The transportation industry is filled with specific transportation terminology and abbreviations that raise a lot of questions and can seem a bit confusing at times. Read on to learn what is insignificant mumbo jumbo and what is essential phrases. We debunk and simplify the most used terms so that you can distinguish the important from the irrelevant.
The transportation, logistics, and freight forwarding industry, which in itself has many names that mainly cover the same thing, is a business that tosses around industry jargon and terminology left, right, and centre. Why do all that transportation terminology and abbreviations even exist for something as simple as the transportation of goods? For people outside of the industry, it can seem confusing, and it often results in more questions than answers.
There are many reasons. They cover the entire spectrum. On the one hand, they are a professional tool to define new terms and meanings that create a universal industry standard across multiple languages and geographical areas. On the other, they intend on being a barrier to entry to the uninvited, distancing the industry from the rest of the commercial world and trying to create an increased sense of professionalism.
The language gives the transportation industry a bad rap
The issue is not that the industry has developed its own ‘parallel’ language or that it communicates in abbreviations. It is an industry that has extensive interaction with other sectors and people, for example, sellers and buyers of goods, governments, banks, and everybody else who participates in international activities where products have to cross international borders.
And this is where the problem originates. The transportation industry is a proud one, but unfortunately, that pride is often expressed as an arrogant expectation of everybody knowing the expressions and terms used. Furthermore, the language of the industry unconsciously expects the receiver to have detailed knowledge of all the facets of this simple operation, which can seem both freighting and frustrating at the same time.
All this limits the otherwise productive chain of communication, and the result is that often real issues, regardless of who is at fault, are not caught in time. The overall effect is an industry that is known for delivering poor service and not fulfilling promises. It is a shame that the terminology, which was supposed to increase productivity, is deluded with nonsense mumbo-jumbo, casting deep shadows on the sectors of transportation and logistics as a whole.
The most important terms of transportation and logistics
For the untrained eye, it can almost be impossible to separate the essential terminology from the mumbo jumbo of the industry. We cannot cover everything, but we have selected the most used terms in transportation, which usually causes a great deal of confusion. We will try explaining their significance and share the nonsense expressions; they are often linked to.
This way, you will hopefully be better equipped to interpret the communication from your transportation provider, ask tougher questions, and get a better response in return.
Terms of service
For all international shipping of goods, there is an agreement between the sender and receiver of the goods. This agreement, written or oral, needs to contain when, or rather where, during transit, the ownership of the goods, and thereby the cost of the shipping, is transferred from the sender to the receiver. Is it not, you must agree before booking the transportation. Luckily, there is a global standard for defining the point of transfer. The standard is a set of terms and abbreviations that linked to a specific geographical location, usually a city or airport, thereby defining the point of transfer of the costs.
Collectively these terms often referred to as clauses, incoterms, or just terms, and sometimes they are even entirely left out. In this case, the specific terms are used directly and often in an abbreviated state. The most used within imports are EXW and FOB, also known as Ex-Works and Free On Board, and for exports DAP and CFR, also known as Delivered At Place and Cost and Freight. You may also encounter the latter as DDU, short for Delivered Duty Unpaid, which is an outdated term that in reality has been out of service since 2010. Besides that, you may see the term Ab, which originates from Latin meaning “from”. It is mostly used in connection with ab factory, which has the same meaning as EXW – the receiver is responsible for the transportation all the way from the factory.
Not only can the terms themselves create confusion, but they are also used quite loosely in the industry. For example, one will often see a freight forwarder refer to EXW-costs or DAP-costs. It creates confusion because EXW and DAP define which party has to pay for which part of the transportation process. But EXW-costs often only refers to the transportation process and customs clearance that covers the part from the address of the sender to when the goods are onboard the ship, train, or aircraft in the country of origin. In the same way, DAP-costs often only refers to the transport from the port, airport, or terminal in the country of destination to the address of the receiver. If one is in doubt, it always makes sense to explicitly define both ‘from’ and ‘to’ in the questions for the transportation salesperson. For example “Does this cost cover transportation from EXW Shanghai to the delivery at my address in London?”.
Who is who?
There are many different roles within transportation and logistics, and each and everyone has multiple names. The two most important functions, according to us, are the shipper and the receiver.
Shipper is the company, or person, who is listed as the sender of the goods and often referred to as the seller, shipper, vendor, contractor, or merely the factory. These terms are worth noting because we often read communication where the shipper is blamed for delaying the shipment. Usually, arguing that the product was ready in time, or that the documents were not available prior the document-cut-off.
The receiver also has many names, including the consignee or BCO (beneficial cargo owner). It is the company, or person, who is receiving the goods and written on the bill of lading; the one who the products are destined for. In rare cases, the goods are transferred to a new party, or person during transit. In this case, the new receiver is called the endorsee.
There is a more or less standard exception to this in the world of courier transportation. Here, the term receiver is generally used for the person who has made the agreement with the courier company. In reality, this means that the receiver, in this specific case, not necessarily is the actual receiver of the goods. Here, the person receiving the goods will on the documents be referred to as delivery.
To learn more about the other roles in transportation, you should read our article about international transportation here.
One of the terms of transportation that is set out to confuse people, which is also overused and randomly applied, is all-in. It usually refers to the price of transportation and added services, but without it really being properly defined which exact services are included. Therefore, it will always be a good idea to know exactly what kind of extra costs that can occur in addition to this all-in price. For example, the costs of customs and VAT (Value Added Tax) are usually not included. The costs for special handling and extra fees are also usually not included in the all-in price.
To understand the total price of the transportation, it is, unfortunately, necessary to ask for an invoice. You will, however, often experience that the transportation provider is not able to provide the invoice at the time of booking. Also, one has to be aware that the cost, which is to be paid to H.M.R.C. in the form of import duties, VAT, and special import fees are not part of the transportation and is, therefore, to be settled separately – and often directly to H.M.R.C.
Delivery with a side-loader, Hammar lift or besima
Has nothing else been arranged, a shipping container is typically delivered on the back of a truck (also called the chassis). It means that you must empty it from a height of approximately 130cm, which can be unpractical if you do not have a ramp or a warehouse with dock.
Alternatively, before the delivery, you can make other arrangements. Here, terms like side-loader, Hammar lift, or besima are common, although they all refer to the same thing. Namely a crane attached to the truck, able to pick up the container and place it on the ground next to the truck.
This type of delivery is popular because it is cheaper than having a separate crane come out to lift the container of the truck and onto the ground. However, there are certain limitations, for example, that the container can only be placed on the left side of the truck. If you need the container to open up in a certain direction, and you do not have space for the truck to turn, it is, therefore, a good idea to agree on upfront whether you want the container loaded with the doors facing the front or the back of the truck.
Is there enough free time to avoid detention?
Within the world of transportation and shipping, the term free time refers to the time you have available before the owner of a specific piece of equipment needs it back. For example, when you take delivery of a shipping container, usually, you have three days to empty and return it to the owner, allowing the shipping company to put it back into circulation.
If you do not return the container within this free time, there is a fee for each extra day you keep it. This fee is known as detention, and the daily rate is typically going up day-by-day.
Detention is not to be confused with demurrage, which is the amount you pay for renting a space for the container if you are not quick enough in clearing customs and removed from the port after it arrives.
Fees are not just fees
In the transportation industry there are an endless amount of added fees, it seems. The ones we often encounter include oil fees, currency adjustment fees, war risk surcharge, congestion surcharge, and peak season fees. Beside those fees there exist fees for inspection, quarantine, documentation, and many other more or less foreseeable events.
The common aspect of all fees mentioned here, and those not, lies in the importance of understanding what they entail. Also, it is essential to know whether they are real-life unavoidable fees you have to accept when entering a deal with a transportation provider.
We cannot mention them all in this article, but we do however encourage you as a transportation buyer to be critical when presented with added fees. At Transporteca, we feel that added fees create confusion, uncertainty, and frustration, which is why customers here on our portal do not experience them.
Means of transportation
Freight forwarders organise themselves into divisions or departments, where each is responsible for a particular mode of transportation, for example, a sea freight division, an air freight division, a road transport division and possibly a separate express – or courier division. Rail transport will depend on the route and be in either the sea freight division or the road transport division.
This split into transportation modes can create confusion because you, as a transportation buyer, have to decide which type of transportation you need before knowing all the details of each service. You need to decide, to be guided to the correct person in the right department. Furthermore, when you have “arrived” with your transportation request in a certain part of the organisation, it is next to impossible to receive insight into alternative means of transportation. The simple reason for being that if you transfer your request from a specific way of transportation to another, and thereby from one division to another, the commission on your shipment moves along with it. That is why, as a freight forwarder, it can be hard to “give up” a shipment and transfer it to another department.
It is however very seldom the type of transportation, which determines what service is the best for the transportation buyer. The best service is much more dependent on when the goods arrive at the destination, how well the service is executed, and how much it costs. If these factors are known, it is much less relevant for most products if they travel via aircraft, ship, truck, or train – or if the service is a combination of multiple options.
Complicating things further, it is also possible to choose a courier – or express service. The word courier in itself can seem a bit confusing because it covers both shipments with a courier company such as UPS, FedEx, and TNT, but also shipments with ‘a man with a van’ type services. This is a driver with a van, who exclusively transports your cargo from the pickup address and straight to the delivery address. Courier, or express, shipments with well-established courier companies can be shipped both via road, typically the case within Europe, and via air, which has striking similarities to the standard air freight service.
Here on the portal, we show all relevant forms of transportation for every search made. We display all the relevant information and variables needed for making the best possible decision as a transportation buyer.
Do not be afraid, just ask!
If ordering transportation, and the associated communication, becomes too complicated, remember that shipping and logistics is a transparent and straightforward operation. It does not require a graduate degree to do the work as a freight forwarder. Perhaps, that is the reason it can seem the industry as a whole suffers from low self-confidence, materialising in a need to create its’ own language to mystifies the involved parties to the public. Unfortunately, this also creates an exponential growth in email communication, misunderstandings, and in reality, often unexpected costs or unnecessary delays.
Do not be put off by foreign terminology, abbreviations, or industry mumbo jumbo. Instead, seize the opportunity to ask questions and learn to understand how things work. It often helps to highlight and validate the skills of your freight forwarder – they probably do not know it themselves, if they do not give you a straight answer, and then they are probably not the right ones to work with.
We have tried to cover some of the essential terms. Without a doubt, there is more terminology and industry mumbo-jumbo, which we have not mentioned. Send us a few words via chat or email, if you have some terms you think should be added to the benefit of all our readers. We cannot promise that we know the meaning of everything said in the business, but we will do our best to find it out.
Written by Morten Laerkholm, CEO & Founder, Transporteca