Understanding Common International Shipping Terms

Confused by all the shipping terms out there? Don’t worry—you’re not alone! International shipping can feel complicated, especially with so many unfamiliar terms and regulations to navigate. However, understanding the basics can make the entire process much easier and less stressful.

To make it easier for you, we’ll break these terms down into categories and types so you can better understand them and manage your shipments confidently.

Let's get started!.

Why Shipping Terms Matter

Shipping terms are the foundation of smooth international trade, setting clear expectations between buyers and vendors.

1. Clarity in Responsibilities: Shipping terms define who is responsible for specific tasks, costs, and risks, minimizing misunderstandings.
2. Cost Control: Clear terms prevent hidden or unexpected logistics expenses.
3. Risk Management: They outline liability during transit, specifying when risk transfers from the seller to the buyer, protecting goods and investments.
4. Customs Compliance: Streamline clearance by assigning documentation and duties.
5. Efficiency in Operations: Reduce delays and keep goods moving seamlessly through the supply chain.

Now that you understand why shipping terms are essential, let’s examine key terms and abbreviations that simplify global trade.

8 Key International Shipping Terms and Abbreviations

Understanding the key terms that define responsibilities, costs, and documentation in shipping is crucial for smooth global trade operations. Here are some essential shipping terms and abbreviations that every importer and exporter should know:

1. Incoterms (International Commercial Terms)

Incoterms are globally recognized rules that define the responsibilities of sellers and buyers in international trade. They clarify who handles transportation costs, risks, and customs duties.

• EXW (Ex Works): Buyer assumes all responsibilities from the seller’s premises onward.
• FOB (Free On Board): Seller delivers goods onto the ship; buyer takes over from there.
• CIF (Cost, Insurance, and Freight): Seller pays for freight and insurance to the destination port.
• DDP (Delivered Duty Paid): Seller delivers goods, covering all costs, including import duties.

2. COD (Change of Destination)

This term allows you to change the shipping destination while the cargo is in transit. It’s useful for businesses that need flexible delivery options.

3. CYCY (Container Yard to Container Yard)

CYCY refers to a shipment in which containers are delivered and picked up at designated container yards. It’s often used for sea freight.

4. HS Code (Harmonized System Code)

The HS Code is a standardized classification system for goods. Customs authorities worldwide use it to calculate tariffs and duties.

5. ETA/ETD (Estimated Time of Arrival/Departure)

These terms provide the expected timelines for a shipment’s arrival or departure, helping businesses plan deliveries efficiently.

6. Demurrage

Demurrage refers to charges incurred when cargo is not cleared or picked up within the allocated free time at the port. It’s crucial to avoid delays to prevent extra costs.

7. Detention

Detention charges apply when you fail to return shipping containers to the carrier within the agreed timeframe.

8. Wharfage

Ports charge wharfage fees for the use of their facilities to load, unload, or store cargo. These fees are usually part of the total shipping costs.

Now that you're familiar with the terminology, let’s dive into the types of shipments and the specific terms that govern them.

Also read: What Is Wharfage? Overview & Benefits

Shipping Terms for Different Shipment Types

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Understanding the types of shipments helps you choose the best option for your cargo and budget. Each shipment type comes with unique advantages that suit specific business needs. Here are the most commonly used shipment categories:

1. Parcel Shipments

Parcel shipments are ideal for small-scale deliveries. They cater to businesses sending individual packages or smaller goods, often weighing less than 50 kg. E-commerce businesses and small consignments commonly use this type of shipment, where speed and tracking are priorities.

2. Less-than-Truckload (LTL)

If your cargo isn’t large enough to occupy an entire truck, Less-than-Truckload (LTL) shipping is a cost-effective option. LTL shipments combine goods from multiple businesses in a single truck, allowing you to split freight costs with others. 

3. Full Truckload (FTL)

When you need exclusive use of a truck for a large shipment, Full Truckload (FTL) is the solution. FTL shipments are more secure and faster because the goods travel directly to their destination without multiple stops. Though costlier than LTL, FTL eliminates risks like damage from frequent handling.

With shipment types explained, it’s time to look at how the choice of transport mode can change the shipping terms you encounter.

Also read: LTL Freight Shipping and Logistics Solutions

Shipping Terms Based on Mode of Transport

Each mode of transport comes with specific terms that simplify logistics and communication. Knowing these terms helps you coordinate seamlessly with freight forwarders, suppliers, and carriers.

1. Air Transport

Air transport is best for urgent or high-value goods. Here are common terms you’ll come across:

• AWB (Air Waybill): A document that serves as a contract for air cargo transportation.
• Chargeable Weight: The weight used to calculate air freight charges based on actual or volumetric weight.
• IATA (International Air Transport Association): The regulatory body for international air carriers.
• ULD (Unit Load Device): Containers or pallets used to group cargo for air transport.

2. Sea Transport

Sea freight is a cost-effective option for bulk and long-distance shipments. Important terms include:

• Bill of Lading (BOL): A key legal document that confirms the receipt of goods for shipment.
• TEU (Twenty-foot Equivalent Unit): Standard unit for measuring container capacity in ships.

3. Road Transport

Road transport offers flexibility and direct delivery. Common terms include:

• POD (Proof of Delivery): A document confirming that goods were delivered successfully.
• Cross-Docking: Transferring goods from one truck to another with minimal storage time.

4. Rail Transport

Rail transport is efficient for heavy or bulk shipments over long distances. Key terms to know are:

• Block Train: A dedicated train carrying cargo directly to a single destination.
• Freight Carriage Charges: Costs associated with transporting goods via rail.
• Waybill: A document providing details about the shipment, including route and destination.
• Multimodal Transport: Combining rail with other transport modes like road or sea for seamless delivery.

Now that we've covered transport-specific terms, it's time to review the key shipping documents and the essential terms associated with them.

Essential Shipping Documents and Their Terms

Shipping documents are vital for smooth international trade. They confirm transactions, help clear customs, and ensure safe delivery. Here's a list of key documents you'll encounter:

1. Commercial Invoice:

A formal bill provided by the seller to the buyer, listing goods sold and their value.

• Purpose: Used for customs clearance.
• Contents: Product details, value, buyer/seller info, and terms of sale.

2. Packing List: 

A document that itemizes the exact contents of a shipment for verification.

• Purpose: Assists customs and inventory checks.
• Contents: Item descriptions, weights, dimensions, and packaging details.

3. Certificate of Origin

An official document certifies where the goods were manufactured.

• Purpose: Affects tariffs and taxes.
• Contents: Exporter details, product description, and country of origin.

4. Delivery Order

A document issued to authorize the release of goods to the consignee at the destination.

• Purpose: Allows consignee to collect goods.
• Contents: Shipment info, consignee details, and release instructions.

5. Dangerous Goods Declaration (DGD)

A mandatory document for shipping hazardous materials to ensure safe handling.

• Purpose: Ensures safety in transport.
• Contents: Description of hazardous goods, safety precautions.

6. Export Declaration

A statement that provides details of the goods you are exporting to comply with regulations.

• Purpose: Ensures export compliance.
• Contents: Product description, value, destination.

Having these documents ensures smooth customs processing and timely delivery. Next, we’ll look at additional shipping terms and fees.

How Pazago Can Take Your Shipping to the Next Level

At Pazago, we’re not just about helping you understand shipping terms. We’re here to revolutionize your entire shipping experience. With our cutting-edge technology, we optimize your logistics, improve efficiency, and ensure you stay on top of global trade.

• Automated Documentation & Management: Pazago automates document generation and ensures compliance, helping you manage all export paperwork in one secure place.
• Shipment Tracking: Real-time tracking keeps you updated on shipments, preventing delays and enhancing client communication.
• Communication Tools: Centralized chats improve coordination, ensuring smooth interactions with your team, suppliers, and partners.
• Logistics & Insurance: Pazago simplifies logistics planning and insurance management in one seamless process.
• Integrated Finance: Simplify FX risk management and financial processes, improving visibility and control over your logistics operations.

By using these innovative solutions, Pazago ensures a smoother, more efficient shipping process, reducing costs, minimizing risk, and enhancing your international trade experience.

Conclusion

Understanding shipping terms is essential to ensuring your goods reach their destination smoothly and efficiently. With a solid grasp of terms like Incoterms, shipping modes, and key documents, you can streamline your processes, avoid delays, and stay compliant with global regulations.

Pazago takes this a step further by leveraging advanced technology to optimize your logistics, enhance efficiency, and simplify every aspect of the shipping process. 

Simplify Global Trade. Let Pazago help you optimize your trade today.