Understanding shipping terms is crucial to every business that needs to transport goods, both locally and internationally.
What are Shipping Terms? (Also Known as INCOTERMS)
The terms of shipment in international trade, also known as International Commercial Terms (Incoterms), were established by the International Chamber of Commerce(ICC). Incoterms codified shipping terms and meanings are intended to create a transparent practice of establishing delivery terms, costs, responsibilities, and potential risks common to the freight industry. Moreover, Incoterms identifies who holds ownership of freight as well as when the transfer of ownership occurs.
This framework allows for seamless transactions between international shippers and consignees as these cargo shipping terms are internationally recognized. The intent of all shipping terms laid out by the Incoterms is to prevent potential misunderstanding between countries.
History of Shipping Terms
The history of freight shipping terms goes back to 1936, when they were initially published. They have been continually updated over the years, with its eight installment established in 2011 (Incoterms 2010). The amendments were created to keep pace with modern shipping practices.
How Shipping Terms are Used
Shipping delivery terms established under the Incoterms set out to clarify three major points.
- Who is responsible for transportation services
- Who is responsible for costs and fees
- When and where is ownership of the goods officially transferred?
Establishing these shipping terms helps eliminate confusion and disputes.
Common Shipping Terms
Now that you have a better understanding of international shipping terms, let’s take a look at some common shipping terms you should know.
3rd Party Logistics Providers (3PL) and Brokers
In shipping terms, a 3rd Party Logistics Provider (3PL) offers its service as a logistics head, managing the details between shippers and carriers. A 3PL can sometimes act as a shipper as well.
An accessorial is any additional services a carrier must provide after arriving at a destination. An example of an accessorial would be unloading freight at the delivery location.
Backhauling is loading up new cargo on a truck that has made a delivery. The newly loaded freight is then driven back to its original point of departure.
Bill of Lading (BOL)
A Bill of Lading (BOL) is a document that establishes the shipping terms between a shipper and carrier and acts as an invoice and receipt. It will also detail the specifics of a freight, including tracking numbers and accessorials.
A blind shipment is when a third-party manages the logistics between a shipper and consignee without the two parties being aware of each other.
Blocking and Bracing Freight
Blocking and bracing freight refers to the packing of a truck hauling multiple orders.
Bulk freight is used to describe cargo that is not packaged.
Carriers are the companies that physically transport cargo for shippers. Many carriers can operate by land, sea, and air.
A consignee is the financially responsible party of a shipment and is usually also the recipient.
A container is a large steel storage unit designed to withstand the elements in order to transport goods.
An embargo refers to the act of inhibiting a delivery from being transported or received. Embargos usually are established between two conflicting nations, but other external factors such as severe weather can be the cause.
A flatbed is used to describe a trailer that only has flooring and no walls or roof. When attached to a truck, it’s frequently used to transport bulk cargo and heavy machinery.
A freight class is a scale used to describe the difficulty of transporting specific cargo. The classes range from Class 500 down to Class 50. Metrics such as transportability, fragility, weight, stow-ability, liability, and size all factor into a freights classification. Class 500 represents freight with a higher cost of shipping.
Hazmat is an abbreviation for hazardous materials, otherwise known as material that can be harmful through exposure. To handle Hazmat cargo, the driver is required to be Hazmat Certified.
Interline is the action of transferring cargo between two or more carriers before it reaches the consignee.
Less than Truckload (LTL)
An LTL is a shipment of cargo that is larger than a parcel but not enough to fill a truck to maximum capacity. To maximize space and overhead, a carrier will transport multiple LTL on a truck.
Linehaul is the term used to refer to a freight’s route, usually between distribution centers. It can also be used to describe the distance calculated to determine shipping costs.
National Motor Freight Traffic Association (NMFTA) is the main regulatory body governing the freight industry.
A receiver is the party tasked with recordkeeping of incoming freight. While the shipper tends to the logistics of sending freight, a receiver is responsible for accepting the cargo.
Sealed Trailers and Trucks
A sealed freight is one that is not to be touched while on transit. After the cargo has been loaded onto the truck, the doors are sealed with a notice. This seal indicates that the contents shouldn’t be handled until they arrive at their final destination.
A shipper is the party responsible for a freight's logistics until it is brought to a receiver. The shipper is tasked with all outbound logistics.
Truck Load (TL)
A Truckload is the designation given to a cargo that requires the full use of a truck, leaving no additional space to store LTL freight.
Let Us Help
If you need help determining the shipping terms of your cargo, contact CSA Transportation today. We’re here to guide you through so that your shipping is hassle-free.