Freight vocabulary is dense, and the same shipment can be described in several ways depending on who is speaking. This glossary defines the terms that appear most often on quotations and documents, followed by a summary of the eleven Incoterms 2020 rules that set who arranges and pays for what.
Modes, equipment and loads
- FCL: full container load — the container is booked for one shipper's cargo.
- LCL: less than container load — cargo is consolidated with other shippers' freight and deconsolidated at destination.
- FTL and LTL: the road equivalents: a dedicated full trailer, or a shared part load.
- TEU and FEU: twenty-foot and forty-foot equivalent units, the standard measures of container capacity.
- High cube: a container with extra internal height, commonly used for light, bulky cargo.
- Reefer: a temperature-controlled container or trailer.
- Flat rack and open top: equipment for cargo that will not fit through the doors of a standard box.
- Out-of-gauge: cargo exceeding standard equipment dimensions, requiring a specific plan and often permits.
- Transloading: transferring cargo from one piece of equipment to another — for example from ocean containers into domestic trailers — to suit the onward leg.
- 3PL: third-party logistics: outsourced storage, fulfilment and distribution alongside freight.
Documents and parties
- Bill of lading: the ocean carrier's receipt and contract of carriage; a negotiable original also functions as a document of title.
- Sea waybill: a non-negotiable alternative that speeds up release where no documentary payment is involved.
- House and master documents: the house document is issued by the forwarder to the customer; the master is issued by the carrier or airline to the forwarder on consolidated cargo.
- Air waybill: the air carrier's receipt and contract of carriage; never a document of title.
- Shipper, consignee and notify party: the sender, the receiver, and the party to be advised of arrival.
- NVOCC: a non-vessel-operating common carrier: issues its own transport documents while carriage is performed by a vessel operator.
- Customs broker: the licensed party that files declarations with the authority.
Charges and operational terms
- Chargeable weight: the greater of actual gross weight and volumetric weight, used to price air and some road freight.
- Demurrage: charges for keeping equipment inside the terminal beyond the free period.
- Detention: charges for keeping equipment outside the terminal beyond the free period.
- Storage: terminal or warehouse charges for cargo held beyond the allowance.
- THC: terminal handling charges, levied at origin and destination.
- Cut-off: the deadline for cargo or documentation before a departure; documentation cut-offs fall earlier than cargo cut-offs.
- Rolled booking: a confirmed booking moved to a later departure, usually due to overbooking or a missed cut-off.
- Blank sailing: a scheduled sailing cancelled by the carrier.
- VGM: verified gross mass, the declared weight of a packed container required before vessel loading.
- Free time: the period during which demurrage or detention does not accrue.
Incoterms 2020 — any mode of transport
Incoterms rules allocate cost, risk and obligations between seller and buyer. They do not transfer ownership or replace the sales contract, and each should be stated with a named place — for example DAP Rotterdam.
- EXW: Ex Works. The buyer takes over at the seller's premises and bears essentially everything from that point, including export formalities.
- FCA: Free Carrier. The seller delivers, cleared for export, to a carrier nominated by the buyer at the named place. Risk passes on delivery there.
- CPT: Carriage Paid To. The seller pays carriage to the named destination, but risk passes when the goods are handed to the first carrier.
- CIP: Carriage and Insurance Paid To. As CPT, with the seller also providing insurance at the higher level of cover specified in the 2020 rules.
- DAP: Delivered at Place. The seller bears cost and risk to the named place, ready for unloading; import clearance and duties fall to the buyer.
- DPU: Delivered at Place Unloaded. As DAP, but the seller also unloads at destination.
- DDP: Delivered Duty Paid. The seller bears cost and risk through import clearance and duties — the maximum obligation on the seller.
Incoterms 2020 — sea and inland waterway only
- FAS: Free Alongside Ship. The seller delivers alongside the vessel at the named port of shipment.
- FOB: Free On Board. The seller delivers on board the vessel; risk passes at that point. Intended for bulk and break-bulk rather than containers, where FCA usually fits better.
- CFR: Cost and Freight. The seller pays freight to the destination port, but risk passes on board at origin.
- CIF: Cost, Insurance and Freight. As CFR, with the seller providing minimum insurance cover.
Choosing a term
The most common source of dispute is a mismatch between the term chosen and the way the cargo actually moves — typically using FOB or CIF for containerised cargo, where risk in practice passes at the terminal rather than at the ship's rail.
Also confirm who is able to clear customs in the destination country. DDP obliges the seller to act as importer, which is not always possible or advisable. If in doubt, describe the commercial arrangement to your coordinator and we will set out the practical effect of each option.
