Freight Shipping Terminology Explained

What's in this article?

Whether you're an individual or a company that needs to transport or receive goods from overseas, coming across freight shipping terminology is inevitable.

Jargon can be hard to understand when it relates to something out of your domain, especially if you don't make shipping transactions often.

In this article, we'll highlight commonly used terms in freight shipping in a non-exhaustive list and what they mean so that you can understand your next shipment like a pro!

What are Incoterms®?

Incoterms® is an internationally recognized standard for trade agreements. This agreement helps avoid misunderstandings and ambiguity in contracts.

The latest version of Incoterms®, published in 2017, includes 21 different terms describing how products are shipped.

Freight Shipping Terminology

Aggregate shipment

Aggregate shipment is a term used for multiple shipments from different shippers going to one consignee (e.g., a warehouse).

They are combined into one shipment and sent together.

A blind shipment is a shipping method where the manufacturer's details are withheld from the customer by the supplier, intending to directly send goods to the customer without needing a middleman, like a distributor.

Bill of lading (BOL)

A bill of lading is one of the most common forms of shipping contract used, also known as the "contract of carriage."

Shippers use it to describe the contents of containers being shipped and for consignees to receive the shipment with proper documentation and clearance.

It typically contains the container's name, destination port, the type of goods, and the quantity of each good.

Bulk freight

The term bulk freight refers to a freight shipment of items that don't require special handling, like being packed into containers. These items are typically shipped via truck, rail, ship, or air.

There are many different types of goods that are transported via bulk freight, such as grains, fertilizers, paper, plastics, steel, and wood.

Cargo

This refers to any kind of good that is being transported.

Cash on delivery (COD)

The condition of using cash as a payment method for delivered goods and making the payment at the delivery time.

Certificate of inspection (COI)

A document issued by a customs official certifying that all required documents were presented before the cargo was released.

It also indicates whether the goods were cleared through customs.

Certificate of origin (CO)

A certificate of origin (CO), also known as a customs declaration form, is used to document the origin of goods entering the United States.

A CO must accompany each shipment of merchandise brought into the United States.

If you import items from outside the United States, you must obtain a valid CO before importing those goods into the United States.

The CO is usually filed with the importer, but it may also be filed with a foreign trade zone operator, such as a port authority or customs broker.

Container load

A container load is the amount of cargo contained within one container.

Customs clearance

The term "customs clearance refers to the process of assessing an outgoing shipment before allowing it out of the country.

This assessment involves determining whether the item meets the requirements set forth by the country the goods are being exported from.

Demurrage/detention

A demurrage fee is a payment made by a shipper or a consignee to a carrier as a penalty for delaying the shipment beyond the allowed free period.

Demurrance is the same as detention, except that it applies to equipment rather than cargo.

Embargoes

When an item is embargoed, this means that it has been prohibited from entering or leaving a location, such as a port or country, for economic reasons or safety and security purposes.

Embargoes can come in the form of trade barriers, quotas, bans, and many others.

Forty-Foot equivalent unit (FEU)

A container that meets standard measurements, 40 feet long, 8 feet tall, and 8 feet wide, would be referred to as a forty-foot equivalent unit.

Containers with these dimensions can typically hold up to 23 pallets.

General Agreement on Tariffs and Trade (GATT)

The GATT was signed in 1947 as a binding, legal agreement among countries with the intention of promoting international trade and getting rid of trade protectionism that would reduce fairness for the countries under GATT.

Import declaration

This document contains essential information about the goods you're importing. It's usually required upon entry borders or at customs.

You must fill it out completely and honestly, as you can face charges or fines for falsification.

The following sections can usually be seen in an import declaration form:

• Name of importer/exporter

• Address where the goods are shipped from and delivered to

• Description of the goods

• Value of the goods

Intermodal

Intermodal shipping refers to goods sent by multiple modes of transportation, such as containers transported by a truck, train, ship, or plane.

It also refers to the goods being transported without any direct handling of the goods themselves.

Intermodal transportation can also be referred to as the "carriage of goods by at least two different modes of transport," defined by the European Conference of Ministers of Transport.

Less-than-truckload (LTL)

When cargo doesn't fill the capacity of a trailer truck, leaving empty space means that the freight is less-than-truckload.

Consequently, couriers tend to combine the cargo with other cargo to ensure the truck's capacity is filled to the maximum.

Net weight

When goods are transported, they are typically wrapped in additional packaging to avoid any exterior damage.

Therefore, the net weight of the good is its weight, excluding the weight of the packaging.

Onboard

Written confirmation, usually on a bill of lading that the cargo to be shipped is already present on the vehicle of transportation.

This is often used for seafaring freight.

Overage

Where shortage indicates a lower number of physically-counted items than what is stated on export/import documentation.

Overage is the opposite, in which there is a greater amount of physical items than what is written.

Payment terms

Refers to the conditions for payment that are agreed between a seller and a buyer.

Point of origin

Represents the opposite of the destination. This refers to where the goods are coming from.

Proforma invoice

A document that is not intended to be the final quotation as the basis of payment.

Instead, it is a preliminary bill sent by the seller or provider of services for advanced delivery of goods or orders placed in advance to the customer.

Quarantine

This refers to when goods are temporarily suspended and stored in a certain location for a period of time, typically due to health and safety precautions.

Goods can also be put into quarantine if there are documents that have yet to be completed.

Quota

Quota is the term used for a predetermined amount of goods that are allowed to be exported or imported for a certain period of time.

Shipper's letter of instruction (SLI)

This is a document that authorizes an exporter's agents or freight forwarders to issue a bill of lading on their behalf.

Supply chain

This refers to the entire network involved, from creating a product or service until it reaches the end consumer.

Third-party logistics (3PL)

A company that provides logistical support for other companies, such as storage and transportation.

Conclusion

Freight shipping terms can seem like a foreign language when you first hear them.

But once you understand the basics, it becomes much easier to navigate the world of freight shipping.

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