4 Common Shipping Terms with Detailed Explanations and their Usage in International Trade for Newbies!

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Shipping products from one place to another seems fairly easy, just pack the stuff and send it.  But shipping comes with its own set of shipping terms which can be troublesome for someone new in the trading process. Within the market, different industries rely on one another for various kinds of supply. The entire process which looks relatively simple is carried out at a vast level and requires co-operation and effective communication. Correct and on-time shipping of these products is crucial for a harmonious function of the economy. Being involved in the world of trade can sometimes be confusing as there are numerous terminologies that one needs to be aware of especially if someone is new. Looking at various abbreviations can make someone feel overwhelmed with information and alphabet jargon. 

Most common shipping terms and their meanings. Image source: canva.com

Depending on the size of the product, it is defined as a parcel, less-than-load (LTL), or a full truckload (FTL) shipment. Your shipments can be too small for certain carriers and large containers require certified carriers. There are unique shipping terms for different modes of transportation – sea, air, road, or rail.  This wide variety of shipping terms involved in the process of moving goods through the supply chain can become confusing. But understanding related terms is crucial to ensure that the goods are shipped on-time, within compliance, and in good shape. Here’s a guide to some common shipping terms:

  1. Cargo Insurance

Cargo is referred to any goods that are being shipped irrespective of the mode of transportation. Usually, a carrier provides minimal compensation if a carrier falls overboard in a sea or gets stolen during the shipment process, so it’s important to get cargo insurance done especially in case of valuable items. There are 3 Institute cargo clauses A, B, and C. These clauses are internationally recognized and doesn’t vary with companies. Clause A covers all kinds of risks. Clause B and C cover lesser risks are and cheaper than Clause A.

The same applies to different modes of transportation as well. In shipment via road, the maximum liability of a trucker varies from country to country. With shipping via air, it differs with the nationality of the airline but usually, they cost around $30 per kg. Ocean shipment varies, but maximum liability varies between $500 to $900 per shipment. Which makes cargo insurance imperative for ocean shipment.

  1. Shipping Weights and Volume

Carefully understand the terms and conditions of the carrier being used for the shipment process. If the shipment is by road, you need to know whether the shipment is FTL or LTL. A full truckload (FTL) is a carrier that offers the entire truck for a single customer’s shipment. Less-than-truckload (LTL) is a medium level shipment that accumulates various different shipments in a single truckload.

For ocean shipments, there is a full container load (FCL) and less than container load (LCL). In shipment, customers either pay by weight or volume. An individual can save up if the product is densely packed by paying via volume. If the shipment is smaller than 1 ton, then a higher price between weight or volume is taken into consideration. 

Air shipment follows a fixed volume formula rule, customers pay for 1 ton as long as the product doesn’t take up more than 6 cubic meters in volume. If the shipment exceeds 6 cubic meters, then the payment is via volume. Air shipment has the advantage of metric calculation over kilograms. 

  1. Certificate of Origin

Sometimes the countries ask for the origin of the product as it might affect the trading agreements between countries. Certificate of origin is a document certifying where the goods were originally manufactured, commonly known as COO. A COO can be used for preferential duty treatment in case of a free trade agreement. The customs authority of the country of import can also ask for a COO, in such cases, the COO must be stamped by the Chamber of Commerce. All these requirements are brought to knowledge prior to the shipment process usually by the carriers.

  1. Hazardous Materials (HazMat)

They are interchangeably used with the term “dangerous good”. Hazmat products are goods that pose a threat to safety, they can be explosive, toxic, flammable, poisonous, corrosive, etc. The term “dangerous goods” is more commonly used in international shipments and “hazardous goods” in domestic shipments. The shipment of hazmat products requires special documentation that contains preventive measures in case there is an emergency situation concerning the product for safety purposes. 

While the basic concept of shipment of a product from point A to point B may not seem complicated but the structured process behind it can become confusing for people. So, it is important to familiarize yourself with different functions and shipping terms before availing of the services.