FAQ

This is a trade term used by sellers and buyers to qualify the contract between them. INCOTERMS 2000 is the latest version of the International Chamber of Commerce’s definitions of such trade terms. While not a law, the INCOTERM definitions are used worldwide and bring certainty to the detail of the contract.

FOB (Free On Board) is one of the common trade terms in use. Yet this ‘common’ aspect of the term has resulted in the vast array of definitions found all over the world for FOB. Some of these various terms directly contradict others, and many are supported by domestic legislation making such definitions unique to a specific country or to a specific port.

In defining FOB as an INCOTERM, it is expressed as being Monomodal and it can only be used for transactions where seafreight is the main carriage. Under INCOTERMS 2000, risk and responsibility pass from the Seller to the Buyer when the goods cross the (named or unnamed) ship’s rail at the (named) port of loading, cleared for export by the Seller. Note also that costs pass at this same nominal mid-point, which clearly cr eates a problem in calculating such a division.

For FOB to apply, the Seller must be in the physical position of being able to load the cargo to (and thereafter across) the rail under their own direct control. This would involve the Seller’s own labor, or an agent that is under the contractual control of the Seller. Further this process would have to be monitored by both the Seller and Buyer or their representatives. Generally, from a modern perspective, this control often cannot be achieved as the Seller is either not allowed into the harbor area or, even in those extreme circumstances where they are, they have no influence over the party loading the vessel. The INCOTERM FOB still has an application in some markets, but these are more and more in the minority. Note that the use of an ‘on-board’ Bill of Lading or mate’s receipt could be appropriate in recording the passage of risks under FOB making FOB one of the few terms still unavoidably dependant on such documents.

Twenty-foot Equivalent Unit & Forty-foot Equivalent Unit.
Both of these expressions are used in sea freight Containerized trades. The expression ‘TEU’ is used when describing the length of a container – it means ‘twenty-foot equivalent unit’ the reference is to the length of a standard 20ft ISO container.

The ISO (international standards organization) who first determined the standard dimensions for containers is based in New York. Consequently, the standard sizes that they settled on are all given in ‘imperial’ measurements and not metric ones. Note then that a ‘twenty-foot’ container is often incorrectly given it’s nearest metric length of 6 meters (The true metric length of a 20 foot container being slightly more than this).

So, a standard length 20ft or 6m container is one teu (it is equal to one twenty-foot length). Using the same formula then, a 12m or forty-foot container is equal to two teu’s. This is sometimes expressed ‘feu’ (meaning forty-foot equivalent unit).One hundred 40ft container are equal to 200 TEU’s

The use of the expression is often seen in Rail freight when a container carrying train is referred to as been a ‘100 teu’ carrier. This means 100 x 20ft containers or 50 x 40ft containers or (more importantly) any combination thereof.

There have been some developments in the use of a longer ISO design – the 50ft container. Should this variation be used, it would become equal to 2.5 teus.

Twenty-foot Equivalent Unit TEU & Forty-foot Equivalent Unit FEU.
Both of these expressions are used in sea freight Containerized trades. The expression ‘TEU’ is used when describing the length of a container – it means ‘twenty-foot equivalent unit’ the reference is to the length of a standard 20ft ISO container.

The ISO (international standards organization) who first determined the standard dimensions for containers is based in New York. Consequently, the standard sizes that they settled on are all given in ‘imperial’ measurements and not metric ones. Note then that a ‘twenty-foot’ container is often incorrectly given it’s nearest metric length of 6 meters (The true metric length of a 20 foot container being slightly more than this).

So, a standard length 20ft or 6m container is one teu (it is equal to one twenty-foot length). Using the same formula then, a 12m or forty-foot container is equal to two teu’s. This is sometimes expressed ‘feu’ (meaning forty-foot equivalent unit). One hundred 40ft container are equal to 200 TEU’s

The use of the expression is often seen in Rail freight when a container carrying train is referred to as been a ‘100 teu’ carrier. This means 100 x 20ft containers or 50 x 40ft containers or (more importantly) any combination thereof.

There have been some developments in the use of a longer ISO design – the 50ft container. Should this variation be used, it would become equal to 2.5 teus.

Free In & Free Out also refered as Terminal Handling Charge – THC
This term is used in containerized seafreight to describe the charges raised by the Port of Arrival or Discharge to lift the container onto or off the vessel.

The cost normally embraces movement within the harbor to get the container to or from the ‘stack’. The ‘stack’ is literally the place where the containers are stacked during their period in the harbor and it is common for different vessels to involve different stacks. In a groupage (consolidation) shipment, cost will also include unloading of the cargo from container and discharging in a warehouse.

It is not common for the THC at origin or destination to be included in the actual ocean freight charges, although it might be possible to arrange this. The reason for this is that Ocean Freight is generally charged out in US $ whereas the THC would be cost incurred in a local currency – which may be weaker than the dollar. To pay the THC as part of the freight could, therefore, actually increase the cost of that event.

THC is also sometimes referred to as FIO: Free In & Free Out. While not the same, FIO refers only to the unloading of the container from vessel to the stack or vice versa.

Pre (or Post) – Shipment Inspection
A Pre-Shipment inspection involves the inspection of cargo prior to loading or shipment by either an independent third party or by a representative of the buyer. The inspection is called for to assess the quantity, quality, composition or condition (or all of these) of the cargo.

Essentially, there are two types of inspection. An Inspection that is commercial in nature – this is to say that the buyer or buyer and seller have agreed to the inspection – or one that is mandated by law. When the inspection is legislated, it is normally a requirement of the government of the destination country. They will normally appoint an independent inspection service to act on their behalf in the various countries of origin and frequently, the clean report issued by the inspection service (or a certificate that the clean report has been issued) is the ‘trigger’ for payment. As such, the buyer cannot remit funds to the seller unless the cargo has passed the inspection. The extent of the inspection may be fixed and quite specific, dependant on the nature of the goods. Equally, the goods and circumstances dictate where and when such inspections take place. They can range in extent from a simple ‘tally’ e.g. counting boxes and opening a random sample of these, right up to drawing samples and subjecting them to chemical analysis in a laboratory.

With a ‘commercial’inspection, the buyer normally appoints someone to be present at the loading, again checking quantities and random samples. This may be someone from the independent inspectorate field, or their own local agent etc. There are no guidelines for these informal commercial inspections but a common application is to endeavor to check that the quality of goods ordered on the strength of a high-grade sample meet the standards of the sample goods.

Even though Cargomaster (or the forwarder) does not make inspection itself, we can appoint and support you in this process. Some inspections inspection: SGS, Bureau Veritas.

Moving products from one point (A) to the other (B)

This means the consignee box is made to “order”. Or also II order of shipper”.

This is called a blank order bill of lading.

This designation for a bill of lading is used when there is required a document of title or a negotiable form of the Bill of Lading.

An” order” bill of lading is negotiable. An order bill of lading is a document of title. A document of title represents the goods and gives possession of goods. Title or ownership is passed on for an Order Bill of Lading by endorsement of the shipper in the bill of lading. The subsequent holder of the original endorsed Order Bill of Lading becomes the new “owner” or controller of the goods.

In view of this important aspect of title for an Order Bill of Lading the agent of an ocean carrier will not release a shipment against an order bill of lading which is not endorsed. Perhaps because the shipper forgot. Without a. bond of indemnity the only solution in such a case is to procure either another original bill of lading with the endorsement or failing that all three original order bills of lading must be presented.

A variation of the order bill of lading is to show in the consignee box “order of a named bank”. In that case endorsement of the named bank is required before the agent of ocean carrier at destination releases a shipment.

In this context it must be noted that a Bill of Lading made out to order of a named consignee is not an order bill of lading but a straight bill of lading because the named consignee must endorse the bill of lading, no independent third controls the shipment.

This means the consignee box is made to “order”. Or also II order of shipper”.

This is called a blank order bill of lading.

This designation for a bill of lading is used when there is required a document of title or a negotiable form of the Bill of Lading.

An” order” bill of lading is negotiable. An order bill of lading is a document of title. A document of title represents the goods and gives possession of goods. Title or ownership is passed on for an Order Bill of Lading by endorsement of the shipper in the bill of lading. The subsequent holder of the original endorsed Order Bill of Lading becomes the new “owner” or controller of the goods.

In view of this important aspect of title for an Order Bill of Lading the agent of an ocean carrier will not release a shipment against an order bill of lading which is not endorsed. Perhaps because the shipper forgot. Without a. bond of indemnity the only solution in such a case is to procure either another original bill of lading with the endorsement or failing that all three original order bills of lading must be presented.

A variation of the order bill of lading is to show in the consignee box “order of a named bank”. In that case endorsement of the named bank is required before the agent of ocean carrier at destination releases a shipment.

In this context it must be noted that a Bill of Lading made out to order of a named consignee is not an order bill of lading but a straight bill of lading because the named consignee must endorse the bill of lading, no independent third controls the shipment.

A term which can be used interchangeably with “consolidation” is “groupage”. Therefore, when a forwarder consolidates several smaller Less-than-Container Load (LCL) shipments into one complete or Full Container Load (FCL) the forwarder has made a consolidation. Consolidated containers usually attract lower preferential ocean freight rates per container.

Or a forwarder consolidator in view of his regular annual volume of containers is able to negotiate special rates.

The second part of the essential definition of a consolidation is the service aspect. Any successful ocean container consolidations service should be on a regular scheduled basis, at best weekly, with first class fast ocean carriers.

Volume II

Class 1 – Explosives

Class 2 – Gases

Class 3 – Flammable Liquids

Volume III

Class 4 – Flammable Solids

Class 5 – Oxidizing substances & Organic Peroxides

Volume IV

Class 6 – Poisonous & Infectious Substances

Class 7 – Radioactive Material

Class 8 – Corrosives

Class 9 – Miscellaneous dangerous substances

Remember the freight forwarder is not qualified to classify goods – demand a Material Safety Data Sheet- for short, MSDS. Most MSDS will clearly state a UN number, if applicable goods are regulated, or a MSDS says equally clearly goods are not regulated by IMO. For this purpose try to get the proper chemical name if a chemical is involved. A freight forwarder should not handle knowingly dangerous goods without supporting shipper’s declaration of hazardous goods.

A disbursement is an amount of the charges connected with the transportation of the goods (e.g. clearance charges, insurance premiums etc.) which is advanced by the shipper, agent or carrier. This amount is to be collected on behalf of the shipper, agent or carrier from the consignee by the delivering carrier. A disbursement fee of 10%, will be assessed for the collection by a carrier from the consignee of a disbursement.

The person or company whose name appears on the airwaybill or bill of lading as the party to whom the goods are to be delivered by the carrie

The value of the goods declared to the carrier by the consignor (supplier/exporter) for the purpose of fixing the limit of the carriers’ liability for loss, damage or delay to the cargo. It is also the basis for possible applicable valuation charges.

Any type of container in which a consignment can be transported, whether or not such a container is considered as aircraft equipment.