weight is the actual weight of the goods we talk about.
Both Net Weight and Gross Weight should be displayed on the declaration form and packing list. But what you need to fill in is the total weight. That is, if you have 200 of the above cups, then Net Weight you should fill in is 100kg(0.5kg*200), and Gross Weight is 150kg(0.75kg*200).
Volumetric Weight
Volumetric Weight, also called Dimensional Weight. It calculates the weight of cargo according to its volume. The calculation formulas are slightly different according to different transportation methods.
For example, shipping a batch of goods by air (Actual Weight is 95 kg and Volume is 1.2 CBM).
Volumetric Weight =Total Shipment Volume / 6000 = Total Shipment Volume * 167
i.e. Volumetric Weight = 1.2 * 10⁶cm³/6000 = 200kg
Or, Volumetric Weight = 1.2 CBM * 167 = 200.4KG
Shipping a package of 3kg and 30cm*40cm*40cm by express,
Volumetric Weight =Total Shipment Volume / 5000 = Total Shipment Volume * 200
i.e. Volumetric Weight = 30*40*40/5000 = 9.6kg
Or, Volumetric Weight = 0.048 CBM * 200 = 9.6kg
For sea freight, if it is FCL, the charging is based on the container quantities, as long as your cargo weight is within the maximum load range of the container. If it is LCL, there are different volume and weight conversion ratios. You’d better ask your freight forwarder or agent about it.
Chargeable Weight
Shipping 10kg of books and 10kg of cotton, the volume of cotton is much larger than books, so the transportation cost is also higher. If it is charged the same as 10kg of books, freight forwarders will even lose money. Therefore, Chargeable Weight is used to calculate freight. It compares actual weight and volume weight and chooses the larger one to collect fees.
In the example above, the actual weight is 95kg but the volume weight is 200.4kg. The freight fees should be calculated based on 200.4kg. However, the minimum unit is 0.5kg, so the final Chargeable Weight should be 200.5kg.
D/A & D/P
D/A (Documents Against Acceptance) and D/P (Documents Against Payment) are two payment methods. But they will influence when you can get shipping documents to pick up your cargo.
Both under D/A and D/P, your supplier will send B/L with other necessary documents to his bank. Then the supplier’s bank sends these documents to your bank. If you pay by D/P, your bank will release documents to you after receiving your payments.
But if you pay by D/A, you can get shipping documents from your bank after you accept the bill of exchange and promise to pay within a future date, i.e. your bank trusts your promise and releases shipping documents to you, while you just need to make payments on the agreed date.
Port of Loading & Port of Discharge
Port of Loading (POL) or Loading Port refers to the port where your cargo is loaded on the vessel. Generally, your seller will choose the nearest port as the Loading Port. For example, the Yiwu seller will send cargo to Port of Ningbo and load it on the ship there, while Dongguan seller will choose Port of Shenzhen.
Port of Discharge (POD), or Discharge Port, refers to the port where the goods are finally unloaded, i.e. port of destination we usually say. Also, it is called Port Of Arrival (POA). For example, if you import to New York, then Port of New York is usually the discharge port.
You can agree with the seller to pick up the goods at Port of Discharge or designate other final destinations. Suppose your cargo is unloaded at Port of Los Angeles, and then sent by rail to Denver, Colorado. Then, Port of Discharge is Los Angeles Port and Place of Delivery is Denver.
Generally, the seller will confirm Port of Loading and Port of Discharge with you and display them on Bill of Lading.
Packing List
Packing List is one of the customs clearance documents. It lists the detailed information of the goods and packaging, including the product name, specification, quantity, gross weight, net weight, shipping mark, packaging type and numbers (e.g. the goods are packed in cartons, 200 bags per box, 4 dozen per bag), etc.
The buyer should hand over Packing List to customs to inspect and check the cargo. When there is a letter of credit, it shall be strictly in accordance with the letter of credit.
Shipping Order
Shipping Order, or S/O, is issued by shipping companies. It is a document indicating that the company can ship this batch of goods.
The seller needs to take S/O to go through the export customs declaration. After customs inspects the goods, it stamps on S/O. Then your cargo is allowed to be loaded and released.
Arrival Note
Arrival Note (AN) is a notice issued by the freight forwarder when the cargo is about to arrive at the destination port. The forwarder will notice the notify party on Bill of lading. Usually, it is the buyer himself, the designated freight forwarder, agent, or broker. The person notified should handle customs quarantine, import customs clearance, pick-up procedures, etc.
The End
There are many shipping terms, but it is impossible to include them all in one article. If you have any questions about the above commonly used terms or others, just leave a message below.
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