A logistics dictionary or transport lexicon helps people to understand complex logistics processes and shipping terminology. Entrepreneurs can use a logistics lexicon to make sure that freight conditions are communicated accurately in contracts and documents and are therefore always
on the safe side.
For companies that ship goods via import and export, a logistics lexicon is essential. It helps to understand the importance of shipping conditions as well as to positively influence administrative effort, costs and customer satisfaction.
Freight Dictionary: Freight Conditions - Definition
Freight conditions or shipping freight conditions in logistics describe all aspects regarding the shipping of goods. This includes the shipping method, packaging guidelines, loading regulations, freight and customs regulations, as well as transport insurance.
These terms lay the foundation for cooperation between customers and carriers and freight carriers. The legal regulation behind it is based on the Incoterms®, which were introduced in 1936 published by the International Chamber of Commerce (ICC).
International rules for standard commercial contract formulas (English: International Commercial Terms = Incoterms®) also determine globally recognized contract and delivery conditions to enable standardised trading transactions. They determine the framework for the cost distribution, the risk and the obligations of the business owners.
What do the Incoterms® 2020 stand for?
The Incoterms® are legal abbreviations for shipping freight conditions, and 11 clauses specify which conditions dealers and buyers should comply with. They were updated in 2020 and have since replaced the Incoterms® from 2010.
List of freight conditions:
EXW (Ex Works) - ex works - factory location
FCA (Free Carrier) - free carrier - location of the carrier
FAS (Free alongside Ship) - free alongside ship - agreed loading port
FOB (Free on Board) - free on board - agreed port of shipment
CPT (Carriage paid to) - freight paid to - agreed destination
CFR (Cost and Freight) - costs & freight - agreed port of destination
CIF (Cost, Insurance and Freight) - Cost, Insurance & Freight - agreed
Port of destination
DAP (Delivered at Place) - delivered to a named place - agreed destination
DPU (Delivered at Place Unloaded) - delivered to a named place - unloaded at the place of unloading
DDP (Delivered Duty paid) - delivered & customs paid - agreed destination in the importing country
CIP (Carriage, Insurance paid to) - freight & insurance paid - agreed destination
4 groups of freight conditions in logistics
The Incoterms® freight conditions can be divided into four groups.
1. Group E: Collection clauses (EXW)
2. Group C: Shipping clauses with the costs of transport being borne by the
Dealer (CPT, CIP, CFR, CIF)
3. Group F: Shipping clauses without the retailer assuming the costs of transport
(FCA, FAS, FOB)
4. Group D: Arrival clauses (DAP, DPU, DDP)
There are also two types of clauses.
1. Clauses for all types of transport (EXW, FCA, CPT, CIP, DAP, DPU, DDP)
2. Ship transport clauses (FAS, FOB, CFR, CIF)
General freight conditions of Incoterms®
Depending on the freight agreements, sellers and buyers have different obligations regarding freight costs and transport conditions.
The Incoterms® thus regulate the obligations and costs of both sides for their journey, who has to take over and who bears which risk as a result. The 11 clauses also serve as a basis for determining which contracting party procures the consignment note and other documents, handles customs clearance, insures, inspects and packs the goods and bears the costs.
Important information about the Incoterms® freight conditions
Shippers must be clear on the fact that Incoterms® do not replace the purchase contract, nor the contract and other agreements with the carrier. They serve as a basis for the dealer and buyer to guarantee safe and regulated transport of the goods.
These points must be taken into account:
Both parties must agree to the distribution of obligations and costs:
- The chosen clauses should match the chosen shipping methods (air, ship, train, truck).
- The clauses serve as a template, but can be adapted by both parties according to the supply chain, provided they remain within the scope of the respective clause
- The Incoterms® must be stated in the purchase contract, otherwise they are invalid
- The version of the clauses (e.g. Incoterms® 2020) must also be noted
- The pick-up and unloading location must be specified with a specific address / factory name / shipping company
- The Incoterms® do not replace the sales law or the complete sales contract — they are additional clauses that determine fundamental rights and obligations in international trade and logistics
- Breach of contract, complete transfer of ownership, etc. are regulated by clauses in the purchase contract
- The Incoterms® serve as the basis for trade between seller and buyer; separate contracts are drawn up for agreements with other parties, such as the shipping company.
Other freight terms you should know
In transport logistics, numerous freight terms are used for shipping goods. These include, among others:
- Sea freight (shipping of goods via freight ship)
- Air freight (shipping goods internationally by plane)
- Truck freight (transportation of goods by road) and
- Rail freight (transportation of goods by train)
Other terms from logistics that you will come across again and again are:
- Carrier (the executing company that delivers the freight)
- Freight forwarder (the organiser of all contracts and deliveries across the entire supply chain)
- Europalette vs. Standard-Palette
- LTL & FTL
- Transportmanagement-System (TMS)
- Intermodal freight shipping
- Transport insurance
Amazon Freight can be your transport logistics partner. With our extensive network of freight forwarders and its own trailers, we take care of all aspects of logistics, including compliance with freight conditions, load securing, customs tariffs and more.
Create a free shipper account today to receive a quote, or contact us at: freight-eu-interest@amazon.com. One of our team will be happy to advise you.