Frequently Used Shipping Terms
FIOS – Free In, Out, Stowed
When you see FIOS, “Free” means the freight rate excludes cargo handling. Here’s what this entails:
- Buyer’s Responsibility: Loading, unloading, and stowage.
- Key Tip: Port congestion and delays can impact costs like demurrage. Familiarising yourself with FIOS terms helps manage these risks.
Liner Terms
Liner Terms outline how costs and responsibilities are divided during shipping.
- Liner Terms Hook/Hook (LTHH): The ship manages stowage, but delivery to/from the hook is the responsibility of the shipper or receiver.
- Full Liner Terms (FLT): Covers loading, unloading, lashing/unlashing, and dunnage, though certain charges (e.g., port levies) may not be included.
Abbreviations You May Encounter
Below are some commonly used abbreviations in shipping. Understanding these can streamline communication and logistics planning:
Abbreviation | Meaning |
AA | Always Afloat |
APS | Arrival Pilot Station |
BAF | Bunker Adjustment Factor (fuel surcharge) |
CBM | Cubic Metres |
CIF | Cost, Insurance, and Freight |
FOB | Free on Board |
L/C | Letter of Credit |
NOR | Notice of Readiness |
TEU | Twenty-foot Equivalent Unit (container size) |
Incoterms Explained
Incoterms are globally accepted trade terms that clarify the division of costs, risks, and responsibilities between buyers and sellers. Here’s a breakdown of the most common ones:
Rules for Any Mode of Transport
- EXW (Ex Works): Seller provides goods at their premises; the buyer takes full responsibility for transport and export.
- FCA (Free Carrier): Seller delivers goods, cleared for export, to a location chosen by the buyer. This term shifts loading responsibilities depending on the delivery point.
- CPT (Carriage Paid To): Seller pays for carriage to the named destination, but risk transfers to the buyer once the goods are handed to the first carrier.
- CIP (Carriage and Insurance Paid To): Like CPT, but the seller also arranges insurance to cover the goods during transit.
Rules for Sea and Inland Waterway Transport
- FAS (Free Alongside Ship): Seller delivers goods alongside the buyer’s vessel. Risk and cost transfer to the buyer at this point.
- FOB (Free on Board): Seller is responsible for all costs until the goods are loaded onto the vessel. The buyer takes over from there.
- CFR (Cost and Freight): Seller pays for freight to the named port but bears no responsibility after loading.
- CIF (Cost, Insurance, and Freight): Like CFR, but the seller must also insure the goods during transit to the destination port.
Delivered Terms
- DAT (Delivered At Terminal): Seller delivers to a named terminal, covering all transport and unloading costs up to this point. The buyer handles import and final delivery.
- DAP (Delivered At Place): Seller delivers to a named destination, ready for unloading. Buyer assumes risk and costs from this point onward.
- DDP (Delivered Duty Paid): Seller handles all costs, risks, and customs clearance, delivering the goods to the buyer’s location.
Important: Some Incoterms are unsuitable for containerised shipping (e.g., FOB and CIF). Modern contracts often favour FCA or CPT for containerised cargo.
Risk and Insurance Considerations
Understanding where the risk transfers in shipping contracts is critical to protecting your cargo:
Insurance Requirements
Terms like CIP and CIF require the seller to provide insurance. Be sure the policy covers at least 110% of the goods’ value.
Demurrage Risks
Charges for delayed unloading can mount quickly. Ensure all parties understand the delivery and unloading terms to avoid disputes.
Customs Responsibilities
Incoterms like DDP place full customs liability on the seller, while FOB or EXW pass it to the buyer. Confirm roles to avoid legal and financial complications.
