Shipping conditions

In international shipping, you'll be exposed to a lot of terminology related to shipping, documents, customs declarations, and more. These multi-word shipping terms may confuse you because you don't know what they actually mean or when you need them. Therefore, here's a list of some common shipping terms to help you master more business knowledge:

Incoterms
Sender, carrier and recipient
Bill of Lading
Certificate of origin
FCL and LCL
4 types of weight
D/A and D/P
Port of loading and port of discharge
Packing list
Shipping order
Arrival note
Incoterms
Incoterms are the most common shipping terms. Published by the International Chamber of Commerce (ICC), they are also known as commercial terms, delivery terms, and price terms. They define internationally the responsibilities, risks, and costs of buyers and sellers under various trade models, such as EXW, FOB, CIF, DDP, and so on.

Shipper, carrier and consignee
The shipper, the carrier, and the recipient are the people who carry out the transaction. They are the foundation of commerce. But in real-life communication, we don't normally use these words.

In practice, the shipper is generally the seller or supplier who arranges the transportation of the cargo.

Carrier refers to transportation companies, such as shipping lines, rail or road transport companies, airlines, etc. In practice, it generally refers to shippers, who are responsible for the shipment of goods. Carriers are agents of these shipping companies.

As a buyer, if you pick up the cargo yourself, you are the recipient. If you entrust someone else with receiving the cargo for you, such as your agent or local carrier, then the recipient is the person you designate.

Bill of Lading
The bill of lading, or B/L or BOL, is a document used in international maritime transport. It is generally issued by the carrier to your supplier. After you pay for your order, your supplier will transfer the B/L to you. The person holding it will be the owner of the cargo. You must bring the B/L with you to collect your cargo at its destination.

Certificate of origin
The Certificate of Origin (CO) is used to prove that the goods were originally produced in the exporting country. It is a necessary document for import customs clearance.

There are several types of COs. The general certificate of origin can be used in most countries. And among some countries, there are preferential certificates of origin, due to 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 you import from China to Australia, you can use the FTA.

By using these preferential certificates of origin for import customs clearance, you may pay fewer duties and taxes, or even no duties at all. Therefore, as a buyer, it's best to know what type of certificate of origin you can use and request it from your supplier.

FCL and LCL
FCL and LCL relate to the way you use a container to ship your cargo. FCL (full container load) means your cargo can fill the entire container and you don't need to share it with others. In other words, all the goods in the container are yours.

LCL (less than container load) means that your cargo isn't too large and you only need a little space in a container to load it. Therefore, you can share a container with others.

In our experience, if your cargo volume is greater than 17 CBM, it's generally more cost-effective to choose FCL shipping. FCL is charged per container, for example, $1,500 for a 20 GP container and $1,600 for a 40 HQ container. If you have two 20 GP containers of goods,

Freight = 2 containers * $1500 per container = $3000

If your cargo volume is between 1 and 13 CBM, LCL is a better option. LCL is charged based on 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 and 17 CBM, you can choose FCL or LCL. It's best to consult with your carrier and calculate both prices, as LCL isn't always the cheapest. Sometimes, the costly labor required for sorting at the port will make the LCL price higher than the FCL.

Weight
In any transaction, whether calculating freight, declaring at customs, or preparing certain shipping documents, it is necessary to show the weight of the goods. There are several commonly used weighing methods:

Net weight
Net weight refers to the weight of the product itself, excluding all packaging. For example, if a mug weighs 0.5 kg, then the net weight of the mug is 0.5 kg.

Gross weight
Unlike net weight, gross weight is the total weight of the product plus packaging. For example, if a 0.5 kg mug is placed in a 0.2 kg box and there is also 0.05 kg of foam in the box to protect the mug, then the gross weight = 0.5 kg + 0.2 kg + 0.05 kg = 0.75 kg. Generally, gross weight is the actual weight of the goods we are talking about.

Both the net and gross weight must be shown on the declaration form and the packing list. However, you must fill in the total weight. That is, if you have 200 of the above-mentioned mugs, then the net weight you must fill in is 100 kg (0.5 kg * 200) and the gross weight is 150 kg (0.75 kg * 200).

Volumetric weight
Volumetric weight, also called dimensional weight. Calculates the weight of a load based on its volume. The calculation formulas vary slightly depending on the transport method.

For example, send a batch of goods by air (actual weight is 95kg and volume is 1.2 CBM).

Volumetric weight = Total shipment volume / 6000 = Total shipment volume * 167

i.e. Volumetric weight = 1.2 * 10⁶cm³/6000 = 200 kg

Or, Volumetric weight = 1.2 CBM * 167 = 200.4 kg

Sending a package of 3 kg and 30 cm * 40 cm * 40 cm by express,

Volumetric weight = Total shipment volume / 5000 = Total shipment volume * 200

i.e. Volumetric weight = 30*40*40/5000 = 9.6 kg

Or, Volumetric weight = 0.048 CBM * 200 = 9.6 kg

For ocean freight, if it's FCL, the charge is based on the container's volume, provided the weight falls within the maximum container load. For LCL shipments, there are different volume and weight conversion ratios. It's best to consult your carrier or agent regarding this.

Billable weight
When shipping 10 kg of books and 10 kg of cotton, the volume of cotton is much greater than that of the books, so the transportation cost is also higher. If the same amount is charged as for 10 kg of books, the carriers will even lose money. Therefore, the billable weight is used to calculate the freight. Compare the actual weight and the volumetric weight and choose the higher weight to charge.

In the example above, the actual weight is 95 kg, but the volumetric weight is 200.4 kg. Freight rates should be calculated based on 200.4 kg. However, the minimum unit is 0.5 kg, so the final billable weight should be 200.5 kg.

D/A and D/P
D/A (Documents Against Acceptance) and D/P (Documents Against Payment) are two payment methods, but they will influence when you can obtain shipping documents to pick up your cargo.

With both D/A and D/P, your supplier will send the bill of lading along with other necessary documents to your bank. The supplier's bank then forwards these documents to your bank. If you pay by D/P, your bank will release the documents to you after receiving your payment.

But if you pay with D/A, you can obtain the shipping documents from your bank after accepting the bill of exchange and promising to pay at a future date. That is, your bank trusts your promise and gives you the shipping documents, while you only need to make the payments on the agreed date.

Port of loading and port of discharge
The port of loading (POL) or loading port refers to the port where the goods are loaded onto the ship. Generally, the seller will choose the nearest port as the loading port. For example, a seller from Yiwu will ship the goods to the port of Ningbo and load them onto the ship there, while a seller from Dongguan will choose the port of Shenzhen.

The port of discharge (POD) refers to the port where the goods are finally unloaded, the port of destination we usually call it. It is also called the port of arrival (POA). For example, if you are importing into New York, the port of New York is usually the port of discharge.

You can agree with the seller to pick up the goods at the port of discharge or designate other final destinations. Suppose your cargo is unloaded at the Port of Los Angeles and then shipped by rail to Denver, Colorado. In that case, the port of discharge is the Port of Los Angeles and the place of delivery is Denver.

Generally, the seller will confirm the port of loading and port of discharge with you and show them on the bill of lading.

Packing list
The packing list is one of the customs clearance documents. It lists detailed information about the goods and their packaging, including product name, specification, quantity, gross weight, net weight, shipping mark, packaging type, and numbers (e.g., goods are packed in cartons, 200 bags per box, 4 dozen per bag), etc.

The buyer must submit the packing list to customs for inspection and verification of the cargo. If a letter of credit is issued, the buyer must strictly comply with the terms of the letter of credit.

Shipping order
The shipping order, or S/O, is issued by the shipping company. It's a document indicating that the company can ship this batch of goods.

The seller must present the S/O to clear the export customs declaration. After customs inspects the goods, they seal the S/O. The goods are then allowed to be loaded and released.

Arrival note
The arrival note (AN) is a notice issued by the carrier when the cargo is about to arrive at the port of destination. The carrier will notify the party notified on the bill of lading. This is usually the buyer, the designated carrier, the agent, or the broker. The notified party should be responsible for customs quarantine, import customs clearance, collection procedures, etc.

The end
There are many shipping terms, but it's impossible to cover them all in one article. If you have any questions about the commonly used terms mentioned above or others, just leave a message below.

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