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Incoterms 2010

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The terms in this glossary have been carefully selected from those encountered in the shipping business.
We hope you will find them useful.

The assumes no liability for its contents or use thereof nor does it endorse products.

Ad Valorem
According to the value. For example, an import duty rate of 10% ad valorem means 10% of the value of the goods.

An independent person or corporation acting as a representative, usually in a foreign market, who attempts to sell products
for an overseas seller (principal) and earns a commission on successful sales. Agents are not normally involved in delivery or
servicing of product.

Air Waybill (AWB)
The document which covers transport by air. It is issued by the carrier, whether an airline or a freight forwarder, as a
non-negotiable document serving as a receipt to the consignor for the goods, and containing the conditions of transport. It
also shows the details of the consignee so that they can be contacted on arrival of the goods.

House AWB issued by a freight forwarder acting as a carrier.
The term used for the AWB issued on airline's stationery to a freight forwarder for all of the goods covered by one or more
House AWB's on the one flight going from one loading airport to one destination airport.

buyer who has requested his bank to arrange an L/C on his behalf. In some countries where the buyer may have trouble
arranging an import license, the applicant may be a third party acting on behalf of the buyer.
Bunker Adjustment Factor - an adjustment to shipping companies freight rates to take into account fluctuations in the cost of
fuel oil (bunkers) for their ships.

Bank Guarantee
A document issued by a bank acting as a guarantor for their customer. The bank's guarantee is accepted because of their
status and creditworthiness compared to that of their customer. Often used in conjunction with major projects, in the form of
Bid Bonds, Performance Bonds and Warranty Bonds, commonly for 10% of the contract value, all of which provide the buyer
with a measure of comfort should the seller not fulfill his obligations at various stages of the contract.

The seller in whose favor an L/C is issued, ie the person who will "benefit" from the L/C.
(See also Letter of Credit).

Bill of Exchange
unconditional order in writing, issued by the seller (drawer) instructing the buyer (drawee) to pay the seller's bank
payee) a specified amount (normally the full invoice value) on demand (at sight) or at a fixed or determinable future time.
A suitable form can be obtained from the seller's bank, or drawn up on a blank sheet of paper.

Bill of Lading (B/L)
The document which covers transport by sea. Signed by the carrier, whether a shipping line or a freight forwarder, it serves
as a receipt to the consignor for the goods, as evidence of the contract of transport containing the conditions of transport,
and as a document of title by which possession of the goods can be transferred. Typically a B/L is issued in a set of three
signed originals or negotiable, one of which must be presented to claim the goods upon which the others become void.

* Combined Transport / Multimodal B/L
A B/L covering transport by shipping container from an inland place prior to the loading port, to an inland place beyond the
destination port. Most freight forwarders and shipping companies title their B/Ls as "Bill of Lading for Combined Transport or
Port-to-Port shipment" or similar.

* Congen B/L
A standard form of bill of lading used in shipments by chartered ship.

* Clean B/L
A bill of lading indicating that the goods were received by the carrier in good order and condition, without any clauses
declaring a defective condition in the goods and/or their packing.

* Dirty/Foul/ Classed B/L
A bill of lading with any clauses declaring a defective condition in the goods and/or their packing. Almost invariably not
acceptable to banks for presentation under L/Cs and almost always not acceptable to the buyer.
(See also Clean Bill of Lading).

* House B/L
A bill of lading issued by a freight forwarder acting as a carrier. The terms and conditions of the contract may well be
different to the terms and conditions contained on the shipping company's B/L, which can in extraordinary circumstances
lead to legal complications should a dispute arise.

* Master B/L
The term used for the B/L issued by a shipping company to a freight forwarder for all of the goods covered by one or more
House B/Ls on the one ship going from one loading port to one destination port.

* Ocean B/L
A B/L covering port-to-port shipment. Typically banks continue to use this term on L/Cs even though the majority of
international shipments are containerized
(See also Multimodal B/L).

* On Board/ Shipped On Board B/L
A B/L evidencing that the goods were not only received by the carrier but were actually loaded on board in good order and
condition. "Shipped" indicates that not only were the goods on board, but that the ship has departed the port.

* Order B/L
A negotiable B/L, in which the goods are consigned "to order of" a particular party, often the shipper in which case the
consignee is mostly shown simply as "to order".

* Straight B/L
A non-negotiable B/L in which the goods are consigned directly to a named consignee.

Colloquial term for a shipping container.

Non-containerised cargo.

Service Rate Additional - the charge levied by shipping companies to importers for LCL cargo, including the port charges,
 transport to an unpacking depot (see CFS) subsequent sorting and storage of the goods and finally loading onto a vehicle
collecting the goods for delivery to the buyer
Currency Adjustment Factor - an adjustment to shipping companies' freight rates to take into account the effect over time of
fluctuations in currency exchange rates.

Carnet ATA
A document, normally issued by a Chamber of Commerce which is a member of the International Chamber of Commerce (ICC)
to enable the holder to temporarily take merchandise into certain countries, as samples or for display purposes, without the
need to pay import duty or pay a bond for the duty. The issuer will require the holder to give them security by way of a bank

Cash against Documents (CAD)
An arrangement whereby the buyer pays for goods as soon as the buyer receives the seller's documents. There is normally
an intermediary involved, ie a bank or an agent acting on behalf of the seller, to ensure that the transaction takes place

A general term for any document issued by the seller or another party, certifying to some action having taken place or some
fact about the goods.

Certificate of Origin
A certificate stating the country of origin of the goods. Depending on the importing country's requirements, this can be as
simple as being issued by the seller or the manufacturer. In most cases however, it is required to be issued by a Chamber of
Commerce in the country of origin.

Container Freight Station - place or depot where individual LCL cargo is loaded into, and unloaded from, containers

A written contract between a ship-owner and a charterer who rents use of the ship or part of its freight capacity. A voyage
charterparty is a contract covering transport of goods from one or more ports to one or more ports and will detail the costs
and responsibilities involved.

Commercial Invoice
A document issued by the seller, addressed to the buyer, giving details of the individual transaction, including complete
description of the goods, prices, currency, delivery and payment terms and so on. This is generally used by the Customs
authorities in the importing country to assess customs duties payable.

A group of shipping companies who have associated to offer regular services on specific routes at published rates.
Sometimes referred to as liner shipping. Non conference shipping lines are sometimes referred to as independent or

The party shown on the bill of lading or air waybill to whom the shipment is consigned. Need not always be the buyer, and in
some countries will be the buyer's bank. See also Bill of Lading - Order B/L and Notify Party.

Where a freight forwarder groups, or consolidates, one or more shipments for one or more shippers to the one destinations
one overall shipment. (See also House B/L and Master B/L).

Consular Invoice
The seller's commercial invoice certified, for a fee, in the exporting country by the consular representative of the importing
country. Now required only by a handful of countries.

Container ship
Ship designed to take ISO (International Standards Organization) containers in vertical cells within the ship's holds as wellas
on the deck. These ships generally rely on infrastructure on the wharf to load and unload the containers.

Conventional ship
Ship designed with holds which can load almost any type of loose cargo, such as drums, sacks, crates, pallets
etc. These
ships are designed with their own derricks for loading and unloading.

Customs Broker
A person or corporation licensed by the Australian Customs Service to handle on behalf of importers the process of clearing
goods through customs.

Customs Duty
A tax, duty or tariff levied at the time of import upon goods entering a country. Usually based on the value of the goods
(ad valorem), on the physical nature of the goods such as quantity or weight, or on a combination of the value and other

Container Yard - place or depot where individual containers are held prior to loading on board a ship and after unloading from
the ship. Can be inland or at the dock-side.
Documentary Collection
A method whereby the seller uses the services of his bank to ensure that the buyer only receives the shipping documents
under conditions specified by the seller, ie upon payment, or upon acceptance, of the seller's bill of exchange. (see also Bill of
Exchange, Cash Against Documents and URC522).

Documentary Credit
The officially correct term for Letter of Credit. The UCP500 only mentions "Documentary Credit" not "Letter of Credit".
(See also Letter of Credit and UCP500).

Extra charges paid to a carrier when loading and/or unloading has not been completed within the specified time.

Documents against Acceptance (D/A)
see Documentary Collection

Documents against Payment (D/P)
see Documentary Collection

see Bill of Exchange

see Bill of Exchange

see Bill of Exchange

The practice of selling goods in a foreign market at a price lower than which they would be sold at in the home market, to
gain a competitive advantage over other suppliers. If this is shown to be injurious to locally-based suppliers in the foreign
market, the government of that country may impose remedies by way of anti-dumping duties.

Duty Drawback
If goods which have been imported, and upon which customs duty has been paid, are exported or have been used in the
manufacture of goods which have been exported, then the exporter may be entitled to a refund of the original import duty
Exchange Rate
The price of one currency in the terms of another.

To send goods from a country to an overseas destination.
FI (Free In)
In the international ocean freight terminology the word “Free” means “Not included”. I.e. if FI, then the shipper is responsible
for the coast of loading goods onto a vessel for the international shipping overseas.

FO (Free Out)
FO is the international shipping term in ocean freight that indicates that the consignee (recipient) is responsible for the cost
of unloading cargo from the vessel at the destination.

FIO (Free In and OUT)
The international shipping term used in the ocean freight industry means that the carrier is NOT responsible for the cost of
loading and unloading gods onto/from the vessel.

Flat Rack
A device which is designed for cargos which will not fit into containers to be shipped on container ships. Consists of a base
and two ends of the same dimensions as an ISO container.

Force Majeure
A clause in a contract which protects both parties in the event that part of the contract cannot be complied with due to
causes outside the control of the parties and could not have been avoided by exercising due care. For example, floods,
earthquakes, civil unrest and so on.

Freight Forwarder
A person or corporation who arranges transport of goods on behalf of either the seller or buyer. In many cases the freight
forwarder will also consolidate several small shipments into one larger one to take advantage of better freight rates. In most
cases the freight forwarder will assume the legal liabilities of acting as a carrier
Gross Weight
The total weight of a shipment of goods, including their packaging such as crates, pallets etc.

see Consolidation
Hazardous Goods
Certain cargoes, as prescribed by the UN, such as explosive, radioactive, poisonous and flammable goods etc, which must be
declared to the carrier before being loaded onto ships or aircraft
. The penalties for mis-declaring or failing to declare
hazardous or dangerous cargo are extremely high.
To bring goods from overseas into one's country.

Incoterms 2010 (New)
A set of rules for the interpretation of the most commonly used trade terms in foreign trade, recognized throughout the world, 
issued by the International Chamber of Commerce.

A process whereby someone with a risk of something happening to their financial detriment (the assured) pays someone else
(an underwriter) a fee (premium) to bear that risk on their behalf.

Insurance Certificate
A certificate issued by the insurance underwriter giving details of a particular transaction which is held insured under an
insurance policy.

Insurance Policy
Contract of insurance
Landed Cost
The total cost which an importer pays to have goods delivered into their premises. This typically includes the costs of the
goods, international transport, insurance premium, port charges, customs duties, delivery charges,
bank charges etc.

Less than Container Load, a small amount of cargo insufficient to on its own be economically shipped as FCL. It will be
combined with other LCL cargo from other shippers going to the same destination port, into an FAK FCL.
See also Consolidation.

Letter of Credit
A conditional order in writing, issued by a buyer's bank, guaranteeing to pay the seller upon presentation of stipulated
documents, strictly in accordance with the credit. It is strongly recommended that every exporter and importer has a copy
of the "Uniform Customs and Practice for Documentary Credits", International Chamber of Commerce publication 500.
These are available from most major Chambers of Commerce, or from us at AUD 20.00 including postage, handling and
GST, to Australian addresses only.

Letter of Credit - Confirmed
A letter of credit which has been further guaranteed by a local bank generally in the exporter's country.

Letter of Credit - Irrevocable
A credit which cannot be revoked, cancelled or amended unless the beneficiary agrees. Virtually all L/Cs issued under UCP500.

Letter of Credit - Discrepancy
Where a document does not comply strictly with the terms and conditions of an L/C.

Letter of Credit - Under Reserve
Where documents with discrepancy/ies are nevertheless negotiated against an L/C, and the negotiating bank reserves the
right to take back the funds from the exporter if the discrepancy is not acceptable to either the buyer or the L/C issuing bank.

Liner terms
Freight rates which include loading/unloading charges, generally with a regular shipping lines.
A list of the various shipments being carried on a ship or aircraft.
Nett Weight
The weight, or mass, of the goods themselves without any packaging.

Notify Party
The person or company to be advised by the carrier upon arrival of the goods at the destination port.
On Board / Shipped On Board
A notation on a bill of lading, indicating that not only did the carrier receive the goods in good order and condition, but they
were also placed on board the ship.

Open Account
The seller allows the buyer to send payment at some future time (ie 60 days).
Packing List
A document which details the contents, and often dimensions and weight, of each package or container.

see Bill of Exchange

Phytosanitary Certificate
A document issued by the Department of Agriculture, Fisheries and Forestry, for exports from Australia of plants or plant

Port charges
see APCA, BSRA and PSC

The buyer pays the seller for the goods prior to shipment.

Pro Forma Invoice
A sample invoice issued by the exporter before shipment, which the importer may require to arrange import approvals or
apply for a letter of credit. It can also be used as an offer to sell goods.

Port Service Charge, similar to APCA.
Colloquial for a refrigerated container

A "roll-on/roll-off" ship, where loaded transport vehicles are driven onto it, such as a car ferry, or where containerized and
other cargo is loaded into it by forklifts or similar. Shipping Marks. Specific markings on packages to identify them apart from
other packages and to identify them on the relevant documents.
Sight Draft
A bill of exchange drawn "at sight" meaning that as soon as the drawee accepts the bill it falls due for payment.
See also Bill of Exchange.

Said to contain, often placed before the description of goods on a bill of lading because the carrier does not know the
nature or quantity of goods actually placed in the packages or the containers.

Society for Worldwide Inter-bank Financial Telecommunications, whereby banks can electronically transfer funds, issue
L/Cs, etc.
Telegraphic transfer, an electronic means of transferring funds between banks, generally using SWIFT.

The weight of packaging or a container without the goods.

The period of time before a bill of exchange falls due for payment

Term Draft
A bill of exchange drawn for a period other than at sight or on demand.

Twenty-foot equivalent unit, the means of describing the carrying capacity of a train or ship. For example, a 40 foot
container takes up the space of two TEUs.

Terminal handling charge, levied by CY and CFS operators for goods passing through their operations.

To Order
see Bill of Lading, Order B/L.

Goods are transferred from one ship to another at an intermediate port. Can also refer to goods being transferred from one
method of transport to another.
Uniform Customs and Practice for Documentary Credits, International Chamber of Commerce publication 500, which lays out
guidelines for banks to follow when dealing with L/Cs. (See also Letter of Credit).

Uniform Rules for Collections, International Chamber of Commerce publication 522, which lays out guidelines for banks to
follow when handling Collections.
(See also Collections).
Value for Duty
The value of an import declared to the customs upon which customs duty will be calculated. In Australia, the value of the
goods at the time of export from the exporting country, thus generally the FOB value and using the exchange rate at the
date of export. Many other countries use the CIF value at the time or declaration in the importing country.

A notional or calculated weight for bulky goods sent by air. Generally stated as 6000cm3 = 1 kg, meaning thatthe total
volume in cubic centimetres is divided by 6000 to give an equivalent weight in kgs. The airline or forwarder will charge
whichever is the greater of the actual weight and volumetric weight. Also shown sometimes as 167 kg = 1 cbm
see APCA, BSRA and PSC


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