Interested in becoming fluent in the language of shipping? You’ve landed in the right place.

INCO terms, short for International Commercial Terms, are a set of standardised trade terms published by the International Chamber of Commerce (ICC). These terms are used globally in international and domestic trade contracts to define the responsibilities of buyers and sellers. They clarify who is responsible for the costs and risks associated with the transportation and delivery of goods—promoting smoother and more predictable trading relationships.

In this blog, Powerhouse International QLD, a leading freight forwarder, dives into Incoterms and their meaning & various other shipping terms—so you can navigate this process more informed than ever.

Have questions or need personalised shipping insights?

Key Points of INCO Terms

Key Point	Description
Responsibilities and Risks	INCO terms specify who is responsible for various stages of the shipping process, such as packaging, loading, transporting, insuring, and unloading the goods. This helps avoid misunderstandings and disputes between buyers and sellers.
Cost Allocation	They determine which party bears the costs of transportation, insurance, and customs duties. For example, some terms may require the seller to cover all transportation costs up to the buyer’s location, while others may only require the seller to deliver the goods to a shipping port.
Delivery Points	INCO terms define the point at which the risk of loss or damage to the goods transfers from the seller to the buyer. This can be at the seller’s premises, a port, or the buyer’s location.
Legal Framework	They provide a common legal framework that is recognised internationally, which simplifies the drafting of contracts and enhances legal certainty.

Why INCO terms are Important

Why INCO Terms are Important

Importance	Description
Clarity and Precision	They offer clear definitions and guidelines, reducing the risk of misunderstandings and disputes between trading partners.
Efficiency in Trade	By standardising terms, INCO terms streamline the negotiation process and make international trade more efficient.
Risk Management	They help businesses manage and mitigate risks by clearly defining when and where the responsibility and risk for goods transfer from the seller to the buyer.
Cost Control	Knowing who is responsible for each cost element helps businesses plan and control their expenses more effectively.
Legal Protection	Using INCO terms provides legal protection and reduces the likelihood of litigation, as these terms are widely recognised and accepted by courts and arbitration panels around the world.

Freight Forwarding Terminology:

1. Consignee

This frequently used shipping term refers to the “importer.”

2. Third Party Move/Triangle Shipment

This involves three parties in an international trade transaction: the seller, the buyer, and a third party (often a logistics provider or intermediary). In this arrangement, goods are shipped directly from the seller in one country to the buyer in another, but the transaction is facilitated by the third party, which may handle documentation, payment, or logistics. This method is commonly used to streamline operations, reduce costs, and maintain efficiency in global supply chains.

3. Bill of Lading (BOL)

The most important document that provides information about what’s being shipped, who the consignee is and who the dispatcher is. This is a legal document.

4. Express Release/Telex Release

Under telex/express release, you do not require an original bill of lading from the supplier. You can gain release of your goods with a copy. Suppliers will normally only arrange a telex release, once you have paid them for the goods or you are in compliance with agreed payment terms.

5. Customs Clearance

This is the process through which goods are approved by customs authorities for import or export. This involves:

Documentation: Submitting required documents such as invoices, shipping manifests, and certificates of origin.
Duties and Taxes: Calculating and paying any applicable duties, taxes, and tariffs.
Inspection: Undergoing inspections to ensure compliance with local regulations and standards.
Approval: Receiving authorisation from customs authorities to move goods across borders.

Customs clearance is essential for legal and efficient international trade, ensuring that goods comply with all regulatory requirements.

6. Customs Entry/Customs Brokerage

Customs Entry, also known as Customs Brokerage, involves the process of preparing and submitting necessary documentation to customs authorities to facilitate the import or export of goods. Customs brokers, who are licensed professionals, assist businesses in navigating complex customs regulations, ensuring compliance, calculating duties and taxes, and expediting the clearance process. Their expertise helps prevent delays, reduces the risk of penalties, and ensures smooth cross-border transactions.

7. Bonded

In shipping terms, “Bonded” refers to goods that are stored in a bonded warehouse or transported under a customs bond. These goods have not yet cleared customs and are typically held in a secure location until import duties, taxes, and other regulatory requirements are fulfilled. Bonded storage allows importers to delay payment of these fees until the goods are moved out of the bonded facility for domestic use or re-exported, providing financial and logistical flexibility.

8. Volume /Chargeable Rate

This shipping term refers to the cost calculation based on the space that goods occupy, rather than their actual weight. This is especially relevant for lightweight but bulky items. The chargeable rate is determined by comparing the actual weight and the volumetric weight. The higher of the two weights is used to calculate shipping costs, ensuring carriers are compensated fairly for the space used.

9. Certificate of Origin

In order for your customs agent to apply for many Free Trade Agreements, they will require a certificate of origin. Suppliers would apply for this with the relevant governing body.

10. Arrival Notice

A document issued by freight forwarders to consignees advising them of their shipment’s arrival. If your shipment’s arrival details change, many forwarders will send out an email with another arrival notice. It’s important not to ignore these—forward the email to your broker if your cargo moved CIF/CFR.

Incoterms for Any Mode of Transport

1. EXW – Ex Works (Named Place of Delivery)

The seller makes the goods available at their premises, and the buyer is responsible for all transportation costs and risks from that point onward.

2. FCA – Free Carrier (Named Place of Delivery)

The seller delivers the goods to a carrier or another person nominated by the buyer at the seller’s premises or another named place. The risk transfers to the buyer once the goods are handed over.

3. CPT – Carriage Paid To (Named Place of Destination)

The seller pays for the carriage of the goods to the named place of destination. Risk transfers to the buyer once the goods are handed over to the first carrier.

4. CIP – Carriage and Insurance Paid to (Named Place of Destination)

Similar to CPT, but CIP in Incoterms means the seller also pays for insurance against the buyer’s risk of loss or damage to the goods during transit.

5. DAP – (Delivered at Place)

The seller delivers when the goods are placed at the disposal of the buyer at a named place of destination. The seller bears all risks involved in bringing the goods to the destination.

6. DPU (Delivered at Place Unloaded)

The seller delivers the goods, once unloaded, at the named place of destination. The seller bears all risks and costs associated with delivering and unloading the goods.

7. DDP – Delivered Duty Paid (Named Place of Destination)

The seller delivers the goods to the buyer, cleared for import and ready for unloading at the named place of destination. The seller bears all costs and risks, including import duties and taxes.

8. DAT – Delivered At Terminal (Named Terminal at Port or Place of Destination)

As of the latest update in Incoterms 2020, the term DAT (Delivered at Terminal) has been replaced by DPU (Delivered at Place Unloaded).

Incoterms for Sea and Inland Waterway Transport:

1. FAS – Free Alongside Ship (Named Port of Shipment)

The seller delivers when the goods are placed alongside the vessel at the named port of shipment. The risk transfers to the buyer at that point.

2. FOB – Free on Board (Named Port of Shipment)

The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment. Risk transfers to the buyer once the goods are on board the vessel.

3. CFR – Cost and Freight (Named Port of Destination)

In Incoterms, CFR means the seller pays for the cost and freight to bring the goods to the named port of destination. Risk transfers to the buyer once the goods are on board the vessel.

4. CIF – Cost, Insurance & Freight (Named Port of Destination)

Similar to CFR, but the seller also pays for insurance against the buyer’s risk of loss or damage to the goods during transit.

Have questions or need personalised shipping insights?

Other Frequently Used Shipping Terms

1. FIS or FIS Delivery Meaning in Shipping

The term “FIS” is not officially recognised as an Incoterm by the International Chamber of Commerce (ICC). The ICC publishes a standardized set of Incoterms, which include terms like EXW (Ex Works), FOB (Free on Board), CIF (Cost, Insurance, and Freight), and DDP (Delivered Duty Paid), among others.

However, “FIS” might be used informally in some industries or regions, and it could stand for “Free In Store” or “Free Into Store.” In this context, it would generally mean that the seller is responsible for delivering the goods to the buyer’s specified location, such as a warehouse or store, and covers all the costs and risks associated with the transportation until the goods are delivered to that location.

2. FRT Meaning in Shipping

The term “FRT” is not an officially recognised Incoterm by the International Chamber of Commerce (ICC).

“FRT” might be an abbreviation used informally in certain industries or regions, potentially standing for “Freight.” However, without a standardized definition, its meaning can vary depending on the context in which it is used. It’s important to clarify the specific terms and conditions in any contract where non-standard abbreviations like “FRT” are used to avoid misunderstandings.

Ship Confidently with Powerhouse International QLD

INCO terms are essential tools in international trade that provide a clear, standardized framework for defining the responsibilities, costs, and risks associated with the transportation and delivery of goods.

Ultimately, this is just a basic glimpse into the world of freight forwarding. There are numerous additional terms referring to the procedures, documents, and services being offered by shipping companies. The terms mentioned above rank amongst the most commonly used ones. If you know what they mean, you will streamline and enhance your communication with freight forwarding companies significantly.

For all your freight forwarding needs, trust Powerhouse International QLD and our personalised solutions.

We offer an array of services – from air freight to customs clearance, warehousing, and comprehensive freight document management. As a leading Brisbane freight forwarding company, we’ve been in business for more than three decades and we know what it takes to give our clients a seamless and streamlined solution.

Whether you’re looking for a freight forwarding partner or you have a question to ask, our customer support team will be more than happy to provide you with the specific information you need.