Understanding Shipping Definitions & Incoterms with Speedy Air Cargo
Speedy Air Cargo has curated a list of various shipping definitions to help you decode the jargon and understand the process effectively. Shipping FAQ The below definitions explain the differences between shipping methods. Contact Speedy Air Cargo if you need any more information regarding types of shipping.
Ex Works (EXW)
Ex Works means that the seller fulfills its obligation to deliver when it has made the goods available at its premises (i.e., works, factory, warehouse, etc.) to the buyer. In this case, the seller is not responsible for loading the goods on the vehicle provided by the buyer. The seller is also not responsible for clearing the goods for export unless otherwise agreed. Ex Works represent the minimum obligation for the seller. The term should not be used when the buyer cannot carry out, directly or indirectly, the export formalities. In such circumstances, use the free carrier (FCA) term.
Free Carrier (FCA)
Free Carrier means the seller fulfills its obligation to deliver when it has handed over the goods, cleared for export, into the charge of the carrier named by the buyer at the designated place. If the buyer indicates no precise point, the seller may choose within the place, or range stipulated where the carrier shall take the goods into its charge. When the seller’s assistance is required in making the contract with the carrier (rail, air, etc.), the seller may act at the buyer’s risk and expense. The free carrier may be used for any mode of transport, including multimodal transport.
Free On Board (FOB)
Free On Board means that the seller fulfills its obligation to deliver when the goods have passed over the ship’s rail at the named port of shipment. The buyer has to bear all costs and risks of loss or of damage to the goods from that point. Free On Board requires the seller to clear the goods for export. The term can only be used for sea or inland waterway transport and in the case of roll-on/roll-off or container traffic, the ship’s rail serves no practical purpose.
Cost and Freight (CFR)
Cost and Freight (CFR) means that the seller must pay the fees and freight necessary to bring the goods to the named port of destination. The risk of loss or damage to the goods is transferred from the seller to the buyer when the goods pass the ship’s rail in the port of shipment. Any additional costs due to events occurring after the time the goods have been delivered on board the vessel are also incurred by the buyer. If the buyer does not insure the shipment and the goods are damaged, you may run the risk of not being paid. Cost and Freight require the seller to clear the goods for export.
Cost and Freight can only be used for sea or inland waterway transport. In roll-on/roll-off or container traffic, the ship’s rail serves no practical purpose.
Cost, Insurance and Freight (CIF)
Cost, Insurance and Freight (CIF) means that the seller has the same obligations as under CFR. The seller also has many other responsibilities, such as procuring marine insurance against the buyer’s risk of loss of or damage to the goods during the carriage. The seller is only required to contract for insurance, pay the insurance premium, and obtain insurance on minimum coverage. Cost, Insurance and Freight (CIF) requires the seller to clear the goods for export. This term can only be used for sea or inland waterway transport.
Carriage Paid To (CPT)
Carriage Paid To means the seller pays the freight for the carriage of the goods to the named destination. The risk of loss or damage to the goods is transferred from the seller to the buyer when the goods have been delivered into the carrier’s custody. Any additional costs due to events occurring are also transferred from the seller to the buyer. If the buyer does not insure the shipment and the goods are damaged, you may run the risk of not being paid. A carrier is any person who, in a contract of carriage, undertakes to perform or procure the performance of carriage by rail, road, sea, air, inland waterway or by a combination of such modes.
Delivery Duty Unpaid (DDU)
Delivered Duty Unpaid means the seller fulfills its obligation when the goods arrive by any means of transportation to the named place of destination. The seller has to bear the costs and risks involved in bringing the goods (excluding duties, taxes and other official charges payable upon importation). The seller also bears the costs and risks of carrying out customs formalities. The buyer pays the duty and any additional costs. The buyer bears any risks caused by its failure to clear the goods for import in time. If the parties wish the seller to carry out customs formalities, bear the costs and risks, or pay any taxes, this must be clarified by adding words to this effect. This term can be used for all modes of transport.
Delivery Duty Paid (DDP)
Delivered Duty Paid means the seller fulfills its obligation when the goods arrive by any means of transportation to the named place of destination. The seller has to bear the costs and risks involved in bringing the goods (including duties, taxes and other official charges payable upon importation) and the costs and risks of carrying out customs formalities. The seller pays the duty. Delivered Duty Paid represents the seller’s maximum obligation. The buyer has to pay any additional costs and bear any risks caused by its failure to clear the goods for import in time. Delivered Duty Paid should not be used if the seller cannot obtain an import licence. If the parties wish the seller not to carry out customs formalities and bear the costs and risks or not pay any taxes, this must be clarified by adding words to this effect. This term can be used for all modes of transport.
These definitions were taken from Pierobon.org.
Container Load Definitions
There are several other terms and abbreviations used in the shipping industry for container loads. You can read the information given on this page to understand the meaning of the various terms associated with shipping containers. The respective meaning of the terms FCL, LCL, CY and CFS is as follows:
FCL – Full container load or full carload
LCL – Less than container load, loose container load, less than carload or lose carload
CY – Container yard
CFS – Container freight station
FCL vs LCL
The word carload relates to the rail car. The terms FCL and LCL are differentiated, in practice, on whether the ‘whole container’ or ‘not the whole container is intended for the consignee.
FCL means the load reaches its allowable maximum (or full) weight or measurement. In practice, however, FCL in ocean freight does not always imply packing a container to its full payload or full capacity. For example, an exporter books a 20′ container that is intended for a consignee at the FCL flat rate of US$1,500. Suppose the consignment occupies 500 cu. ft. and weighs 5,000 kg only, the case is still FCL, and the exporter has to pay US$1,500.
Suppose an exporter intends to pack a container to the full capacity or full payload with the consignments of two or more consignees for the same destination. The case is LCL, and the carrier will charge the LCL freight rate on each shipment. In the LCL arrangement, the shipper is required to deliver the cargo to the carrier’s container freight station for containerization. Thus there is no guarantee that the two or more consignments from the same exporter will share the same container. In some cases, the exporter is allowed to pack the container at their premises in the LCL arrangement. Then the carrier uses that same container to pack in more cargo from another shipper (s) to make a full container load at the container freight station.
Case Sample: If the importer maintains the order at 1,500 cartons and no forwarder is involved, and if the high cube container service is not available, it may mean that there will be one 40′ FCL plus 135 cartons LCL. A combination of FCL and LCL in a consignment, which is typical aftermath of the cargo overflow, is a poor exporting and importing practice, considering the additional freight and other charges in both countries. LCL can ship all 1,500 cartons, but the freight cost can be higher, and the cargo may be exposed to a higher risk of damage and loss.
CY vs CFS
CY and CFS apply to the manner and the location of the cargo delivery and receipt in a container service. CY is the delivery (or receipt) of a whole container from (or at) the shipper’s or the forwarder’s (or the consignee’s) cargo yard or premises. The CFS is the delivery (or receipt) of loose cargo from (or at) the carrier’s container freight station.
The carrier operates the container freight station (CFS) for the receipt, forwarding, and assembling or disassembling of cargo. Typically, the container freight station is a customs clearance center. The CFS service may be necessary under any of the following circumstances:
The kind of cargo and quantity of order does not warrant the use of the whole container.
The shipper’s or the consignee’s premises are inaccessible by container due to poor road conditions (e.g., narrow road) and location (e.g., remote area not served by the container).
The overall load of the vehicle exceeds the legal limit.
The shipper or the consignee lacks the necessary container loading or unloading equipment.
Modes of CY and CFS Container Services
CY/CY container service
The CY/CY (read as ‘CY to CY’) container service—door-to-door container service or house-to-house container service—broadly means that the whole container received by the carrier is packed at the shipper’s or the forwarder’s premises, and the delivery of that same whole container to the consignee’s premises.
In a related term, door-to-door service—which is often used in cargo forwarding and may involve the LCL—refers to a freight service available from a forwarder whereby the cargo is picked up at the consignor’s premises and delivered to the consignee’s premises.
CY/CFS container service
The CY/CFS (read as ‘CY to CFS’) container service—door-to-port container service—broadly means that the whole container received by the carrier is packed at the shipper’s or the forwarder’s premises. That same entire container is emptied at the carrier’s container freight station at the port of destination. The consignee arranges the delivery of the loose cargo from the container freight station to his/her premises.
CFS/CY container service
The CFS/CY (read as ‘CFS to CY’) container service—port-to-door container service— broadly means that the delivery of the loose cargo to the carrier’s container freight station at the port of origin is packed into the full container and the delivery of that same container to the consignee’s premises.
CFS/CFS container service
The CFS/CFS (read as ‘CFS to CFS’) container service—port-to-port container service or pier-to-pier container service—broadly means that the delivery of the loose cargo to the carrier’s container freight station at the port of origin is packed into the whole container, and that same whole container is emptied at the carrier’s container freight station at the port of destination. The consignee arranges the delivery of the loose cargo from the container freight station to his/her premises.