Shipping Book of Knowledge

Customs Brokers
The customs broker---broker or customhouse broker or customs house broker---is an

individual or company licensed to clear export and import goods through customs.
In general, the role of brokers is the same worldwide. Besides clearing of goods
through customs, other export services a broker renders include booking of space for
ocean, air and land freight, canvassing and providing the freight cost, and preparation of
export documents and sending them to the bank for negotiation. In certain countries, it is
a business practice that exporters prepare their own export documents. The broker also
renders the forwarding services as a freight forwarder.
Few large exporters have their own in-house licensed customs broker.
The broker basically handles any export goods. At times, it is necessary to retain the
service of a broker experienced in the exporter's line of product and the port of
destination.
It is important to select a reliable customs broker. The exporter normally has to sign
an authorization paper allowing the broker to handle the customs declaration. In case the
broker commits an error, the exporter is held liable.
The brokerage fee varies from country to country. The broker may collect a basic
service fee on top of other charges, such as documentation charges and port fees. In
certain countries, the broker collects a uniform base fee, plus a small percentage of the
value of shipment. In a country where the brokerage fee is not regulated, it may vary
considerably among brokers. The exporter must check with different brokers in order to
get the best offer. It is important to request the broker to show the breakdown of charges
on the billing.
A good and honest broker can help new exporters with certain export routines and
help them save money.
Freight Forwarders or Consolidators
The freight forwarder---forwarder---is an individual or firm who renders cargo

delivery services. In domestic (local) freight forwarding, it is the delivery of goods
usually from the exporter's premises to the local customs in exporting, and vice versa in
importing. The customs broker also renders local freight forwarding for exporters and
importers.
International (foreign) freight forwarding is the delivery of goods from the exporter's
premises (or from the port or point of origin) to the port or point of destination (or to the
importer's premises).
The freight consolidator---consolidator or groupage operator---is an individual or
firm who accepts less than container load (LCL) shipments from individual shippers, and
then combines them for delivery to the carrier in full container load (FCL) shipment.
The services of a forwarder are usually available in a consolidator, and the forwarder
often engages in the consolidation of cargo. Hence, the term forwarder is often used
synonymously with the consolidator.
The forwarder provides a wide range of services. Besides all of the export services
available from a customs broker, the forwarder may also arrange for the insurance, export
packing and trucking.
The forwarder usually receives the forwarder's charges from the exporter. In
addition, it may receive a commission from the carrier---freight company (ocean, air,
truck and rail).
In the ocean shipment, the forwarder may 'buy' the shipping space, in a special
arrangement with the carrier, and 'resell' the space to individual shippers, instead of
receiving a commission. In such an arrangement, the forwarder functions as an
independent distribution or logistical company known as the NVOCC (nonvessel
operating common carrier) or NVO (nonvessel owner or nonvessel owning carrier),
or commonly referred to as the ocean freight consolidator. The Case Sample: Freight
Consolidation (1) below illustrates the function of a NVOCC or NVO.
Case Sample:
Freight Consolidation (1)
XY Consolidator 'buys' 100 containers of 20' from RS Shipping on vessel S/S AMIGO,
Voyage No. 8, the route is from Port A (of the exporting country) to Port B (of the
importing country), at a discounted box rate of US$1,300/container. To explain the case,
it is assumed that the freight is charged on measure basis only, instead of weight or
measure, and assumed that the capacity of 20' container is 33 CBM (cubic meters). As
such, XY Consolidator 'buys' a total fixed shipping space of 3,300 CBM at the ocean
freight cost of US$39.394/CBM.
If the shipper UVW Exports books 10 CBM of space for a product directly with RS
Shipping, on the same vessel and voyage number, the LCL (less than container load) rate
is US$55/CBM. If the shipper ABC Exports books a 20' container directly with RS
Shipping, the FCL (full container load) flat rate is US$1,500/container, which is
US$45.455/CBM. In case ABC Exports is able to load 28 CBM only due to the odd
sized export packages, the freight cost is US$53.571/CBM. In general, the CBM cost of
FCL is lower than the LCL.
XY Consolidator, which does not operate or own any ships, offers (i.e., 'sells' the
space they 'bought') UVW Exports and other LCL shippers to transport their goods at
US$54/CBM, against the US$55/CBM from RS Shipping. XY Consolidator offers
ABC Exports and other FCL shippers at US$1,450/container, against the
US$1,500/container from RS Shipping. In practice, the consolidator 'selling' at the same
rate as the shipping company is not uncommon.
XY Consolidator groups all LCLs of individual shippers into FCLs, and then
delivers all FCLs to RS Shipping in one lot, that is 100 containers of 20' or less, if the
space is not fully 'sold'.
In such a case, XY Consolidator operates as a NVOCC and issues a freight

forwarder's bill of lading to each shipper, without receiving a commission from RS
Shipping.
In a related case, the letter of credit from the importer may stipulate "transport documents
issued by freight forwarder are not acceptable", thus the bill of lading from a NVOCC is
not acceptable.
The Forwarding Practices of Exporters
Exporters use the services of a forwarder primarily for convenience. New exporters can
benefit from the services of a good and honest forwarder.
In less developed countries, it is a business practice that the exporter utilizes own
contacts or sources of export services like trucking and customs declaration, especially in
ocean shipments, instead of relying on the forwarder, which is the practice in developed
countries.
Referring to Case Sample: Freight Consolidation (1), XY Consolidator may offer

UVW Exports to transport their goods at US$70/CBM, including such charges as the
inland freight (cartage) and handling, from UVW Exports' premises to Port B. If UVW
Exports uses its own contacts in the forwarding instead of a consolidator, the freight rate
of US$55/CBM from RS Shipping plus all other charges may amount to less than
US$70/CBM. Exporters should always check the options.
Importer's Specified Forwarder

or Consolidator and Its Implication
Some importers may specify the forwarder to use for their imports. The international
freight forwarder either has own office or a handling agent abroad.
Case Sample:
Freight Consolidation (2)
Further to Case Sample: Freight Consolidation (1), assuming that XY Consolidator has
an office named XY Branch at the importing country of DEF Imports, and DEF
Imports contracts XY Branch to handle a shipment from UVW Exports at the
exporting country, the sales term is FOB Port A in the exporting country. The contract,
in which UVW Exports is informed in advance by DEF Imports, calls for a delivery
from Port A to DEF Imports' premises---meaning that DEF Imports has to pay XY
Branch the agreed-upon CBM (cubic meter) cost to cover such charges as the ocean
freight from Port A to Port B in the importing country, and the handling charge,
documentation fee, and inland freight from Port B to DEF Imports' premises.
XY Branch notifies XY Consolidator of the contract and requests it to coordinate

with UVW Exports. As the trade term is FOB Port A, UVW Exports must arrange and
pay for the cartage from its premises to Port A, plus the brokerage fee and other charges.
Under this situation, XY Consolidator may offer to handle the trucking and customs
declaration for UVW Exports. The exporter (the UVW Exports) must check the options
before accepting the offer. Depending on the country, the cost can be lower, or higher,
when the exporter uses its own contacts.
In another instance, the importer, especially the new customer, may not inform the
exporter that a forwarder will be involved in the delivery. The exporter becomes aware of
such involvement only after receiving the letter of credit, in which a forwarder is
specified. Such incidence must be avoided as the cost of exporting can be affected, for
example, the diversion of cargo to another location designated by the forwarder, which
may cost more.
Freight Containers
The pattern of cargo reception and shipment has changed with the use of the freight
container---container, box or LO/LO (lift on/lift off). The use of containers, which
started more than 40 years ago, in intercontinental traffic is now available in most
seaports worldwide.
In the 1960's, many seaports either had inadequate container facility or none at all.
Consequently, export shipments often relied on conventional (break-bulk) vessels. The
cargoes were placed alongside a vessel for hoisting on board. The stevedores
(longshoremen) were often employed to carry cargoes on and off the vessel. The loading
and unloading of vessels consumed too much time, which caused dockside bottlenecks
and delayed shipments. With the increased use of containers, the congestion was
decentralized. The problem of congestion was transferred from the docks or piers to the
container freight stations or terminals.
ISO Freight Containers

The acronym ISO stands for the International Organization for
Standardization, with headquarters in Geneva, Switzerland. The ISO freight
container refers to a container complying with the ISO container standards in
existence at the time of its manufacture.
Container Classifications
Containers are available in configurations to take almost every kind of cargo and mode of
transportation (ocean, air, road, and rail).
Containers for Intercontinental Use
In terms of the type of cargo for which the containers are mainly intended, they
are classified as general cargo container and specific cargo container.
General Cargo Container
(1) General purpose (dry

cargo) container
It is suitable for the widest

varieties of cargo. It is fully
enclosed and weatherproof,
having rigid walls, roof and
floor, with at least one of its
walls, either end wall (end
loading) or side wall (side
loading), equipped with
doors.
Dry Cargo Container
Please see Dimension of
General Purpose Containers
for the related information.
(2) Specific purpose container
It is used to facilitate the packing (loading) and emptying (unloading) of

container other than by means of doors at one side of the container, and for
other specific purposes like ventilation.
 Closed ventilated container

It is used for the carriage of cargo, such as hides, that cannot stand
excessive moisture. It is similar to the dry cargo container with specially
designed natural or mechanical (forced) ventilation.
 Open top container
It is similar to the dry cargo container except that it has no rigid roof, but
has a movable or removable cover (e.g. a cover made of canvas, plastic or
reinforced plastic material) supported on movable or removable roof
bows. The open top container is used for machinery, sheet glass, and other
heavy, bulky or long objects.
 Platform (flat rack)

It does not have a superstructure, that is, rigid side walls and load-carrying
structures. The term load refers to static/dynamic form of load (not cargo
load) or forces arising out of the lifting, handling, securement and
transporting of container. It is equipped with top and bottom corner
fittings. The corner fittings (see diagram in the Dimension of General
Purpose Containers) provide means of supporting, stacking, handling and
securing the container. The flat rack is used for machinery, lumber, and
other heavy or large objects.
 Platform based containers open sided
Specific Cargo Container
(1) Thermal container (reefer)
It has insulated walls, doors, roof, and floor, which limit the range of temperature
loss or gain. It is used for perishable goods like meat, fruits and vegetables.
 Insulated container
It does not use any device for cooling and/or heating.
 Refrigerated container (with expendable refrigerant)

It uses dry ice or liquefied gases. It does not require external power supply
or fuel supply.
 Mechanically refrigerated container

It uses a refrigerating appliance, that is, the mechanical compressor or
absorption unit.
 Heated container
It uses the heater, that is, a heat-producing appliance.
 Refrigerated and heated container
It uses the refrigerating appliance (mechanical or expendable refrigerant)
and heater.
(2) Tank container

It is used for the carriage of bulk gases and liquids like chemicals.
(3) Dry bulk container

It is used for the carriage of dry solids in bulk without packaging, such as grains
and dry chemicals. It consists of a cargo-carrying structure firmly secured within
the intercontinental container framework.
(4) Named cargo types
It consists of various types of containers, such as automobile (car) containers and

livestock (cattle and poultry) containers.
Unit Load Device (ULD)
The unit load device (ULD) is the air equivalent of the ISO container. Due to its
unique shape resembling an igloo, the ULD is sometimes called the igloo (or
iglu).
The air mode containers mainly are of the IATA (International Air Transport
Association) types. The popular sizes of ULD include the IATA Type:
IATA Type
8 lower deck container, 60.4" x 61.5" x 64"
5 lower deck container, 88" x 125" x 64"
3 main deck container, 88" x 125" x 86"
Several other types of ULD are also in use worldwide.
Container Dimensions and Capacity
Containers intended for intercontinental use have external nominal dimensions of:
Length ----- 9.8125 feet (2.991m) as 10 feet;

19.875 feet (6.058m) as 20 feet;
29.9375 feet (9.125m) as 30 feet; and
40 feet (12.192m)
Width ----- 8 feet (2.438m)
Height ----- 8.5 feet (2.591m) and

9.5 feet (2.896m)
All above dimensions have permissible tolerances.
The 20 feet (20') and 40 feet (40') containers are very popular in ocean freight. The
8.5 feet (8.5') high container---8 feet 6 inches (8' 6") high container---is often referred to
as standard container.
The demand for the high cube container---hicube---is increasing. The popular high
cube container has a normal height of 9.5 feet (9.5' or 9' 6").
There are half height containers (4.25' or 4' 3" high) designed for heavy loads such
as steel rods and ingots, which absorb the weight limit in half the normal space.
The most widely used type of container is the general purpose (dry cargo)
container (please see Container Classifications) having a nominal length and height of
20' x 8.5', 40' x 8.5', and 40' x 9.5'. Referring to the Dimension of General Purpose
Containers below, the dimensions shown in the table are not fixed, that is, the external
and internal dimensions may vary among containers of the same length and height.
The container capacity is the total cube a container can accommodate. The term
cube often refers to the cubic measurement of cargo. The capacity (i.e., the internal
volume) is determined by multiplying the internal dimensions, that is, the product of
internal length, width and height. The capacity may vary among containers of the same
length and height.
Rating, Tare Mass and Payload of Containers
Rating
Rating is the maximum gross mass (or weight), that is, the maximum permissible
weight of a container plus its contents. The rating of a 20' dry cargo container is
24,000 kgs. (52,900 lbs.), and a 40', including the high cube container, is 30,480
kgs. (67,200 lbs.).
Tare Mass
Tare Mass---tare weight or tare---is the mass (or weight) of empty container,
including all fittings and appliances used in a particular type of container in its
normal operating condition.
The tare mass of containers may vary due to the different construction
techniques and materials used in the container. A 20' x 8.5' dry cargo container
may weigh 1,800 kgs. to 2,400 kgs., a 40' x 8.5' may weigh 2,800 kgs. to 4,000
kgs, and a 40' x 9.5' may weigh 3,900 kgs. to 4,200 kgs. Some dry cargo
containers may fall outside the indicated weight range. The reefer weighs more
than a dry cargo container of the same size.
Payload
Payload is the maximum permitted mass (or weight) of payload, including the
dunnage and cargo securement arrangements that are not associated with the
container in its normal operating condition. Therefore, Payload = Rating - Tare
Mass.
If the tare mass of a 20' dry cargo container is 2,400 kgs. and a 40' is 3,900
kgs., the payload of 20' is 21,600 kgs. (i.e., 24,000 kgs. minus 2,400 kgs.) and 40'
is 26,580 kgs. (i.e., 30,480 kgs. minus 3,900 kgs.). However, the exporter may be
prohibited to have that much payload in areas where there are legal limitations to
the overall load of a vehicle.
In exporting, it is common to encounter a payload of 17,500 kgs. or less in

the 20' container, and 24,000 kgs. or less in the 40' container.
The Marking and Identification of Containers
The rating, tare mass and payload of a container is marked on its wall, usually on the end
(rear) door in the case of an end-loading dry cargo container.
Each container has an identification code or container number---a combination of

the 4-letter characters that identify the owner (the operator of container) and the 7-
numeric characters that identify the container. The container number can be found on the
outer and inner side walls.
The container number is entered on the bill of lading to facilitate the identification
and tracking of the container and the cargo.
Table and Diagram:

Dimension of General Purpose Containers
Dimension of General Purpose Containers
Recommended
CONTAINER Capacity
Load Volume
Nominal Cubic Cubic Cubic Cubic
Length Width Height
Dimension Feet Meter Feet Meter
20' 8' 8' 6"
External
6.096 m 2.438 m 2.591 m
19' 4.25" 7' 8.625" 7' 10" 1170 cft 1000 cft
Internal
5.899 m 2.353 m 2.388 m 33.131 cbm 28 cbm
40' 8' 8' 6"
External
12.192 m 2.438 m 2.591 m
39' 5.375" 7' 8.625" 7' 10" 2385 cft 2050 cft
Internal
12.024 m 2.353 m 2.388 m 67.535 cbm 58 cbm
40' Hicube 8' 9' 6"
External
12.192 m 2.438 m 2.896 m
39' 5.375" 7' 8.625" 8' 10" 2690 cft 2350 cft
Internal
12.024 m 2.353 m 2.692 m 76.172 cbm 66 cbm
NOTE: Containers with the same external length may not have exactly the same
internal length and width.
The Recommended Load Volume (RLV) refers to the suggested
maximum cube to use in calculating a full container load. The RLV can
be about 10-15% less than the container capacity, depending on the
export pack dimensions.
Rear view of 20' x 8.5' container
CAUTION:
Miscalculated capacity may result in a

large empty and unusable space or a
shortage in space. For example (see 20' x
8.5' container diagram on the left), the
master cartons have a uniform height of
20 inches, and the length and width are
greater than the height. If 1170 cubic feet
is used to calculate a 20' full container
load, most likely some cartons will not fit
despite the empty space of about 170
cubic feet. You cannot stuff the
remaining cartons into the remaining 14"
high empty space.
Containerized Shipments
The use of containers in export shipments makes the transport and handling easier and
faster. The crane and gantry are commonly used in handling containers. The forklift is
also used at the docks and container terminals to move the 20' and shorter dry cargo
containers, which are equipped with forklift pockets---fork pockets or tine pockets.
The ports worldwide handle over 100 million TEUs annually. The unit TEU
(twenty-foot equivalent unit) is used to express the relative number of containers based
on the equivalent length of a 20' container. For example, 100 containers of 20' is 100
TEUs, while 100 containers of 40' is 200 TEUs.
The container ships used in the international traffic are designed with the cells
(compartments with cell guides) resembling a honeycomb wherein the containers are
placed, thus named cellular container ships.
The ships are bigger and faster nowadays, especially those used in the deep-sea
voyage (long haul). Those rated below 20 knots are common in the short-sea voyage
(short haul). The knot is a unit of ship's speed, being one nautical mile per hour. One
nautical mile is 1.852 kilometers. A ship that steams at 20 knots is moving at a speed of
about 37 kilometers per hour.
Some cellular container ships in the 20 to 23 knot range can accommodate 2,000 to
3,000 TEUs. Some rated 24 knots have a carrying capacity of 4,000 to 4,900 TEUs and
load of 56,000 to 75,000 metric tons. The length of the vessel can be about 900' (275
meters) and the beam---the widest part of a ship---can be about 125' (38 meters). The size
of vessel is huge compare to a standard football field having a goal line of 300' (91.44
meters) and an end line of 160' (48.77 meters).
Convenience of Containers in
Multimodal Transport and Transhipment
Containers are designed to facilitate the carriage of goods without intermediate
reloading. They are fitted with devices permitting their ready handling,
particularly in the multimodal transport and transhipment (the word
"transhipment" is also written with two letter 's' as "transshipment").
The prefix 'multi-' means at least two or many. The term mode refers to the
way or means. Multimodal transport means at least two different modes of
transportation. In export shipping, it refers to delivery using a combination of
usually ocean and land (rail or road) carriers, and using only one shipping
document known as through bill of lading or combined transport bill of lading,
issued usually by the ocean shipping company or its agent.
Theft, Pilferage, Damage, and Insurance
The cargo security of container shipments against theft, pilferage and damage is
improved, especially in the CY/CY container service. Hence, the cargo insurance
in a container shipment generally is lower than in a break-bulk shipment.
The metal seal that is provided by the carrier and used in securing the
container doors is tamperproof, but it is easily removed. In some countries, the
importer's customs broker may use padlocks to secure the doors of container for
their client once the FCL (full container load) shipment reached the destination
port.
Importer's Specified Container Shipping Company
Importers may specify in the purchase order and/or the letter of credit (L/C) the
container shipping company or the vessel to use for their shipment. Big importers,
such as chain stores, and large shippers may have a contract with the shipping
company to deliver an annual minimum TEU (twenty-foot equivalent unit) at
preferred or discounted freight rates.
Container Size, Number and Load Options

The cargo weight and cube influence the size and number of containers needed for an
order. The term cube refers to the cubic measurement of cargo.
From the analysis in the Case Sample: Container Selection (1) below, it is obvious
that not all 1,500 cartons (2,250 cu. ft. or 63.713 CBM) will fit into two 20' containers or
one 40' standard container. A solution is to request the importer to adjust the order to
1,365 cartons (2,047.5 cu. ft or 57.979 CBM) to make one 40' FCL (full container load),
in case the high cube container (the hicube) is not available. The alternate solution is to
use a 40' hicube. However,
 not all shipping companies and sea routes have the hicube,
 there are legal limitations to the overall height of a vehicle in certain areas
(e.g, tunnel and underpass) and countries, and
 the FCL (full container load) freight rate of hicube is higher than the
standard container.
Some of the shipping companies having high cube containers include:
 APL (U.S.A.)
 Evergreen (Taiwan)
 Hanjin (South Korea)
 Hapag-Lloyd (Germany)
 "K" Line (Japan)
 Maersk (Denmark)
 NYK (Japan)
 OOCL (Hong Kong-Taiwan)
 Sea-Land (U.S.A.)
Case Sample:
Container Selection (1)
An importer orders 1,500 cartons of product DX. The gross weight of each carton is 10.5
kilograms and its length-width-height is 1.5' x 1' x 1' (1.5 cu. ft. or 0.04248 CBM). The
nature of product DX demands the stowage of cartons in upright position.
The cargo gross weight of 15,750 kilograms suits a 20' or a 40' container. The total
cube is 2,250 cu. ft. (63.713 CBM).
The capacity of a 20' container is about 1,170 cu. ft. (33.131 CBM) and a 40' is about
2,385 cu. ft. (67.535 CBM). It seems that all 1,500 cartons will fit into two 20' containers
or one 40' standard container, but the figure is misleading. It is important to consider the
excess, but unusable, space generated from the stowage of odd sized cartons.
Analysis on some possible methods of stowing product DX and the total number of
cartons that will fit into a container, based on the internal dimension of the general
purpose container and the Diagram: Package Orientation, is as follows:
Method of Stowing
(A) Stowing the front (length) of all cartons parallel to the side (length/deep) of
container.
(B) Stowing the front (length) of all cartons parallel to the end (width/wide) of
container.
(C) Crosswise stowing---alternate each row in the wide (shown below) using the
methods (A) and (B), that is, a row of CA alternate with a row of CB presented
below.
Container Method (A) Method (B)
20' x 8.5' deep 12 rows 19 rows

wide 7 rows 5 rows
Standard
Container high 7 layers 7 layers
Total: 588 cartons 665 cartons
Cube: 882 cu. ft. 997.5 cu. ft.
Method (C)
Container CA CB
(C) = CA + CB

wide 3 rows 3 rows
Standard
Total: 252 cartons 399 cartons 651 Cartons
Cube: 976.5 cu. ft.

wide 7 rows 5 rows
Standard
Container high 7 layers 7 Layers
Total: 1,274 cartons 1,365 Cartons
Cube: 1,911 cu. ft. 2,047.5 cu. ft.
Method (C)
Container CA CB
(C) = CA + CB

wide 3 rows 3 rows
Standard
Total: 546 cartons 819 cartons 1,365 Cartons
Cube: 2,047.5 cu. Ft.

wide 7 rows 5 rows
High Cube
Total: 1,456 cartons 1,560 cartons
Cube: 2,184 cu. ft. 2,340 cu. ft.
Method (C)
Container CA CB
(C) = CA + CB

wide 3 rows 3 rows
High Cube
Container high 8 layers 8 Layers
Total: 624 cartons 936 cartons 1,560 Cartons
Cube: 2,340 cu. ft.
Maximized Use of a Container Capacity
The essence in maximizing the use of a container capacity is to stuff the most cubes (i.e.,
largest cubic measurement) into a container that would give the lowest freight cost. If the
capacity of a container is 1,170 cu. ft., it does not mean that the exporter must (or can)
fully stuff it up to 1,170 cu. ft.. This can seldom be done due to the restrictions imposed
by the kind of cargo and the type and size of the export pack.
The freight cost per cubic unit generally is lower when more cubes are stuffed into a
container. However, when the total cube is too close to the container capacity, unloading
and reloading of container may happen. The cost of extra time and labor spent on
unloading and reloading usually is much more than the unit cost of freight saved for
stuffing in more cubes. It would be fortunate if there is no cargo overflow---a situation
where some export packs cannot fit into the container because the remaining space does
not accommodate the size of the packs. The recommended load volume provides a guide
in calculating a full container load (FCL), which helps in avoiding cargo overflow.
Case Sample:
Container Selection (2)
In cases where the importer uses his/her own consolidator in handling the delivery in an
FOB sales term, the exporter may not worry about maximizing the use of a container
capacity. For example, assuming that in the Case Sample: Container Selection (1) the
importer orders 665 cartons of product DX at FOB price and will let his/her own
consolidator, which is located in the importer's country and has an office in the exporter's
country, handle the forwarding. The consolidator, knowing that the cargo is product DX
but not knowing the total weight and cube of the proposed consignment, may quote the
importer as follows:
Quotation - Ocean Freight
FROM : FOB Port of Origin

TO : Importer's Warehouse
WEIGHT : Per 1000 Kgs
MEASURE : Per Cubic Meter
COMMODITY : Product DX
FREIGHT RATES :
20' Std. Container
CY/CY US$2,145
LCL US$65 W/M
Minimum US$125
The Std. Container refers to the

8.5' high standard container.
The CY/CY is explained in
Modes of CY and CFS Container Services
The LCL is explained in
FCL versus LCL
The W/M is explained in
Weight or Measure
The Minimum is the minimum billing or
minimum charge in the freight service.
The above quote includes the ocean freight and the inland freight and handling
charge in the importing country. The brokerage fee and customs duty in the importing
country are on the importer's account.
The cube of 665 cartons is 997.5 cu. ft. (i.e., 665 cartons x 1.5 cu. ft.) or 28.25 CBM.
The total freight in the LCL (less container load) is US$1,836.25 (i.e., 28.25 CBM x
US$65; please see the explanations in the Case Sample: Weight or Measure), while in a
20' container is US$2,145.
In such a case, the exporter does not have to worry about maximizing the use of a
container capacity.
Palletized Cargo in Container Shipments

The Table: Pallet Count below gives an idea of the number of pallets a standard dry cargo
container can accommodate, assuming that each pallet is stacked with cargo to 4.5' high
and each pallet itself is about 5.5" high (or the total height of each loaded pallet is about 5
feet).
To show the gross weight (Gr. Wt.) of each pallet, it is assumed that the acceptable
maximum payload to consignees in a 20' container is 17,500 kgs. and in a 40' is 24,000
kgs..
Table: Pallet Count
20' Container
(for example with 17,500 kgs. payload)
Pallet Total Gr. Wt.
Total
Nominal No. of Pallet No. of Each Pallet
Cu. Ft.
Size Pallet (kgs.)
Deep Wide
45" x 53" 4 2 8 663 2,188
45" x 45" 5 2 10 703 1,750
44" x 52" 4 2 8 636 2,188
44" x 44" 5 2 10 672 1,750
41" x 49" 5 2 10 698 1,750
40" x 48" 5 2 10 667 1,750
40" x 40" 5 2 10 556 1,750
36" x 45" 6 2 12 675 1,458
36" x 36" 6 2 12 540 1,458
35" x 44" 6 2 12 660 1,458
34" x 45" 6 2 12 638 1,458
33" x 44" 7 2 14 706 1,250
40' Container
(for example with 24,000 kgs. payload)
Pallet Total Gr. Wt.
Total
Nominal No. of Pallet No. of Each Pallet
Cu. Ft.
Size Pallet (kgs.)
Deep Wide
45" x 53" 8 2 16 1.325 1,500
45" x 45" 10 2 20 1,406 1,200
44" x 52" 9 2 18 1,430 1,333
44" x 44" 10 2 20 1,344 1,200
41" x 49" 10 2 20 1,396 1,200
40" x 48" 10 2 20 1,334 1,200
40" x 40" 11 2 22 1,222 1,091
36" x 45" 13 2 26 1,463 923
36" x 36" 13 2 26 1,170 923
35" x 44" 13 2 26 1,430 923
34" x 45" 13 2 26 1,381 923
33" x 44" 14 2 28 1,412 857
The indicates the more frequently used pallet size in the export shipments.
It is apparent from the Table: Pallet Count that the palletized cargo leaves a lot of
excess space, considering that the capacity of standard container in a 20' is about 1,170
cu. ft. (33.131 CBM) and in a 40' is about 2,385 cu. ft. (67.535 CBM). Therefore, if the
palletized cargo is light, the freight cost per cubic unit in a container is high.
The moving and static load capacity of a pallet may vary considerably. For safety
reasons, limit the weight of the palletized load to 1,000 kgs. (2,204.6 lbs.).
The packing (loading) of a container generally is faster when the cargo is palletized.
However, the loading of palletized cargo can be time consuming if the loading
equipment, such as forklift and pallet truck, cannot enter the container (please see
Packing (Loading) and Emptying the Containers for related information).
FCL, LCL, CY, and CFS
The respective meaning of the terms FCL, LCL, CY, and CFS is as follows:
FCL ----- full container load;

full carload
LCL ----- less than container load;

loose container load;
less than carload;
loose carload
CY ----- container yard
CFS ----- container freight station
FCL versus LCL

The word carload relates to the rail car. The FCL and LCL are differentiated, in
practice, on whether the 'whole container' or 'not the whole container' is intended
for the consignee.
The FCL means the load reaches its allowable maximum (or full) weight or
measurement. In practice, however, the FCL in the ocean freight does not always
mean packing a container to its full payload or full capacity. For example, an
exporter books a 20' container that is intended for a consignee at FCL flat rate of
US$1,500. If the consignment occupies 500 cu. ft. and weighs 5,000 kgs. only, the
case is still FCL and the exporter has to pay US$1,500.
If an exporter intends to pack a container to the full capacity or full payload

with the consignments of two or more consignees for the same destination, the
case is LCL and the carrier will charge the LCL freight rate on each consignment.
In the LCL arrangement, the shipper is required to deliver the cargo to the
carrier's container freight station for containerization, thus there is no guarantee
that the two or more consignments from the same exporter will share the same
container. In some cases, the exporter is allowed to pack the container at their
premises in the LCL arrangement, and then the carrier uses that same container to
pack in more cargo from other shipper(s) to make a full container load at the
container freight station.
Referring to the Case Sample: Container Selection (1), if the importer

maintains the order at 1,500 cartons and no forwarder is involved, and if the high
cube container service is not available, it may mean that there will be one 40' FCL
plus 135 cartons LCL. A combination of FCL and LCL in a consignment, which
is a typical aftermath from the cargo overflow, is a poor exporting and importing
practice, taking into account the additional freight and other charges in both
countries. All 1,500 cartons can be shipped by LCL, but the freight cost can be
higher and the cargo may be exposed to a higher risk of damage and loss.
CY versus CFS
The CY and CFS apply to the manner and the location of the cargo delivery and
receipt in a container service. The CY is the delivery (or receipt) of a whole
container from (or at) the shipper's or the forwarder's (or the consignee's) cargo
yard or premises. The CFS is the delivery (or receipt) of loose cargo from (or at)
the carrier's container freight station.
The container freight station (CFS) is operated by the carrier for the receipt,
forwarding, and assembling or disassembling of cargo. Normally, the container
freight station is a customs clearance center.
The CFS service may be necessary under any of the following circumstances:
 The kind of cargo and quantity of order does not warrant the use of the
whole container.
 The shipper's or the consignee's premises are inaccessible by container due

to poor road conditions (e.g. narrow road) and location (e.g. remote area
not served by container).
 The overall load of vehicle exceeds the legal limitation.
 The shipper or the consignee lacks the necessary container loading or

unloading equipment.
Modes of CY and CFS Container Services
CY/CY Container Service
The CY/CY (read as 'CY to CY') container service---door-to-door container

service or house-to-house container service---broadly means that the whole
container received by the carrier is packed at the shipper's or the forwarder's
premises, and the delivery of that same whole container to the consignee's
premises.
In a related term door-to-door service, which is often used in the cargo

forwarding and may involve the LCL, refers to a type of freight service available
from a forwarder whereby the cargo is picked up at the consignor's premises and
delivered to the consignee's premises.
CY/CFS Container Service
The CY/CFS (read as 'CY to CFS') container service---door-to-port container

service---broadly means that the whole container received by the carrier is packed
at the shipper's or the forwarder's premises, and that same whole container is
emptied at the carrier's container freight station at the port of destination. The
consignee arranges the delivery of the loose cargo from the container freight
station to his/her premises.
CFS/CY Container Service
The CFS/CY (read as 'CFS to CY') container service---port-to-door container

service--- broadly means that the delivery of the loose cargo to the carrier's
container freight station at the port of origin is packed into the whole container,
and the delivery of that same whole container to the consignee's premises.
CFS/CFS Container Service
The CFS/CFS (read as 'CFS to CFS') container service---port-to-port container

service or pier-to-pier container service---broadly means that the delivery of the
loose cargo to the carrier's container freight station at the port of origin is packed
into the whole container, and that same whole container is emptied at the carrier's
container freight station at the port of destination. The consignee arranges the
delivery of the loose cargo from the container freight station to his/her premises.
Packing (Loading) and Emptying the Containers
The hand packing and emptying of containers is still common in many countries. The
time required in packing or emptying a container depends on the kind, size and weight of
the cargo, the means (manual or mechanical), and the number of persons doing the
packing or emptying. Packing generally takes more time than emptying.
Unitized Load
Unitizing or unitization is the assembly and packing of a number of cargo, either

the same or different items, into a standardized or compact unit for ease of
handling by the mechanical equipment. The palletized cargo, container load and
carload are examples of a unitized load.
The unitized load facilitates the loading, unloading and inventory of

shipment, and improves the cargo security against theft, pilferage and damage.
Turn-Over Rate of Containers
In the CY/CY, CY/CFS and CFS/CY container services, the carrier allows the
shipper or the consignee, as the case may be, to retain (hold) the container at their
premises normally for 24-48 hours only, in order to maximize the turn-over rate
of the container. An overtime use charge, known as demurrage, is collected on
overstayed containers. In special cases, such as when the shipper or the consignee
is doing a substantial amount of business with the carrier, some carriers may
allow a longer time without charging demurrage.
The Use of Loading Equipment

Not all shippers have a container loading dock or raised bank with suitable dock plate at
their premises, where the forklift and pallet truck can enter the container. The cargo is
often manually or mechanically lifted from the ground onto the container that sits on the
chassis (the bogie) or flatbed truck (the open truck). The inclining belt conveyor
sometimes is used to move the cargo from the ground up to the container doors, and the
roller conveyor is used to convey the cargo from the container doors to the inner section,
particularly when packing a 40' container, which is deep.
In case the shipper's premises have a raised bank and the forklift is used, the forklift
must have a lift mast that is non-rising and less than 7' 6" (i.e., less than 90 inches), in
order to allow cargo to be forked into a standard dry cargo container.
Inspecting the Container

In the case of a CY/CY or CY/CFS container service, the shipper has to arrange for the
drayage of the empty container from the carrier's container terminal to the shipper's
premises. The shipper must inspect the container to ensure it will adequately protect the
cargo. In a dry cargo container, the doors, walls and ceiling demand the utmost attention.
The doors must be in good working condition and the door locking bars should
secure and lock properly. The load may push against the container doors during a rough
sea voyage. Even though the rating of a 20' container is 24,000 kgs., the doors cannot
withstand that much pressure of solid load pushed against them during conveyance.
The walls and ceiling must be free from cracks or damage to prevent water and
moisture from entering. There is a chance that a dry cargo container will be carried on
deck since the cellular container ship carries about one-third of the containers on deck.
The possible ingress of the sea water, rain and salt-laden moisture through a damaged
container may ruin the cargo.
Always inspect the container before using it. If a container was contaminated (e.g.
chemical spill) in prior use, then using the same container can be hazardous. Extra
caution must be taken when packing food products in a dry cargo container. Some food
products may absorb odor and moisture.
Stowage of Container
Never allow anyone to smoke inside a container. A carelessly discarded cigarette can
cause a serious fire that may destroy the cargo and the ship, and may cause the loss of
life.
In tropical areas, the air inside a dry cargo container is hot, humid and suffocating,
especially inside a 40' container. To relieve discomfort when packing a container, it is
necessary to use forced ventilation with an electric blower or fan. The air humidity is
high, especially during the wet or rainy season. Forced ventilation can minimize humid
air from being trapped inside a container, as the air may condense into liquid and damage
the cargo when the container enters a subzero temperature area.
The weight of cargo must be distributed evenly within the container. As a rule of
thumb, the center of gravity should not be above half the height of the container, and it
should be within two feet from the center of container in the front-rear direction and
within one foot in the sidewise (transverse) direction.
Cargoes like video monitors and glasswares have a stacking limit or the maximum
stack. Otherwise, the compression from excess weight of overlaying packages may
damage the goods underneath. For this reason, heavier packages should never be stowed
above lighter packages. Liquids should never be stowed above non-liquids. Keep soft
packages away from other packages or objects with protrusions or sharp corners, to
prevent damage cause by movement at sea and on land (rail and truck).
A ship at sea may move in different directions simultaneously. Always apply

dunnage (i.e., material used to separate and protect the cargo from damage during
conveyance, for example, foam, mat and fiberboard) and/or cargo securements when
necessary to prevent the cargo from crashing and cascading inside the container.
Cascaded cargo may lie against the container doors, posing danger to any person who
opens the doors.
Efficient Packing of Containers ---

Corrugated Cartons, Wooden Cases/Boxes, and Bales
The basic information on how to efficiently pack (load) the containers is being discussed
here. There are several container-loading software in the market in which the exporters
and shippers may use to generate the efficient way of packing (loading) the containers.
The cube relation, that is, the dimension of export pack in relation to the internal
dimension of container, is used to efficiently pack (load) a container.
Referring to the Diagram: Package Orientation below, a regular-shaped export pack

(e.g. carton) has six different possible orientations as follows:
Export Pack Orientation
(1) A || D B || W C || H
(2) A || D B || H C || W
(3) A || H B || W C || D
(4) A || W B || D C || H
(5) A || H B || D C || W
(6) A || W B || H C || D
LEGEND: "||" means parallel to
 "A" represents the external length of carton

 "B" represents the external width of carton
 "C" represents the external height of carton
 "D" represents the internal length (deep) of container
 "W" represents the internal width (wide) of container
 "H" represents the internal height of container
The orientation or a combination of orientations that allows the greatest number of packs
or the highest multiple of packs is the most efficient method of packing.
Referring to the Case Sample: Container Selection (1), the method (A) of stowing
the container is the export pack orientation (1) shown above, the method (B) is the
orientation (4), and the method (C) is the combination of orientations (1) and (4). The
product DX demands the stowage of cartons in an upright position. Other orientations
cannot be used as the product could be damaged.
Further to the above case sample, assume that the product DX can be stowed in any
orientation. The different multiples of carton (of the product DX) that can be packed into
a 40' x 8.5' standard dry cargo container, based on the external dimension of carton
A = 18"
B = 12"
C = 12"
and the internal dimension of 40' container
D = 473"
W = 92"
H = 94"
are as follows:
Export
Pack Multiple of Carton Total No. of Cartons
Orientation
(1) D A = 26 26 x 07 x 07 = 1,274
W B = 7
H C = 7
(2) D A = 26 26 x 07 x 07 = 1,274
H B = 7
W C = 7
(3) H A = 5 05 x 07 x 39 = 1,365
W B = 7
D C = 39
(4) W A = 5 05 x 39 x 07 = 1,365
D B = 39
H C = 7
(5) H A = 5 05 x 39 x 07 = 1,365
D B = 39
W C = 7
(6) W A = 5 05 x 07 x 39 = 1,365
H B = 7
D C = 39
Export pack orientations (3) to (6) have the highest number of cartons, thus are the most
efficient way of packing. In practice, the orientations (1), (4), and a combination of (1)
and (4) are often used.
Diagram: Package Orientation
EXPORT PACK
CONTAINER
Efficient Packing of Containers ---

Palletized Cargoes (Cartons, Cases/Boxes, Bags, and Drums)
and Wooden Crates
The cube relation, that is, the dimension of export pack in relation to the internal
dimension of container, is used to efficiently pack (load) a container.
Referring to the Diagram: Palletized Cargo and Diagram: Container below, the
palletized cargo or wooden crate has two possible orientations as follows:
Pallet Orientation</FONT< a>
[1] Y || D Z || W
[2] Y || W Z || D
LEGEND:
 "||" means parallel to

 "Y" represents the side of pallet
 "Z" represents the side of pallet
The different multiples of pallet that can be packed into a 40' x 8.5' standard dry cargo
container, based on the pallet sizes 45" x 53" and 45" x 45", the total height of each
loaded pallet of about 60", and the internal dimension of 40' container
D = 473"
W = 92"
H = 94"
are as follows:
Export
Multiple Total
Pallet Size Pack
Orientation
of Carton No. of Cartons
Y Side Z Side
45" 53" [1] D Y = 10 10 x 01 = 10
W Z = 1
45" 53" [2] W Y= 2 02 x 08 = 16
D Z = 8
45" 45" [1] D Y = 10 10 x 02 = 20
W Z = 2
45" 45" [2] W Y= 2 02 x 10 = 20
D Z = 10
The above indicates the orientation or a combination of orientations having a

higher number of pallet in the given pallet size, thus are more efficient packing methods.
Diagram: Palletized Cargo
-------------------------
Cargo can be stretch
wrapped with plastic
film to protect against
dirt, theft or loss, and
to stand up to rough
handling in transit.
-------------------------
Diagram: Container
Case Sample:
Shipping Pallets
Referring to the Diagram: Palletized Cargo above, the position of the forklift pockets---
for inserting the forks or tines of a forklift---is not suitable for the pallet size 45" x 53",
considering the pallet orientation [2], where the Y (side of the pallet) parallel to the W
(width/wide of container or the end of container), is more efficient for that size of pallet.
The forklift pockets in this pallet size for a two-way double-faced pallet must be at the Y
position, not at the Z position as shown in the diagram.
If the shipper uses a 45" x 53" pallet having a design similar to the given diagram,
the forklift operator has to rotate the pallet inside the container by 90 degrees to position
its Y side parallel to the W (width/wide of container or the end of container), which is
time consuming and defeats the purpose of unitizing for speedy loading. When a forklift
is inside the container, its maneuverability is reduced. While such a pallet may be forked
at the Y side under the base plank (i.e., at the bottom of the pallet), instead of at the Z
side through the forklift pockets, there is a risk of damaging the floors of the container
and warehouse while forking. Moreover, the convenience and safety in unloading the
container at the destination point must be taken into account.
Pallet Constructions and Designs

Pallet Stowing Patterns in a Container
Pallet Stowing Patterns in a Container

The pallet stowing patterns [L], [M] and [N] presented below as viewed from the top of
the container:
Pattern [L]
Pattern [M]
Pattern [N]
Pallet Yield in a Container

Referring to the Diagram: Palletized Cargo and Diagram: Container, and the pallet
orientations [1] and [2] below,
Pallet Orientation
[1] Y || D Z || W
[2] Y || W Z || D
LEGEND:
 "||" means parallel to

 "Y" represents the side of pallet
 "Z" represents the side of pallet
a comparison of the pallet yield in the 20' and 40' dry cargo containers, based on the total
height of each loaded pallet of about 60"
D = 232"
W = 92"
D = 473"
W = 92"
is presented in the Table: Pallet Yield below:
Table: Pallet Yield
20' Container
Pallet
Stowing Pattern >> [L] [L] [M] [N]
Pallet
Orientation >> [1] [2] [1] + [2] [1] + [2]
Total Total Total Total % Floor
Pallets Pallets Pallets Pallets Utilized
Pallet Size
Y Side Z Side
45" 53" 5 8 89.39%
45" 45" 10 10 94.87%
44" 52" 5 8 85.76%
44" 44" 10 10 90.70%
41" 49" 5 8 9 10 94.12%
40" 48" 5 8 9 10 89.96%
40" 40" 10 10 74.96%
36" 45" 12 10 11 10 91.08%
36" 36" 12 12 72.86%
35" 44" 12 10 11 10 86.58%
34" 45" 12 10 11 10 86.02%
33" 44" 14 10 12 12 95.24%
40' Container
Pallet
Stowing Pattern >> [L] [L] [M] [N]
Pallet
Orientation >> [1] [2] [1] + [2] [1] + [2]
Total Total Total Total % Floor
Pallets Pallets Pallets Pallets Utilized
Pallet Size
Y Side Z Side
45" 53" 10 16 87.69%
45" 45" 20 20 93.07%
44" 52" 10 18 94.64%
44" 44" 20 20 88.98%
41" 49" 11 18 20 20 92.33%
40" 48" 11 18 20 20 88.24%
40" 40" 22 22 80.89%
36" 45" 26 20 23 22 96.79%
36v 36" 26 26 77.43%
35" 44" 26 20 23 22 92.01%
34" 45" 26 20 23 22 91.41%
33" 44" 28 20 24 24 93.43%
The above indicates the stowing pattern is inapplicable or unnecessary due to the
large-sized pallet or pallet with equal sides.
The % Floor Utilized is based on the highest Total Pallets (i.e., the highest total
number of pallets in a container for the given pallet size, stowing pattern and pallet
orientation).
Stack Loading of Pallets

Referring to the Table: Pallet Yield above, the number of pallets in a container can be
doubled by double stacking of pallets, but at the expense of the total height and the gross
weight of each loaded pallet. Stack loading is possible only if the cargo underneath can
stand up to the compression from the overlaying pallet, and the center of gravity does not
exceed half the height of the container.
To prevent the cargo beneath the stack from being torn and damaged, use dunnage
like plywood, compressed particle board, fiberboard, and matting, to separate the lower
and upper pallets. L-shaped wood or steel corner supports can be used to give added
strength to the packages.
To prevent the pallets from shifting and crushing inside the container, block and
brace the pallets at the voids with lumber and plywood, or secure them with chains, ropes
and straps to the bull rings at the upper and lower corners of the side walls of the
container.
Interlocking of Export Packs

Interlock the export packs (e.g. cartons or bags) on a pallet and inside a container
wherever possible. Please see the Diagram: Interlocked Cargo below. The interlocked
cargo provides load stability, giving a compact stow that reduces the potential of collapse
with movement on land, air and at sea.
Diagram: Interlocked Cargo
-------------------------
Cargo can be stretch
wrapped with plastic
film to protect against
dirt, theft or loss, and
to stand up to rough
handling in transit.
-------------------------
Pallet Constructions and Designs

Pallets are built with varied construction techniques. The materials commonly used in the
construction of pallets are wood (softwood and hardwood) and plastic (high density
polyethylene). Metals (steel and aluminum) are also used but less frequently.
The low cost softwood pallet---made of softwoods like pine and spruce---is used for
light cargo and it is expendable. The hardwood pallet---made of hardwoods like ash and
maple---costs more but has greater strength than the softwood pallet, and is good for
repeated use.
The wooden pallet is often customized to suit the type, size and weight of the
exporter's cargo and to meet handling and loading requirements.
The plastic pallet generally costs more than a wooden pallet of the same size, but it
is chemical and moisture resistant, cleans easily, is lighter, and will not splinter. Hence,
the plastic pallet is more durable than the wooden pallet. Nevertheless, the wooden pallet
is used most often in export shipments.
Basic Pallet Designs

Two-Way or Four-Way Pallets
A two-way pallet allows forking at the two opposite sides of the pallet, while
a four-way pallet allows forking at all four sides. The four-way pallet is good for
both pallet orientations [1] and [2].
Two-Way Pallet
Two-Way Pallet
Four-Way Pallet
Four-Way Pallet
Single-Faced or Double-Faced Pallets
A single-faced pallet has one full deck (i.e., non-reversible deck), which is often
called a skid, while a double-faced pallet has two full decks (i.e., reversible
decks). The double-faced pallet is ideal for stack loading, racking of palletized
cargo, and conveyor use.
Single-Faced Pallet
Skid
Double-Faced Pallet
With Forklift Pockets or

With Forklift or Pallet Truck Entries
Pallets with the forklift pockets allow forking with a forklift, while pallets
with the forklift or pallet truck entries allow forking with either a forklift or a
pallet truck. Some pallets are designed with forklift pockets that also permit
forking with a pallet truck, in which the rollers beneath the forks of the pallet
truck can come in firm contact with the floor of warehouse and container.
With Forklift Pockets

With Forklift or
Pallet Truck Entries
Variations of Basic Pallet Designs
Two-Way Single-Faced Pallet
It is usually made of wood, with forklift or pallet truck entries.
Two-Way
Single-Faced Pallet
Two-Way Double-Faced Pallet
It is usually made of wood, with forklift pockets.
Two-Way
Double-Faced Pallet
Four-Way Single-Faced Pallet
It is usually made of wood or plastic. The four-way single-faced pallet made of

wood may have a 'half-deck' at the bottom. The four-way single-faced pallet made
of plastic usually does not have a bottom deck.
Four-Way
Single-Faced Pallet
('Half-deck' bottom)
Four-Way Double-Faced Pallet
It is usually made of plastic or wood, with forklift pockets at all four sides
Four-Way
Double-Faced Pallet
RO/RO Vessels and LASH
Besides the full container ship, the RO/RO (roll on/roll off) vessel and the LASH are
other systems of water transport used in international trade.
RO/RO (Role On/Role Off ) Vessels
The RO/RO vessel (RO/RO or RORO) derived from the traditional car ferry,
where motor vehicles are driven on and off by their drivers. RO/RO is popular
within the European trade routes. It is also used in other trade routes like the
U.S.A.-Central America route and Europe-West Africa route.
The RO/RO is equipped with ramp(s) that makes loading and unloading from
the side and/or bow (front of vessel) and/or stern (rear of vessel) possible. Some
modern RO/ROs are designed as a trailer/break-bulk/container carrier suitable for
the deep-sea voyage (long haul), making loading and unloading of containers
from the top, like a full container ship, possible using the crane. The type of cargo
that can be carried on a RO/RO is flexible, including large objects.
The full RO/RO has low stowage factors, as a result of wasted space around
the underside of the trailers and other motor vehicles. Therefore, the full RO/RO
is not ideal for deep-sea trade. The low stowage factors, however, are
compensated for by the quickness of the "turn around' time in ports in the short-
sea voyage (short haul).
In general, the capital cost for a full RO/RO is lower than the full container
ship or the LASH. When the cargo availability is insufficient in a port in the
short-sea trade, investment in sophisticated container handling installations can be
uneconomical. Therefore, the full RO/RO offers a solution to short-sea transport
needs. A large area of land for parking trailers and other motor vehicles is
necessary while they await loading.
LASH (Lighter Aboard Ship)
The lighter aboard ship or LASH---barge-carrier or barge-carrying vessel---is

designed to carry lighters (barges), where they are lifted by crane over the stern
(rear) of the vessel.
The LASH and barge come in different configurations. Some LASHes can
accommodate over 24 barges. Each barge may carry 600 to 1,000 metric tons of
cargo, which is much bigger than the ocean freight container, and can float and be
towed up and down a river or canal, thus the barge is often referred to as the
floating container.
The LASH is useful in moving a relatively large volume of cargo in the

short-sea trade and to and from sites on rivers and canals, such as Rhine Canal in
Europe, that cannot be used by the larger ocean-going vessels. The LASH keeps
the load in the same vessel for the entire trip, thus reduces cargo handling,
transport costs and time.
The LASH is popular in Europe, taking advantage of the extensive inland

waterway systems which are the cheapest means of inland transport. The export
goods from landlocked European countries like Switzerland may move by LASH
or other inland waterway transports to the port of Rotterdam (Netherlands) or
Antwerp (Belgium), and transfer to the ocean going vessel for the deep-sea
voyage.
Conference Shipping
Conference shipping is provided by the conference carrier or member of a freight
conference. The freight conference---conference or steamship conference or liner
conference---is a group of operators of vessel who operate on the same routes and
cooperate on shipping schedules at the standardized freight rates between ports.
Conference shipping has regular sailing schedules, thus is called the liner service.
Most ocean freight is carried by conferences. Conference carriers or their agents

issue an ocean bill of lading.
Non-conference Shipping
Non-conference shipping is provided by the independent carrier or operator of vessel
who is not a member of a freight conference, sometimes called outside shipping.
Independent carriers, which carry about 25% of the ocean freight, operate on selected
trade routes in competition with conference carriers.
Non-conference shipping often does not have regular sailing schedules and freight
rates between ports. Consequently, it is perceived as less dependable than conference
shipping.
Independent carriers or their agents issue an ocean bill of lading.
Charter Shipping
Charter shipping is a tramp service. The term tramp, as used in the ocean shipping,
refers to a cargo ship not operating on regular routes and schedules, and picking up cargo
only when it is chartered (hired) from the ship operator.
While conference and non-conference shipping are for general cargoes, charter
shipping usually is for bulk cargoes like oil, coal, ore, and grain. Charter shipping has the
lowest freight rate per unit of weight or measure.
A charter party is required in charter shipping. A charter party---charter party

contract---is a written contract between the ship operator and the charterer (shipper). The
contract normally includes the ports, freight rate and time involved in the voyage(s).
The ship operator issues a charter party bill of lading. Unless a letter of credit (L/C)
permits or calls for a charter party bill of lading, the bank will reject such transport
document in the L/C negotiation.
Some trade terms used specifically in charter shipping are as follows:
FI
Free In
The word "free" as used in the charter shipping term means not including. FI is a pricing
term indicating that the charterer of a vessel (i.e., the shipper) is responsible for the cost
of loading goods onto the vessel.
FO
Free Out
FO is a pricing term indicating that the charterer of a vessel (i.e., the shipper) is
responsible for the cost of unloading goods from the vessel.
FIO
Free In and Out
FIO is a pricing term indicating that the charterer of a vessel (i.e., the shipper) is
responsible for the costs of loading goods onto the vessel and unloading goods from the
vessel.
Please see International Commercial Terms for the different trade terms used in
exporting-importing.
Voyage charter
The ship is chartered for a single journey and it may involve more than one port
of call. The ship operator crews and operates the ship and it is the operator's own
ship's master in control of the ship.
This type of charter shipping is analogous to the limousine service where the
driver, who is in control of the car in a journey, is provided by the car operator.
Time charter
The ship is chartered for a period of time. This type of charter shipping is similar
to a voyage charter in the crewing and operating of the ship. The contract may call
for a specific or unlimited number of voyages within the agreed time.
Bareboat charter
The term bareboat means a ship without a crew and ship's master. The charterer
(shipper) is in charge of crewing and operating the ship within a period of time,
usually a number of years.
This type of charter shipping is analogous to a car leasing where the lessor
(the car operator) provides the car only and the lessee provides his/her own driver.
Road Freight
The road freight and rail freight are commonly used in the cross-border deliveries, for
example, the delivery of export goods between mainland European countries and between
North American countries.
About 50% to 80% of cross-border deliveries are completed using road freight.
Generally, a transit distance within 1,000 kilometers using road freight is competitive
compared to rail and air freight.
In road freight, like in a RO/RO (roll on/roll off) service, the cargo on a trailer may
be accompanied by a driver who completes the journey to the final destination, or another
driver continues the journey with the same trailer at certain juncture to the final
destination, or a subsequent carrier collects the cargo and trailer or the cargo only and
continues the transit to the final destination, such as in the case of a transhipment. The
trailers may come in lengths of 45', 48' and 53'.
Road freight is widely used in the inland delivery of goods to the port of export. The
delivery charge is called the cartage or trucking fee. The hauling charge for transporting
the ocean freight container on land, normally not including the loading and unloading of
cargo, is called the drayage. In practice, the term "cartage" is used synonymously with
"drayage" in certain countries. The cartage, drayage and other inland transport charges
(e.g. waterway freight and rail freight) are known as inland freight.
Trucking company issues a road waybill, also known as a road consignment note.
In some countries, there are legal limitations to the overall height (e.g. 13' 6") and
load (gross weight) of a vehicle on freeways and major roads. The transportation of bulk
cargo may not be suitable in road freight.
TL versus LTL
TL (truckload) or FTL (full truckload) means a full trailer or truck, while LTL
(less than truckload; loose truckload) means not a full trailer or truck. The TL
resembles the FCL (full container load), while the LTL resembles the LCL (less
than container load).
Rail Freight
Rail freight is popular in multimodal transport and transhipment. It is widely used in
landbridges.
Rail cars--- rail wagons---are available in configurations to accommodate many

kinds of cargo. Flat cars---flatbed rail cars---can be 40' to 89' long and can run at 120
kms. per hour. Some rail cars are specially designed to carry road trailers in a road-rail
service or TOFC (trailer on flat car) service, which is often referred to as the piggyback.
In a COFC (container on flat car) service, for example using 50 flat cars each with a
60-ton capacity, the combined flat cars may carry loads weighing up to 3,000 metric tons,
which is far more than a truck or an airplane can carry. Hence, rail freight is very popular
in the movement of ocean freight containers and in the transport of bulk cargo in long
distance land travel, such as land travel between the East and West Coast ports in U.S.A.
and/or Canada. The U.S.A., Canada and other countries have a double-stack train system
that moves more freight. The 80' and longer container flat cars may carry 8 TEUs
(twenty-foot equivalent units) when the ocean containers are double stacked.
Large shippers, who have rail sidings at their facility, may arrange directly with the
rail carrier to have the rail cars moved to their facility for loading. The rail carrier will
pick up the rail cars at a specified time and move them to the port of export for loading
on the vessel. There is also an overtime use charge, as in the use of ocean freight
containers, also known as demurrage, that is collected on overstayed rail cars.
Rail carriers issue a rail waybill, also known as a rail consignment note.
CL versus LCL
The word carload relates to the rail car. CL (carload) or FCL (full carload)
means a full rail car, while LCL (less than carload; loose carload) means not a
full rail car.
Air Freight
Most air cargoes are carried on passenger airliner. About 80% to 90% of air cargoes are
transported by IATA (International Air Transport Association) members. IATA
standardizes the rules and regulations for air carriers throughout the world.
Air freighters like the Boeing 747-400F can carry loads weighing up to 110.67
metric tons. It can carry 30 IATA Type 2H pallets or containers (10'-high main deck
pallet or container, dimension is 96" x 125" x 118") and 32 IATA Type 8 containers
(lower deck container, dimension is 60.4" x 61.5" x 64"). The air container permits cargo
transport linking air, land and ocean freight without intermediate reloading, using a
multimodal transport document.
Air freight is often used for high value but low volume cargo. It is generally
perceived as expensive. The higher transport charges of air freight, compared to the
charges of land and ocean freight, are compensated for by various benefits (of air freight).
Airlines or air cargo companies or their agents issue an air waybill (AWB), which is
often a straight waybill, that is, the buyer is named the consignee on the waybill and
he/she can claim the consignment from the carrier by simply showing proof of identity.
Unless the goods are consigned to a third party like a bank, or a cash payment has been
received, or the buyer's integrity is unquestionable, it is risky to use a straight waybill in
export shipments even if the means of payment is by a letter of credit (L/C) or a cheque
(check).
Benefits of Air Freight

Faster delivery
The ports worldwide can be reached in 1 or 2 days or in a few hours by air freight, thus
reducing the risks of theft, pilferage and damage to the goods. Delivery to certain areas
may take several weeks to arrive by ocean and land freight. Time sensitive or perishable
goods, such as fresh seafood and flowers, often rely on the air freight.
Better security
Air freight has a tighter control over its cargo, thus it has better security that reduces the
cargo exposure to theft, pilferage and damage.
Less packaging
Air freight requires less packaging because of faster delivery and better security. Less
packaging may mean saving freight, packaging and labor costs.
Lower insurance
Air freight is faster and has better security than the land and ocean freight, thus the
insurance premium rate generally is lower.
Shorter collection time in an

open account trade arrangement
The time to collect payment in an open account trade arrangement most often runs from
the time the customer receives the goods and not from the time the goods are dispatched.
Air delivery is fast, thus the collection time is shorter.
 The Use of Landbridges as Alternative Routes
to the Conventional Ocean Traffic
 Comparison of Institute Cargo Clauses (A), (B) and (C)
Landbridges
The "landbridge" is a generic term meaning use the land freight as a means of transport
connection. The landbridge is a way of transporting cargo from a port or an inland point
of origin in the shipper's country to an inland point or a port of final destination in the
consignee's country using a combination of usually sea and land, or air and land, or air,
land and sea transports, instead of relying fully on journey by water or air, using a
multimodal transport document known as through bill of lading or combined transport
bill of lading.
The three processes of landbridge are as follows:
Microbridge (Micro-landbridge)
Shipment from a country's port to another country's inland destination and vice versa. For
example, shipment from Asian port to U.S. Midwest destination, cargo unloads at U.S.
West Coast port and connects via rail to the final destination under one bill of lading,
instead of eastbound route via Panama Canal or westbound route via Suez Canal to the
U.S. East Coast port and then to final Midwest destination. Please see Diagram:
Microbridge below.
Minibridge (Mini-landbridge)
Shipment from a country's port to another country's port with overland journey in the first
country. For example, shipment from Port of Seattle (Washington, U.S.A.) to the Port of
Rotterdam (Netherlands), cargo delivers via rail to New York (New York, U.S.A.), and
then to Rotterdam.
Landbridge
Shipment from a country to another country, and passes overland in a third country. For
example, shipment from Kobe (Japan) to Hamburg (Germany), cargo unloads at Los
Angeles (California, U.S.A.) and connects via rail to New York (New York, U.S.A.), and
then to Hamburg.
The major advantage of landbridge is the speed of shipment, based on the fact that
the traffic by land or air is generally faster than by sea, and that the nearest distance
between the two points is a straight line. The landbridge is useful for cargo semi-sensitive
to time and cost.
During winter some ports in the northern hemisphere may be closed due to heavy
snow and frozen seaway. Nevertheless, the landbridge keeps the export and import cargo
moving.
The volume of ocean freight flowing between the East and the West increased
considerably in the past decades, especially between the Far East and North America.
The growth in cargo traffic is expected to continue.
The conventional Eastbound ocean traffic from Asia to the East Coast areas in North
America flows via the Pacific Ocean---the Trans-Pacific Route. The route crosses the
Panama Canal (in central Panama) into the Caribbean Sea, and then into the Atlantic
Ocean. It may take 7-8 hours for ships to negotiate the 82-km. Panama Canal through six
pairs of locks.
The conventional Westbound ocean traffic from Asia to the Western Europe or the
East Coast areas in North America flows via the Mediterranean Sea---the Trans-
Mediterranean Route. The route crosses the Indian Ocean, Red Sea (between Africa
and Middle East), Suez Canal (in eastern Egypt, a 161-km. canal linking several lakes
and without any locks), and then into the Mediterranean Sea, serving the Mediterranean
countries and their neighboring landlocked countries. The voyage continues from the
Mediterranean Sea through the Strait of Gibraltar (between Spain in Europe and Morocco
in Africa) into the Atlantic Ocean, serving the East Coast areas in North America, and
from the Atlantic Ocean northbound to the North Sea and Baltic Sea, serving the North
Sea and Baltic countries and their neighboring landlocked countries.
An alternate ocean route to the Trans-Mediterranean Route is through the Cape of

Good Hope at South Africa, that is, going around the southern tip of the African
Continent, but the transit time is much longer.
Panama Canal and Dry Canal

in Relation to the Landbridge Services
The panamax is the draft limits of the Panama Canal, which imposed a ship's
carrying capacity limit to around 3,500 TEUs (twenty-foot equivalent units).
Modern container ships exceed the panamax, that is, cannot transit the canal. The
future container ships in the deep-sea voyage are expected to be much bigger than
those currently in service. The landbridge service that utilizes the West Coast
ports in North America becomes more important in the Trans-Pacific Route.
There were plans to build a dry canal---rail line for container traffic---
linking the Pacific Ocean and the Caribbean Sea in Central American country
(e.g. Nicaragua) using the landbridge service, in order to meet the increasing flow
of cargo between the East Asia and the North and Latin America.
Feeder Vessels and Transhipments
in Relation to the Landbridge Services
As export and import traffic increases worldwide, large container ships having a
load capacity of 80,000 metric tons or more are expected to service the Trans-
Pacific Route and other sea routes, calling at a limited number of deep-sea ports at
each end of the voyage. Consequently, the network of feeder services serve by the
smaller container ship, called the feeder vessel, serving the large deep-sea ports is
expected to expand. In the process, a wider application of the landbridge is
indispensable, particularly in North America, and the transhipment of export
goods will become more frequent in certain trade routes. The ports of Hong Kong
(China) and Singapore in Asia and the port of Rotterdam (Netherlands) in Europe,
for example, are popular ports of transhipment in the deep-sea voyage.
Diagram: Microbridge
Double-Stack Train System MICROBRIDGE
The Use of Landbridges as Alternate Routes

to the Conventional Ocean Traffic
Shipment to the European Ports

from the West Coast Ports in North America
Use the minibridge (mini-landbridge) or the land-sea carriage, that is, freight container
from the West Coast port send via rail to the East Coast port, and then by ship to Europe.
Shipment to the European Ports or Areas

from the Far East and Australia and Vice Versa
Use the landbridge in North America or the sea-land-sea carriage or air-land-sea

carriage, that is, ocean vessel or airplane reaches the West Coast port or area in North
America and the freight container (or the air cargo transfers to ocean container) connects
by rail to the East Coast port or area in North America, and then by ship to Europe.
Alternately, use the Trans-Siberian landbridge in the Russian Federation or the

sea-land carriage or air-land carriage, that is, ocean vessel or airplane reaches
the East Coast port (e.g. Port of Nachodka situated in Asia) or area in the Russian
Federation and the freight container (or the air cargo transfers to container)
connects via Trans-Siberian Railway to the border station in Europe, and then by
rail and/or truck to the European countries.
Some exporters from Japan, Hong Kong (China) and Australia use the Trans-
Siberian landbridge. Exporters also use the ocean-air service (non-landbridge
service) through the Russian Federation, that is, cargo reaches the Russian East
Coast port (e.g. Port of Vladivostok situated in Asia) and connect by air to
Europe.
 Shipment to the East Coast and Midwest Areas

in North America from the Far East Ports
Use the microbridge (micro-landbridge) or the sea-land carriage, that is, ocean
vessel leaves the Far East port and reaches the West Coast port in North America,
such as Vancouver (in British Columbia, Canada), Los Angeles (in California,
U.S.A.), or Seattle (in Washington, U.S.A.), and the freight container delivers via
rail and/or truck from West Coast port to the Midwest and East Coast areas.
 Shipment to the West Coast and Midwest Areas

in North America from the European Ports
Use the microbridge (micro-landbridge) or the sea-land carriage, that is, ocean
vessel leaves the European port and reaches the East Coast port in North America,
such as Halifax (in Nova Scotia, Canada), Saint John (in New Brunswick,
Canada), or New York (in New York, U.S.A.), and the freight container delivers
via rail and/or truck from East Coast port to the Midwest and West Coast areas.
 Shipment to the Far East Ports from the

East Coast and Midwest Areas in North America
Use the microbridge (micro-landbridge) or the land-sea carriage, that is, freight
container from the East Coast and Midwest Areas send via rail to the West Coast
port, and then by ship to the Far East.
Freight or Tariff Rates
The freight rates for export shipments can be obtained by contacting the carrier directly
or the carrier's agent or the freight forwarder or consolidator.
The Tariff
Ocean and air carriers have freight rates published in a rate book called the tariff,
which gives the rates for different kinds of cargo between specific ports
worldwide.
The freight conference publishes its ocean cargo rates, while IATA
(International Air Transport Association) publishes the air cargo rates. There is no
price competition among members within the conferences and the IATA.
Land (road and rail) carriers also have their tariffs, but the cargo rates are
often published independently. Hence, a wider range of rates are often applied
among the competing carriers, especially in the highly competitive road
transports.
Applicable Tariff Rates
The freight rate is often influenced by the volume of traffic on a given route.
When an exporter contacts the carrier or carrier's agent for the freight rate, the
information normally required of an exporter is the kind of cargo and its intended
destination. Information such as the gross weight and total cube of the
consignment, the expected date of shipment, and whether the freight will be
prepaid or collect may also be required. Then, the carrier or carrier's agent refers
to the tariff for the applicable freight rate.
Different Freight Rates and Terminology

Used in International Shipments
General Cargo Rates
The general cargo rate applies to a shipment of mixed products.
Specific Commodity Rates
The specific commodity rate applies to the shipment of a specific product between
specified ports. It is lower than the general cargo rate. In practice, most export
goods are transported under the specific commodity rate.
NES Rates
The NES rate (not elsewhere specified rate) or the NOS rate (not otherwise
specified rate), sometimes referred to incorrectly as the FAK rate (freight all
kinds rate), applies to a product that is not specifically listed in the tariff for a
given route, that is, a product not found under the specific commodity or the
general cargo classifications. The NES rate is higher than the specific commodity
and the general cargo rates.
In case an exporter has a special product that is not listed in the tariff, he/she
may apply with the carrier or the freight conference for a specific commodity rate
for the product for the specified route. Once the product is listed in the tariff, the
exporter can save considerable freight costs in future shipments of such product in
the specified route.
Box Rates
Most ocean freight in modern shipping is containerized. Hence, there is a trend

towards the flat rate per container for FCL (full container load) shipments, known
as box rate, at times also referred to as FAK rate (freight all kinds rate), instead
of the weight or measure that is commonly applied in the LCL (less than container
load) shipments.
The box rate is convenient in simplifying the freight cost calculation in

consignments consisting of a wide range of products. The box rate is commonly
used between the ocean carrier and the NVOCC (nonvessel operating common
carrier), large shipper (e.g. the giant trading company), or large importer (e.g. the
chain store).
Through Freight Rates
The through freight rate is used in multimodal transport and transhipment. It

covers the specified route and mode(s) of transportation to the final destination.
Conference and Non-Conference Rates
The term conference rate refers to the rate of the conference carrier. The term
non-conference rate refers to the rate of the independent or non-conference
carrier. The freight rate from members of a conference is uniform, but it may
differ between the conferences. The non-conference rate varies among the
independent carriers. The non-conference rate is lower than the conference rate.
Charter Rates
The charter rate used in the charter industry varies greatly among the charter
operators. It is the lowest rate per weight or measure. The operator may offer a
very low rate on a return trip in order to secure the cargo, for example, in the
return trip from a voyage charter.
Freight Rate Breaks
Air carriers and some road carriers use a sliding scale of rates or a discount
schedule in charging freight. The sliding scale of rates in the air freight may break
at 100, 200, 300, 500, and 1000 kilograms (kgs.). As such, an air consignment of
200 kgs. to 299 kgs. has a lower rate than the 100 kgs. to 199 kgs.. The freight
rate breaks in road transport may vary greatly among carriers.
Freight Rebates
The granting of a freight rebate to the shipper is not uncommon in the highly competitive
transport industry. The grant can be legal or illegal.
The commission of the freight forwarder is about 2% to 5% in ocean freight and

about 10% in air freight. It is legal for the forwarder in air freight to pay back the shipper
portion of the commission it earns from the carrier, but such a payback may be deemed
illegal in ocean freight. For example, if an airline quotes a freight rate of US$1,000 for a
consignment and the commission of a forwarder is 10% (or US$100), the forwarder may
quote the shipper US$950, the US$50 (or 5% of US$1,000) difference represents the
payback by such forwarder.
In countries where exporters customarily deal directly with the shipping line in
ocean freight instead of dealing with the forwarder, it is not surprising that most exporters
prefer to deal with the forwarder in air freight instead of dealing directly with the airline,
in order to take advantage of the payback.
Conference Discounts and Contract Shippers
The freight conference offers discounts or rebates to the 'loyal' shipper, known as
contract shipper, who gives its entire support to members of the conference. When a
general cargo contract is signed between shipper and conference, the contract shipper is
prohibited from participating directly or indirectly in any arrangements relating to the
carriage of cargo by any vessel not operated by one of the conference carriers. The
contract shipper usually enjoys a 9.5% immediate discount on the amount of freight
ruling at the time of shipment. Some contracts may grant a 10% rebate, instead of an
immediate discount on each shipment, after a required period (six months or more
usually) of 'loyalty' to the conference.
Freight Adjustments
Currency Adjustment Factor (CAF)
In times of unstable currency, the freight rate is often quoted with a currency
adjustment factor (CAF) to cover an additional charge for currency appreciation.
The CAF, if any, is indicated on the bill of lading. The tariff of most international
carriers uses the U.S. dollar as the basis of the freight cost calculation. The CAF
allows for fluctuations in the value of the dollar against the currency in which the
carrier earns its revenues.
Bunker Adjustment Factor (BAF)
The term bunker refers to oil. It may also refer to a compartment on a ship for
storing fuel, that is, oil in modern ships and coal in old-time steamships.
In times of unstable oil prices, the freight is often quoted with a bunker
adjustment factor (BAF) to cover an oil price hike. The BAF, if any, is indicated
on the bill of lading. The BAF allows for fluctuations in the cost of oil.
Weight or Measure in the Freight Cost Calculation
The freight rate on export goods is often based on W/M (weight or measure), that is,
based on the weight or the volume of cargo (the cube or measurement of cargo). The rate
uses the comparative relation between weight and volume of cargo. A cargo that is large
in relation to its weight is charged according to its total cube, while a cargo that is heavy
in relation to its size is charged according to its gross weight.
In general, light cargo is charged based on measure, while heavy cargo based on
weight. Most sea consignments are charged based on measure, while most air
consignments are charged based on weight.
The freight cost by weight or measure that will give the carrier the higher revenue is
the rate that applies.
The unit of ton being used in the freight cost calculation may differ among carriers.
It can be a metric ton (2204.6 lbs. or 1000 kgs.), a short ton (2000 lbs. or 907 kgs.), or a
long ton (2240 lbs. or 1016 kgs.). The exporter must verify with the carrier which unit is
being used. In practice, the most frequently used is the metric ton.
Units of Weight or Measure Commonly Used

in the Freight Cost Calculation
LEGEND:
MT = metric ton
kg. = kilogram
lb. = pound
CBM = cubic meter
cu. cms. = cubic centimeters
cu. ft. = cubic feet
cu. ins. = cubic inches
Weight or Measure
Mode of
Transportation
Ocean Freight 1 MT or 1 CBM
(1000 kgs.) (35.3 cu. ft.)
Air Freight 1 MT or 6 CBM

(1000 kgs.) (211.8 cu. ft.)
1 kg. or 6000 cu. cms.
(366 cu. ins.)
1 lb. or 166 cu. ins.
Road and 1 MT or 3.3 CBM
Rail Freight (1000 kgs.) (116.5 cu. ft.)
1 kg. or 3300 cu. cms.
(201.3 cu. ins.)
1 lb. or 91.3 cu. ins.
Some freight carriers may use the (long ton) 2240 lbs. (as weight) or 40 cu.
ft. (as measure) in the freight cost calculation.
In ocean freight, some freight carriers may use the terms U.S. shipping ton
and British shipping ton. One (1) U.S. shipping ton is equivalent to 40 cubic
feet, and one (1) British shipping ton is equivalent to 42 cubic feet.
Other units may be used in the inland freight cost calculation. For example,
the inland freight could be charged on a per package basis, but within a maximum
allowable weight and/or cube per package. Some carriers may rate a product on a
weight basis only.
In the case of irregular shaped cargo, the weight or measure applies, where
the measure is determined by taking the three widest dimensions that describe the
smallest cubic space enclosing the cargo.
Minimum Bill of Lading
A minimum bill of lading---minimum billing or minimum charge---is often

required in a freight service.
In ocean freight, a minimum of usually 2 or 3 CBM (cubic meters) is

required. The freight consolidator may specify the minimum requirement in a
dollar amount, instead in CBM.
In air freight, a minimum of usually 1 kilogram is required. If a consignment

is light and small, it is more economical to ship by air rather than by sea
considering the benefits of air freight.
In road and rail freight, the minimum requirements vary widely among
carriers.
Case Sample:
Weight or Measure
Assuming that an ocean carrier or a freight consolidator offers an exporter US$65 W/M
for the shipment of 665 cartons of product DX.
 The gross weight of each carton is 10.5 kgs. and its length-width-height is 1.5' x 1'
x 1', which is 1.5 cu. ft. or 0.04248 CBM per carton.
 The specified weight is per 1,000 kgs.

and measure is per cubic meter.
 The consignment has

a weight of 6,982.5 kgs. (i.e., 10.5 kgs. x 665)
and a measure of 997.5 cu. ft. (i.e., 1.5 cu. ft. x 665) or 28.25 CBM (i.e., 0.04248
CBM x 665).
Freight Cost Calculation
The freight cost by weight is:

US$65 x (6,982.5 1,000) = US$ 453.86
The freight cost by measure is:

US$65 x 28.25 = US$ 1,836.25
The measure of product DX is large in relation to its weight, that is, the freight cost by
measure gives the carrier or the consolidator a higher revenue, thus the exporter pays
US$1,836.25.
Freight Payment ---

Freight Prepaid and Freight Collect
The term freight used here refers to transportation charges. The INCOTERMS
(International Commercial Terms) determine whether the shipper or the consignee is
responsible for paying the freight.
Freight Prepaid
Freight prepaid means the freight has been paid or prepaid by the shipper. The
trade terms CFR (C&F), CIF, DAF, CPT, CIP, DDU, DDP, DES, and DEQ
require a prepayment of the cost of main carriage.
In a prepaid delivery, the letter of credit (L/C) normally requires that the
words "Freight Prepaid" be marked on the bill of lading (B/L), clearly indicating
payment or prepayment of freight at port (or point) of origin. The mark may
appear by stamp or be indicated by other means. The words "freight to be
prepaid" or "freight prepayable" or similar wording that may appear on the B/L
do not prove that the freight has been paid.
In a prepaid delivery by a courier, the transport document (i.e., the courier's

receipt) issued by a courier or expedited delivery service must show that the
courier charges have been paid or prepaid by the shipper.
Freight Collect
Freight collect means that the freight still has to be paid by the consignee. The
trade terms FOB, FAS, EXW, and FCA require a collection of the cost of the
main carriage.
In a collect delivery, the letter of credit (L/C) normally requires that the
words "Freight Collect" be marked on the bill of lading, clearly indicating freight
payable at destination. The mark may appear by stamp or be indicated by other
means.
A collection charge usually is included in the freight rate or is collected

separately. Hence, the freight charged on a collect basis is normally higher than
on a prepaid basis.
Shipment Control
Proper control of the date of shipment is very important in the exporting. A delayed
shipment may mean losing the order and the customer's trust.
In the sample letter of credit (L/C) the latest shipment is March 19, 2001. The latest
negotiation is 15 days after the date of shipment which would be April 3, 2001, but the
L/C expires on March 26, 2001. Hence, the latest negotiation date would be March 26,
2001 if the shipment is on March 19, 2001, which means that the UVW Exports must
present the documents to The Moon Bank within 7 days after the date of shipment.
The Earliest Date of Shipment
Importers may stipulate in the letter of credit (L/C) an earliest date of shipment
to prevent the exporter from shipping the goods too early, thus avoiding the high
inventory, warehouse congestion and financial strain.
The Latest Date of Shipment
The latest date of shipment or the last date for shipment stipulated in the letter
of credit (L/C) prevents the exporter from shipping the goods too late, thus
avoiding an inventory shortage. This stipulation is important especially for
seasonal goods or during a currency devaluation in the importing country, in
which a late shipment may render the goods unsaleable or cost more to the
importer.
Disregarded Expressions as to the Date for Shipment
Expressions such as "immediately", "promptly", "as soon as possible" and the

like should not be used for shipments. If they are stated in the letter of credit
(L/C), the bank will disregard them.
Partial and Installment Shipments
Partial Shipment
The partial shipment---part shipment---is allowed, unless otherwise stipulated in the
L/C.
When shipments are made on different dates and/or different ports or points
of origin, but the transport documents indicate the same destination and bear the
same means of conveyance for the same journey, they are not regarded as
covering partial shipments. Please see Case Sample: Non-Partial Shipment below.
When shipments are made by post or by courier, if the post receipts or the
courier's receipts bear the same date and place of dispatch and have been
authenticated by any stamp, signature, mark, or label, they are not regarded as
partial shipment.
Installment Shipment
Installment shipment means shipping an order in different batches and on

different periods stipulated in the letter of credit (L/C).
In case of shipments by installment within given periods are stipulated in the

L/C, failure to ship any installment within the period allowed will render the L/C
unavailable or inoperative for that installment and any subsequent installments,
unless the L/C stipulates otherwise.
Case Sample:
Non-Partial Shipment
The route of vessel S/S HERMANA voyage No. 8 is from Port A to Port B (both in the
seller's country) and then to Port C (in the buyer's country). The transit time between
Port A and Port B is 2 days.
If the seller makes two separate shipments, one from Port A and the other from Port
B, two days apart under one letter of credit (L/C) to the same buyer at Port C via the
same vessel S/S HERMANA voyage No. 8, such case is not a partial shipment. However,
the L/C in such shipments must indicate (if for example that the Port A and Port B are in
the U.S.A.) "shipment from any U.S. ports to Port C", and neither "shipment from Port A
to Port C" nor "shipment from Port B to Port C", otherwise a discrepancy will occur.
Customs Closing Date

The customs closing date is the last date that the carrier accepts the cargo for shipment
in a specified voyage at designated delivery location or closing location---the container
terminal or dock.
The exporter must arrange for cargo arrival at the carrier's designated closing
location before the cut-off date and time, otherwise he/she may lose the order. The
delivery date and location and the customs closing date for the goods are specified in the
shipping order (S/O).
The authorized delivery date can be 2 days, including the day before the closing
date. In case the cargo arrives at the container terminal or dock earlier than the date
specified by the carrier, the vessel may not arrive yet and the carrier may not accept the
cargo. The cargo may incur warehousing charges if it is not returned to the shipper.
Booking of Shipping Space

The exporter can book shipping space with a carrier or carrier's agent directly or through
a customs broker or forwarder. In practice, it is not uncommon for the exporter to select a
carrier and shipping schedule and let the customs broker or forwarder book the space.
Choosing the Carrier
Unless the importer specifies a carrier, the exporter is free to choose a shipping
company or airline which offers a competitive rate and can meet the latest date for
shipment. Certain importing countries may prohibit the use of flag vessels of a
hostile country and any vessels that would make a stopover in a hostile country en
route to their territory.
Worldwide Seaports
Please see Seaports of the World. Some port names may be spelled differently, for
example, Arkhangelsk in the Russian Federation may appear as Archangels.
The letters after the port names in Australia, Canada and the U.S.A. represent
the state or province where the port is located (please see General References---
Abbreviations - Provinces, States and Territories).
Checking the Ocean Shipping Schedules
In many countries, the ocean shipping schedules (both outbound and inbound) are
published in a major newspaper. In countries where newspapers do not carry
shipping schedules, the exporter may contact the carrier, customs broker or
forwarder for shipping information. The information is also available from private
publishers of shipping schedules.
Carrier - Voyage/Flight No.
The phrase "carrier - voyage/flight no." refers to the name of the carrier and its
voyage number (in the case of ocean and land freight) or flight number (in the
case of air freight).
In ocean freight, the name of a carrier usually is preceded by letters S/S, SS,
S.S., M/V, MV or M.V.. The S/S, SS or S.S. stands for steamship, while M/V,
MV or M.V. for merchant vessel. The term steamship is still widely used despite
the fact that modern ships are not propelled by steam.
ETD (ETS) and ETA
When booking shipping space, the exporter should know the ETD (ETS) and
ETA of the shipment.
The term ETD is the estimated or expected time of departure from the port or
point of origin; it applies to all modes of transportation. ETD is shipment on or
about.
The term ETS is the estimated or expected time of sailing from the port of
origin; it applies to ocean freight. ETS is sailing on or about.
The term ETA is the estimated or expected time of arrival at the port or point
of destination; it applies to all modes of transportation.
Stopover En Route to Destination
When booking a shipping space, it is important to verify whether the vessel will
stopover in other port(s) to unload and load other cargoes en route to the
destination. The stopover in certain ports, particularly congested ones, may extend
far beyond the expected time.
Verbal Booking of Space and Dead Freight
In many countries, verbal booking of shipping space is accepted, except for

dangerous goods. Sometimes, the space booked is not used and the carrier may
levy a charge known as dead freight. The exporter must inform the customs
broker or forwarder who booked the space on his/her behalf in advance if the
space will not be used, so that other shippers may use the space and to avoid
paying the dead freight charge.
Dangerous Goods
When shipping dangerous goods, a written application for shipping space is

required. If a shipping order is issued for dangerous goods, it does not mean that
the goods will be accepted for loading on board the vessel. When they arrive at
the designated customs delivery (closing) location, the goods, shipping order and
Dangerous Goods Note are submitted to the ship's master for approval before
customs clearance and loading.
Transhipments
The prefix "trans-" means over or to the other side of. Transhipment or transshipment
(written with two letter 's')---transit shipment---means a shipment destined to a port or
an interior point (location or depot) is best reached by connecting shipment(s) from other
port(s) and/or point(s). It is the unloading and reloading of cargo from one means of
conveyance to another, in the same or different modes of transportation, during the
course of carriage from the place of shipment to the place of destination stipulated in the
letter of credit (L/C).
Unless otherwise stipulated in the L/C, transhipment is allowed provided that the
entire carriage is covered by one and the same transport document.
Some exporters refuse to accept transhipment because of a belief that it costs more
and is slower than a direct shipment. Some importers have the same belief. Contrary to
this belief, by using transhipment the cost to certain destinations can be lower and it can
be faster than a direct shipment. For instance, the frequency of sailing to a certain
destination in a direct shipment is once every two weeks, but by transhipment to the same
destination the frequency of sailing can be once or twice weekly. The point in such an
instance is that the greater the supply the lower the cost and the earlier the shipment the
earlier the importer may receive the goods. In other words, transhipment may save cost
and time.
Most ocean freight are containerized in modern shipping. Hence, intermediate

reloading of cargo is eliminated in the transhipment, which reduces the cost and time.
The transhipment charge usually is included in the through freight rates, but the
shipper must verify with the carrier to ensure that no additional transhipment charge will
be collected from the consignee.
Multilateral agreements make the transhipment possible. With worldwide trades and
new trading partners on the rise, new routes for transhipment will emerge. For example,
trades between Far East and CIS (Commonwealth of Independent States of former
Eastern Bloc), the shipment traditionally passes through the Black Sea, but the transit
time is shorter by transhipment via the Middle East country (e.g. Iran).
Shipments from Asia and Europe to Central and South America, and vice versa,
often require transhipment at ports in North America.
Feeder Vessel and Master Ship
In booking the ocean shipping space with a transhipment, the shipping company
provides the names and voyage numbers of the feeder vessel and master ship. The
master ship sometimes is referred to as the mother ship. The names and voyage
numbers of the feeder vessel and master ship are entered in the ocean bill of
lading.
Transhipment in Landlocked Countries
Certain countries are landlocked and so are inaccessible by deep-sea ocean

vessels. Import and export goods must be transhipped in other country(ies) by
means of truck and/or rail and/or inland waterway (river, canal or lake) transports.
Please see some of the landlocked countries in the Landlocked Countries and
Transhipping Points.
Shipping Order (S/O)
The shipping order---shipping permit---is issued by the shipping company to a shipper

with a confirmed space booking, authorizing the receiving clerk (cargo checker) at the
container terminal or dock to receive a specified amount of goods from the named
shipper.
A shipping order (S/O) typically contains the space booking number, names and
addresses of the shipper and customs broker or forwarder, vessel and voyage number,
sailing time, delivery date and location, customs closing date, and number and type of
packages.
The customs broker or forwarder usually requires the packing list of a consignment
in order to book the shipping space and to obtain the S/O and/or to prepare the dock
receipt (shipping note). In some cases, the presentation of the packing list and a valid
export permit is required to obtain the S/O.
The S/O accompanies the dock receipt and the deliverer of the goods presents these
two and other documents that may be required in the delivery to the receiving clerk
(cargo checker) at the closing location. In certain countries, only the space booking
number is needed instead of a formal S/O, since the information in an S/O is found in the
dock receipt.
 Freight Payment---Freight Prepaid and Freight Collect

 Principles of Cargo (Marine) Insurance
Export Shipping Instructions
When an exporter engages a custom broker or forwarder to handle the customs

declaration, he/she must give instructions on what to do with the shipment in the shipping
instructions. The format of the shipping instructions varies, but all the forms essentially
contain the same information. One form is often used in different modes of
transportation.
B/L Application-Instructions
(Bill of Lading Application-Instructions)
Please see the sample B/L Application-Instructions (BLAI) below that is used in
ocean shipment. The letter of credit (L/C) is a confidential document. Many
exporters prefer not to let the customs broker or forwarder see the L/C, and
instead provide a BLAI detailing the requirements and instructions of an ocean
shipment. Please refer to the Ocean (Marine) Bills of Lading for the explanations
on some of the fields in the sample B/L Application-Instructions (BLAI).
The exporter may provide the BLAI to the customs broker after he/she has
obtained a shipping order (S/O) or a space booking number from the carrier. The
BLAI usually is provided to the customs broker before obtaining the S/O in cases
where the packing list and valid export permit are required to obtain the S/O.
The BLAI normally is accompanied by a copy of the commercial invoice and

packing list, and the Insurance Application-Instructions if the customs broker is to
arrange for insurance.
Some exporters supply the original L/C or its photocopy without supplying
the BLAI, and let the forwarder manage the rest of the export routines with
payment of fees and charges, which may include preparing of export documents
and sending them to the bank.
Shipper's Letter of Instructions
The Shipper's Letter of Instructions (SLI) are shipping instructions that are used
in air shipment, and at times in ocean shipment. The SLI contains basically the
same information as in a B/L Application-Instructions, and it may contain the
words "The exporter authorizes the forwarder named above to act as forwarding
agent for export control and customs purposes" or the like. The SLI form is
available from the carrier or the forwarder.
Sample Form:
B/L Application-Instructions
--- Export Shipping Instructions
UVW EXPORTS
88 Prosperity Street East, Suite 707
Export-City and Postal Code, Export-Country
Tel: (07) 1234-5678 Fax: (07) 1234-8888
B/L Application-Instructions E-mail: [email protected]
Sales Confirmation No.

Shipper's
Commercial Invoice No.
Reference
Export/Manufacturer's License No.
Name
Custom
Broker Tel. No. Fax. No.
or Forwarder
Contact Person Ref. No.
Shipping Tel. No.

Company
or Agent
Shipping Customs Closing Date

Order
or Booking
No.
Delivery Dock & Pier No.

or Closing
Location Container Terminal
A. The CLEAN "ON BOARD" bill of lading is required.

B. The short form (blank back) bill of lading is:
Not Acceptable Acceptable
C. The transport documents issued by the freight forwarder are:
D. The charter party bill of lading is:
1. SHIPPER/CONSIGNOR
2. CONSIGNEE
3. NOTIFY PARTY
4. ALSO NOTIFY
5. CARRIER - VOYAGE/FLIGHT NO.
6. LOADING ON BOARD DATE
7. DISPATCH/TAKING IN CHARGE DATE
8. FROM (Port of Loading)
9. FROM (Place of Dispatch/Taking In Charge)
10. TO (Port of Discharge)
11. VIA (Tranship At)
12. THENCE TO (For Transhipment To)

13. DESCRIPTION OF PACKAGES & GOODS:
14. MARKS & NUMBERS:
15. BILL OF LADING MARKED:
Freight Prepaid Freight Collect
Other Instructions
ETA At Original
No. of copy of the
Bill of Lading required
ETA On Copy
Issued by: Date:
Dock Receipt
The dock receipt---shipping note---when signed by the receiving clerk (cargo checker)
at the container terminal or dock is a proof of the delivery of goods.
Please see the sample Dock Receipt below. The format of the dock receipt varies,
but the contents are basically the same. Some dock receipts may include the Commodity
Code (of goods) field. In practice, the commodity code of goods may be entered in the
"Description of Packages and Goods" field in the dock receipt.
The dock receipt is made out by the customs broker following the instructions and
information contained in the shipping order (S/O), B/L application-instructions (BLAI or
the export shipping instructions) and packing list.
The number of copies of the dock receipt required depends on the circumstances.
Certain countries require a fixed number, where at least one signed copy is returned to the
forwarding agent or the shipper as proof of delivery. The bill of lading (B/L) is issued in
due course in exchange for the dock receipt.
The bill of lading (B/L) is made out word for word according to the dock receipt.
Therefore, it is very important that the shipper provides the correct information in the B/L
application-instructions and packing list, and that the customs broker or forwarder does
not make any errors and omissions in the dock receipt, otherwise a discrepancy may
occur in the B/L and the bank will reject the documents.
The phrase "only clean dock receipt accepted" in the dock receipt is to ensure that
the receiving clerk (cargo checker) at the container terminal or dock puts a 'clean' or
similar notation on the conditions of goods received.
The dock receipt can be clean or foul (unclean, dirty or claused). If a dock receipt is
clean, the bill of lading (B/L) issued in due course will be clean, otherwise the B/L will
be foul (please refer to the Clean versus Foul Bills of Lading for more information).
Mate's Receipt
The counterpart of the dock receipt that is used in the chartering trades is known
as mate's receipt. The mate's receipt is signed by the mate (the deck officer) of
the vessel.
Sample Form:
Dock Receipt
(Shipping Note)
DOCK RECEIPT
Customs Export Declaration
In many countries, export shipments valued below a minimum requirement may not
require a formal customs declaration. The purposes of customs export declaration are to
verify and regulate outgoing cargo (including re-export goods) and to collect the
statistical data (of the product, quantity, value, and destination) for export references.
The format of customs export declaration forms varies from country to country. The
form typically contains the information found in the commercial invoice and the bill of
lading or waybill. In addition, the form may include:
 the business license number and/or tax account number and/or export
permit (license) number of the exporter
 the business license number of the manufacturer from whom the export-
trader buys the export goods
 the commodity code or category of goods
 the country of destination and its country code (a numeric country code
may be assigned to each importing country by the customs of exporting
country for compiling statistics)
 the name, address and code (or license) number of the customs broker or
forwarder
 the customs charges
The exporter normally must sign an authorization paper (the power of attorney)
allowing the customs broker or the forwarder to handle the customs declaration.
In certain countries, exporters may prepare the customs declaration forms by

themselves and let the customs broker handle the rest of the customs formalities.
 Ocean (Marine) Bills of Lading

 Booking of Shipping Space
Ocean (Marine) Bills of Lading
The bill of lading (in ocean transport), waybill or consignment note (in air, road, rail or
sea transport), and receipt (in postal or courier delivery) are collectively known as the
transport documents.
Please see the sample Ocean Bill of Lading below. The bill of lading (B/L) serves as
a receipt for goods, an evidence of the contract of carriage, and a document of title to the
goods. The carrier issues the B/L according to the information in a dock receipt, or in
some cases according to a completed working copy of the B/L supplied by the customs
broker.
The B/L must indicate that the goods have been loaded on board or shipped on a
named vessel, and it must be signed or authenticated by the carrier or the master, or the
agent on behalf of the carrier or the master. The signature or authentication must be
identified as carrier or master, and in the case of agent signing or authenticating, the
name and capacity of the carrier or the master on whose behalf such agent signs or
authenticates must be indicated.
Unless otherwise stipulated in the letter of credit (L/C), a bill of lading containing an
indication that it is subject to a charter party and/or that the vessel is propelled by sail
only is not acceptable.
The Date of Shipment in Ocean Freight
In cases where the bill of lading (B/L) has pre-printed wording indicating that the
goods have been loaded on board or shipped on a named vessel, the issuance date
of such B/L is considered to be the date of loading on board or the date of
shipment.
In cases where the B/L does not have pre-printed wording indicating that the
goods have been loaded on board or shipped on a named vessel, the loading on
board a named vessel is evidenced by the on board notation (e.g. "on board",
"laden on board" or "shipped on board") on the B/L, which must be initialled
and dated by the carrier or its agent. The date of the on board notation is
considered to be the date of shipment.
Transhipment Clauses in Ocean Bills of Lading
If the bill of lading incorporates clauses stating that the carrier reserves the right
to tranship, then the transhipment is allowed even if the letter of credit (L/C)
prohibits transhipment.
Loading On Deck
Unless otherwise stipulated in the letter of credit (L/C), the bill of lading (B/L)
must not indicate that the goods are or will be loaded on deck. Modern cellular
container ships carry about one-third of the containers on deck. Consequently, the
B/L may contain a provision that the goods may be carried on deck. If such
provision is contained on the B/L, then the loading on deck is acceptable even if
the L/C stipulates otherwise, provided that the B/L does not specifically state that
the goods are or will be loaded on deck.
" Full Set ... " (as stipulated in the sample Letter of Credit)
and
" Number of Original B(s)/L "
Full set means all the originals as so issued by the carrier or its agent. A set
contains at least two originals. In practice, a set of three originals is the most
common.
The number of original bills of lading (Bs/L) may be expressed as 3/3 (read
as 'three of three') or 2/2 (read as 'two of two'). In the sample Letter of Credit the
L/C stipulates "Full set 3/3 ...", which means that DEF Imports requires a full set
B/L containing three originals.
If the L/C did not contain the expression "Full set 3/3", then the number of
original bills of lading required would depend on the number as so issued by the
carrier. It can be a sole original B/L, that is, one original only.
The originals are marked as "original" on their face and all have equal value,
that is, all have the same validity. The purpose of issuing more than one original
is to ensure that the port of destination will receive the original when dispatched
separately. The original Bs/L are proof of ownership of goods, one of which must
be surrendered to the carrier at destination, duly endorsed by the title holder in the
goods in exchange for the goods or the delivery order. When one of the originals
being surrendered to the carrier, the others become invalid.
" ... two (2) non-negotiable copies "

(as stipulated in the sample Letter of Credit)
The non-negotiable copy of bill of lading (B/L) should not be confused with the
non-negotiable bill of lading or straight bill of lading. The non-negotiable copy
of B/L simply means the unsigned copy of the B/L, which is for information
purposes. The copies are marked as "non-negotiable".
The copies of the B/L can be of any number. The number depends on the
requirements of the importer, importing country, shipper, carrier, Chamber of
Commerce (if the L/C calls for certification of the B/L), and Consulate (if the L/C
calls for consular legalization of the B/L).
In the sample Letter of Credit DEF Imports requires two copies of the non-
negotiable copy of bill of lading.
" Place of Receipt "
If the place of receipt (or taking in charge) is different from the port of loading, as
in the case of multimodal transport, the on board notation or the pre-printed
wording must include the letter of credit (L/C) stipulated port of loading and the
name of vessel on which the goods have been loaded.
" Container No(s). " and " Seal No(s). "
Please refer to The Marking and Identification of Containers. The container

number is entered on the dock receipt and the bill of lading (B/L).
Under the shipper's load and count arrangement, the shipper or its agent must
seal the container before transferring it to the carrier. The container that originates
from a bonded factory outside the EPZ (export processing zone) or from a factory
inside the EPZ is sealed before leaving the bonded factory or the EPZ.
The metal seal for the container is provided by the carrier. The seal number is
entered on the dock receipt and the B/L. If a seal is broken for customs purposes,
a customs inspector must supervise the breaking of the seal and the resealing of
the container. The new seal number replaces the previous number that was
entered on the dock receipt.
" Shipper "
Unless otherwise stipulated in the letter of credit (L/C), the bill of lading may
indicate as the shipper (the consignor) of the goods a party other than the
beneficiary of the L/C.
" Notify Party " and

" Also Notify " or " Additional Notify Party "
The notify party is the party that the carrier must notify when the goods arrive at
the port of destination. The carrier issues an Arrival Notice informing the notify
party about the cargo discharge point, number of packages and other information.
The letter of credit (L/C) may require that the carrier notifies a party in addition to
the notify party, usually using the words "also notify".
The notify party depends on the L/C requirement, it can be the importer,
freight forwarder or bank. In the sample Letter of Credit the L/C stipulated
"notify the above accountee", in other words the notify party is DEF Imports, 7
Sunshine Street, Sunlight City, Import-Country.
If the notify party and the consignee are the same party, then enter the word
"SAME" or "CONSIGNEE" in the 'Notify Party' field in the bill of lading (B/L).
Sample Document:
Ocean Bill of Lading
Remarks: Fields or items in blue color contain links to the explanation.

A RELIABLE SHIPPING LINE
( NON-NEGOTIABLE UNLESS CONSIGNED TO ORDER )
( SEE REVERSE FOR TERMS AND CONDITIONS )
Shipper's Load and Count

The phrase "shipper's Load and count" means cargo moving under a bill of lading
(B/L) where the carrier acts as a transport contractor without responsibility for loading or
unloading. The carrier marks this phrase on the B/L if it does not supervise the loading or
unloading of the cargo, which is the typical case in a full container load shipment. Hence,
the carrier will not be held accountable for the number of units reported on the B/L. The
carrier often adds the words "said to contain" or "said by shipper to contain" before the
number of units of a commodity, for example, "3 40-FT. CONTAINERS SAID TO
CONTAIN 4,095 CARTONS RUBBER SHOES".
Clean versus Foul Bills of Lading
The bill of lading (B/L) is made out according to the information contained in the dock
receipt, or in some cases according to the completed working copy of the B/L supplied by
the customs broker. If a dock receipt is clean, the B/L will be clean, otherwise the B/L
will be foul. The bank will reject a foul bill of lading, unless stipulated otherwise in the
letter of credit (L/C).
Clean Bill of Lading

The clean bill of lading bears an indication that the goods were received without
damages, irregularities or short shipment, usually the words "apparent good
order and condition", "clean on board" or the like are indicated on the B/L.
Foul Bill of Lading
The foul bill of lading---unclean bill of lading, dirty bill of lading or claused
bill of lading---is the opposite of the clean bill of lading. It bears an indication
that the goods were received with damages, irregularities or short shipment,
usually the words "unclean on board" or the like are indicated on the B/L, for
example, "insufficient packing", "missing safety seal" and "one carton short".
Short Form versus Long Form Bills of Lading
Short Form Bill of Lading

In a short form bill of lading---blank back bill of lading---the terms and
conditions of carriage on the reverse (back) of the bill of lading (B/L) are omitted,
instead they are listed on a document other than the B/L. Unless otherwise
stipulated in the letter of credit (L/C), a short form bill of lading is acceptable.
The short form B/L saves the cost of printing (i.e., no printing on the back of
the B/L) and if the terms and conditions of carriage change, there is no need to
reprint the B/L form.
Long Form Bill of Lading
In a long form bill of lading the terms and conditions of carriage are printed on
the reverse (back) of the bill of lading. The long form bill of lading is commonly
used in international shipping.
Received versus On Board Bills of Lading
Received Bill of Lading

The received bill of lading does not prove that the goods have been shipped. It
only acknowledges that the goods have been received by the carrier for shipment.
Therefore, the goods could be in the dock or warehouse.
On Board Bill of Lading
The on board bill of lading---shipped bill of lading---proves that the goods have
been shipped, as evidenced by the pre-printed wording or the on board notation
(e.g. "on board", "laden on board" or "shipped on board") on the bill of lading.
Straight versus Order Bills of Lading
Straight Bill of Lading

In a straight bill of lading---non-negotiable bill of lading---the title to the goods
is conferred directly to a party named in the letter of credit (the importer usually),
as such the title to the goods is not transferable to another party by endorsement.
In other words, the bill of lading is not negotiable.
The letter of credit calls for a straight bill of lading usually by using such
words as "consigned to [the named party]" or "issued in the name of [the
named party]". The named party can obtain the goods directly from the carrier at
destination. Therefore, unless the cash payment has been received by the exporter
or the buyer's integrity is unquestionable, the use of a straight bill of lading is
risky (please see Fly-By-Night Importers for related information).
Order Bill of Lading
In an order bill of lading---negotiable bill of lading---the title to the goods is

conferred to the order of shipper or to the order of a named party in the letter of
credit (the issuing bank usually).
The purpose of an order bill of lading is to protect the interest of the shipper
or the named party to the title to the goods.
The title to the goods is transferable to another party by endorsement, usually

on the reverse (back) of the bill of lading (B/L) by the title holder of the B/L. If
the endorsement of B/L is required in the letter of credit (L/C), all the originals
must be endorsed.
The letter of credit may calls for an order bill of lading that is: (1) To order
blank endorsed or To order of shipper and blank endorsed, (2) To order of shipper
and endorsed to order of [the named party], or (3) To order of [the named party
(other than the shipper)].
To order blank endorsed or

To order of shipper and blank endorsed
Unless provided otherwise, a consignment that is "to order" means to order of

shipper. The "blank endorsed" means without specifying to whom the bill of
lading (B/L) is transferred. In such instance, whoever bears the B/L after
endorsement holds the title to the goods.
If the sample letter of credit requires a B/L that is "to order blank
endorsed", as such enter the words "To Order" in the Consignee field in the bill
of lading and other documents/forms.
In a "to order blank endorsed" bill of lading (B/L), technically speaking

whoever bears the B/L after its issuance holds the title to the goods.
If the sample letter of credit requires a B/L that is "to order of shipper and
blank endorsed", as such enter the words "To Order of UVW Exports" in the
Consignee field, since the shipper in such L/C is UVW Exports.
In both the above sample cases, the B/L must bear blank endorsement of the
shipper as follows:
UVW Exports
(plus the authorized signature)
And, entering the words "To Order" or "To Order of UVW Exports" in
either of the above cases is correct, but to avoid rejection of documents, always
follow the wordings stipulated in the letter of credit as a precaution.
To order of shipper and endorsed

to order of [the named party]
This letter of credit (L/C) requirement resembles the "to order of shipper and
blank endorsed", except that the words "To Order of [the named party]" must
be indicated over the shipper's endorsement.
If the sample letter of credit requires a bill of lading that is "to order of
shipper and endorsed to order of The Moon Bank", as such enter the words "To
Order of UVW Exports" in the Consignee field in the bill of lading and the
endorsement as follows:
To Order of The Moon Bank
UVW Exports
(plus the authorized signature)
To order of [the named party (other than the shipper)]
The named party under this letter of credit (L/C) requirement most often is the
issuing bank. The L/C does not call for an endorsement, thus the exporter does not
have to endorse the bill of lading.
The sample letter of credit requires a bill of lading "to order of The Sun
Bank, Sunlight City, Import Country", as such enter the words "To Order of The
Sun Bank, Sunlight City, Import Country" in the Consignee field in the bill of
lading and other documents/forms.
Go to Top
Synopsis:
The Title to the Goods in an Order Bill of Lading
To order blank endorsed or

To order of shipper and blank endorsed
The title to the goods is conferred to the shipper, who retains the ownership in the
consignment.
The shipper presents the blank endorsed bill of lading (B/L) and other
required export documents to the bank, the bank negotiates the letter of credit
(L/C) and the bank becomes the title holder in the goods. In such a case the B/L is
negotiable, that is, the rights of holder can be transferred to another party.
To order of shipper and endorsed

to order of [the named party]
The title to the goods is conferred to the shipper, who retains the ownership in the
consignment.
If the named party is the negotiating bank, the shipper's endorsement of the
bill of lading (B/L) transfers the title to the goods to the negotiating bank, and the
bank can transfer the title to the goods to another party by endorsement. The
shipper presents the endorsed B/L and other required export documents to the
negotiating bank.
If the named party is other than the negotiating bank, then the negotiating
bank merely holds the B/L, not its title, on behalf of the named party.
To order of [the named party (other than the shipper)]
The title to the goods is conferred to the named party, who retains the ownership
in the consignment. The shipper merely holds the bill of lading (B/L) on behalf of
the named party.
The shipper presents the B/L and other required export documents to the
negotiating bank, the bank holds the B/L on behalf of the named party and
negotiates the letter of credit (L/C).
The named party can transfer the title to the goods to another party by
endorsement. In practice, the named party in the "to order of [the named party]"
usually is the issuing bank. Therefore, unless the importer pays the issuing bank
and the issuing bank endorses the B/L to order of the importer, the importer
cannot obtain the goods from the carrier. Clearly, the interests of the issuing bank
and the exporter (the shipper) are protected if the B/L is "to order of [the named
issuing bank]".
Other Ocean/Sea Transport Documents
Through Bill of Lading
The through bill of lading---combined transport bill of lading---is used to

cover at least two different modes of transportation, known as multimodal
transport, or different means of conveyance.
The format of a through bill of lading is closely similar to the sample ocean
bill of lading, except the words "Through Bill of Lading", "Combined
Transport Bill of Lading", or "Combined Transportation" or the like usually
are printed on the bill of lading.
Freight Forwarder's Bill of Lading
The freight forwarder's bill of lading---house bill of lading---is issued by the

ocean freight consolidator or NVOCC (nonvessel operating common carrier) or
NVO (nonvessel owner or nonvessel owning carrier).
Unless otherwise authorized in the letter of credit (L/C), the freight

forwarder's bill of lading is not acceptable in the L/C negotiation.
Charter Party Bill of Lading
The charter party bill of lading is issued by the carrier or its agent in the charter
shipping. The documentary requirements in a charter party bill of lading are
similar to the ocean (marine) bill of lading.
Unless otherwise authorized in the letter of credit (L/C), the charter party bill
of lading is not acceptable in the L/C negotiation.
Non-Negotiable Sea Waybill
The non-negotiable sea waybill---liner waybill---usually is marked with the

words "Sea Waybill" or the like on its face.
Stale Bill of Lading

and the Guarantee for Delivery of Goods
In short-sea trades, for example within the Asian countries, it is not uncommon for the
goods to arrive at the port of destination before the bill of lading (B/L). Under this
circumstance the B/L is known as a stale bill of lading or late bill of lading.
The shipper or its agent may receive the B/L from the carrier or its agent in about 2
days after the customs closing date. If the shipper is to arrange for marine insurance, 1 to
4 days may elapse before the shipper receives the insurance policy. The negotiating bank
may dispatch the documents to the issuing bank in 1 to 7 banking days following the day
of receipt of the documents. Furthermore, taking into account the mailing time needed for
the documents to reach the issuing bank, the vessel may have arrived at the port of
destination without the B/L. Consequently, a delay in customs clearance of the goods and
the payment of warehousing charges may occur, and the cargo may be exposed to the risk
of loss or damage at destination.
The remedy to the problem of a stale bill of lading is for the importer to use the
Guarantee for Delivery of Goods (this or similar form is available at the issuing bank)
and the posting of a bond, both of which must be countersigned by the issuing bank, in
order to clear the goods through customs in the absence of the B/L. However, the
importer is obliged to surrender to the carrier the original B/L upon receipt, or to procure
a replacement of the original B/L in case of loss. The bill of lading must be properly
endorsed.
Air Waybills
Please see the sample Air Waybill (AWB) below. The air waybill---air consignment
note or airway bill of lading---serves as a receipt for goods and an evidence of the
contract of carriage, but it is not a document of title to the goods. Hence, the AWB is
non-negotiable.
The goods in the air consignment are consigned directly to the party (the consignee)
named in the letter of credit (L/C). Unless the goods are consigned to a third party like
the issuing bank, the importer can obtain the goods from the carrier at destination without
paying the issuing bank or the consignor. Therefore, unless a cash payment has been
received by the exporter or the buyer's integrity is unquestionable, consigning goods
directly to the importer is risky.
For air consignment to certain destinations, it is possible to arrange payment on a

COD (cash on delivery) basis and consign the goods directly to the importer. The goods
are released to the importer only after the importer makes the payment and complies with
the instructions in the AWB.
In air freight, the exporter (the consignor) often engages a freight forwarder or
consolidator to handle the forwarding of goods. The consignor provides a Shipper's Letter
of Instructions which authorizes the forwarding agent to sign certain documents (e.g. the
AWB) on behalf of the consignor.
The AWB must indicate that the goods have been accepted for carriage, and it must
be signed or authenticated by the carrier or the named agent for or on behalf of the
carrier. The signature or authentication of the carrier must be identified as carrier, and in
the case of agent signing or authenticating, the name and the capacity of the carrier on
whose behalf the agent signs or authenticates must be indicated.
The AWB is issued usually in set of twelve copies. Copies 1, 2 and 3 of AWB are
originals and have the same validity. The originals are usually marked as:
Copy 1 - Original for Carrier

Copy 2 - Original for Consignee
Copy 3 - Original for Shipper
or
Original 1 - (For Carrier)
Original 2 - (For Consignee)
Original 3 - (For Shipper)
or similar expressions at the bottom of the AWB.
Copy 1 or Original 1 is to be signed by the consignor or its agent.
Copy 2 or Original 2, which is to accompany the goods through to the airport of

destination, is signed by the carrier and by the consignor or its agent.
Copy 3 or Original 3 is signed by the carrier, and is handed to the consignor or its
agent after the goods have been accepted for carriage. If the letter of credit (L/C)
stipulates a full set of originals, the presentation of Copy 3 or Original 3 to the bank will
satisfy the requirement.
The AWB also operates like a through bill of lading. It can be used in transhipment,
that is, unloading and reloading from one aircraft to another aircraft during the course of
carriage from the airport of departure to the airport of destination stipulated in the L/C. A
set of AWB's issued by the first carrier usually includes a For Second Carrier copy and
a For Third Carrier copy, which are used if required in transhipment.
The first three digits in the sample Air Waybill represented, for example, by digits
'000', identifies the carrier, and constitute part of the air waybill (AWB) number (e.g.
000-12345678). The carrier's agents, such as the freight forwarder, may issue their own
house air waybill (HAWB), the format of which may differ from the sample air waybill.
The Date of Shipment in Air Freight
The issuance date of the air waybill (AWB) is considered to be the date of
shipment. If the letter of credit (L/C) calls for an actual date of dispatch, the AWB
must indicate a specific notation of the date of dispatch, and the date indicated is
considered to be the date of shipment. The expression "Flight/Date [For Carrier
Use Only] Flight/Date" on the sample Air Waybill, for example, is not considered
as a specific notation of the date of dispatch.
Transhipment Indicated in Air Waybills
If the air waybill indicates that transhipment will or may take place, then the
transhipment is allowed even if the letter of credit (L/C) prohibits transhipment,
provided that the entire carriage is covered by one and the same air waybill.
Split Shipment
The split shipment means that portions of a shipment covered by one air waybill
enter the country at different times.
Sample Document:
Air Waybill
(Air Consignment Note)
Master and House Air Waybills
The freight forwarder may consolidate the consignments of several independent shippers
that are intended for the same airport of destination and dispatch them together under one
air waybill (AWB) issued by the carrier, known as master air waybill (MAWB), with a
cargo manifest detailing such consignments attached to the MAWB. The freight
forwarder in turn issues to each shipper its own AWB, known as a house air waybill
(HAWB) or freight forwarder's waybill.
In the case of air freight using a house air waybill (HAWB), just like in ocean freight
using a house bill of lading (the freight forwarder's bill of lading), it is the freight
forwarder's handling agent at destination, not the carrier, who notifies the consignee of
the cargo arrival at destination.
Clean versus Foul Air Waybills
Clean Air Waybill
The clean air waybill may bear an indication that the goods were received
without damages, irregularities or short shipment, the words "apparent good
order and condition", "clean on board" or the like may be indicated on the air
waybill (AWB).
Foul Air Waybill
The foul air waybill---unclean air waybill, dirty air waybill or claused air
waybill---is the opposite of the clean air waybill. It bears an indication that the
goods were received with damages, irregularities or short shipment, usually the
words "unclean on board" or the like are indicated on the air waybill (AWB), for
example, "insufficient packing", "missing safety seal" and "one carton short".
Road Waybills and Rail Waybills
The road waybill (road consignment note) or rail waybill (rail consignment
note)serves as a receipt for goods and an evidence of the contract of carriage, but it is not
a document of title to the goods. The consignee can obtain the goods from the carrier at
the destination point without presentation of the road waybill or the rail waybill, as the
case may be.
The road waybill or rail waybill must be signed or authenticated and/or bear a
reception stamp or other indication of receipt by the carrier or the named agent for or on
behalf of the carrier. The signature, authentication, reception stamp, or other indication of
receipt by the carrier must be identified on the face of waybill as that of the carrier, and in
the case of agent signing or authenticating, the name and capacity of the carrier on whose
behalf such agent signs or authenticates must be indicated.
The original road waybill or rail waybill may or may not be marked as "original", as
such the waybill(s) presented to the bank are accepted as the original.
If the road waybill or rail waybill does not indicate on its face the number issued or
unless otherwise stipulated in the letter of credit (L/C), the number of waybills required
for presentation to the negotiating bank would depend on the number issued by the carrier
as forming a full set.
Unlike in an ocean (marine) bill of lading or air waybill, a road waybill or rail
waybill usually is not distinguished as either clean or foul, because the road carrier or the
rail carrier normally will not accept cargo that is damaged, shows signs of irregularities,
or is short shipped.
The Date of Shipment in Land (Road and Rail) Freight
If the road waybill or rail waybill contains a reception stamp, the date of the
reception stamp is considered to be the date of shipment. Otherwise, the date of
issuance of the waybill is considered to be the date of shipment.
Transhipment Indicated in Road or Rail Waybills
If the road waybill or rail waybill indicates that transhipment will or may take
place, then the transhipment is allowed even if the letter of credit (L/C) prohibits
transhipment, provided the entire carriage is covered by one and the same waybill
and within the same mode of transportation.
Post Receipts and Courier's Receipts

Post Receipt
The post receipt---postal receipt, parcel post receipt, or certificate of posting--

-is issued by the Post Office for goods sent by parcel post. The date stamped on
the face of a post receipt is deemed to be the date of shipment or dispatch. It must
be dated in the place from which the letter of credit (L/C) stipulates the goods are
to be shipped or dispatched.
Parcel Post Shipments
In practice, most export shipments by parcel post belong to air parcel and do not
have a letter of credit (L/C). The payment is often by cheque. The importer may
use parcel post to avoid expenses in opening an L/C and in processing of goods
on arrival. The consignment most often is a small order and the goods are
consigned directly to the importer. Hence, unless the cheque is cashed or the
integrity of the importer is unquestionable, the exporter must not dispatch the
goods. Please refer to the Fly-By-Night Importers for related information.
The importer may request to dispatch the goods on different dates. For
example if the order is 10 cartons, the importer may request to dispatch 2 cartons
every 2 days.
The maximum weight and measurement requirements of a parcel may vary

from country to country. Generally, the weight limit is 10-20 kilograms.
Courier's Receipt
The courier's receipt is issued by a courier (or expedited delivery service). The
courier's receipt must indicate the name of the courier (or expedited delivery
service) and be stamped, signed or otherwise authenticated on its face and
indicate a date of pick-up or of receipt or wording to this effect, the date is
deemed to be the date of shipment or dispatch.
Unless the letter of credit (L/C) specifically calls for a document issued by a
named courier (or expedited delivery service), a document issued by any courier
(or expedited delivery service) is acceptable.
Courier Shipments
The delivery charge by courier is higher than by parcel post. However, the courier
shipment is faster and generally offers better security against theft and pilferage.
The nature of a courier shipment is similar to a parcel post shipment. Since the
goods are consigned directly to the importer, the exporter must not dispatch the
goods unless the cheque is cashed or the integrity of the importer is
unquestionable.
Export-Import Cargo (Marine) Insurance

The term cargo insurance, popularly known as marine insurance, applies to all modes
of transportation. The need for export (or import) cargo insurance often differs from
exporter to exporter (or importer to importer) and from consignment to consignment.
Unless the insurance is mandatory in a trade term, the exporter or the importer may opt
not to insure the goods at his/her own risks.
Depending on the international commercial terms, either the seller (the exporter) or
the buyer (the importer) is responsible for insuring the cargo. The seller is obligated to
insure the cargo in the CIF and CIP terms. The seller may opt not to insure the cargo at
his/her own risks in the DDU and DDP terms.
The trade terms DDU and DDP are often used in the turnkey projects where the
amount at stake is large. In practice, the seller usually insures the cargo in the DDU and
DDP terms.
Insurance Policy and Cover Note

Proof of insurance coverage is contained in a document known as policy or insurance
policy. The format of insurance policy forms varies from insurer to insurer, but all
essentially have the Institute Clauses and the same information as contained in the
Insurance Application-Instructions (IAI).
The policy must be issued and signed by an insurance company or its agent. If more
than one original is issued and is so indicated in the policy, all the originals must be
presented to the bank, unless otherwise authorized in the letter of credit (L/C).
The sample letter of credit requires "insurance policy in duplicate ...", as such the
presentation of one original and one copy (both signed) will satisfy the requirement.
Unless authorized in the letter of credit (L/C), the cover note issued by broker,
which is a temporary insurance coverage pending the later issuance of an insurance
policy, is not acceptable.
Insurance Policy versus Insurance Certificate
The insurance policy, either a specific policy or an open policy, is issued once by the
insurer. In the case of the exporter holding an open policy, he/she cannot send that sole
policy to all the buyers and for all the shipments made over a period of time. Therefore,
in lieu thereof an insurance certificate---certificate of insurance---is issued by the
exporter to each shipment. The blank insurance certificates are supplied by the insurer
pre-signed and bearing the open policy number of the exporter.
Unless otherwise stipulated in the letter of credit (L/C), the insurance certificate
issued under the open policy is acceptable. If the L/C specifically calls for an insurance
certificate, the insurance policy is accepted in lieu thereof. In practice, the insurance
policy is often used.
In the sample letter of credit the insurance policy is required, hence the bank will not
accept the insurance certificate.
Open Policy versus Specific Policy
Open Policy
The open policy---blanket policy or floating policy---is issued once by the

insurer under contract to cover all shipments made by the exporter over a period
of time (one year usually) subject to renewal, rather than to one shipment only. It
is more often used by the large exporter.
In an open policy the exporter is required to periodically (monthly usually)

declare every shipment made to any location, covering any type of goods, and
using any means of conveyance, including multimodal transport and
transhipment, in order that the insurer may calculate the insurance premiums and
invoice them accordingly. The exporter completes the insurance declaration form
supplied by the insurer and/or supplies the copy of the insurance certificates (see
Insurance Policy versus Insurance Certificate above) to the insurer. An insurance
declaration form typically contains the information in an Insurance Application-
Instructions (IAI).
Specific Policy
The specific policy---voyage policy---is issued by the insurer to cover a particular

shipment or one shipment only. The specific policy is often used in many
countries. The exporter may use the Insurance Application-Instructions (IAI) or
similar form to apply for a specific policy.
Advantages of an Open Policy

Over a Specific Policy
Time Saving and Convenience
In certain countries the insurance agent (broker) may hand-deliver the insurance
policy to the exporter within 4-5 hours after the receipt of the Insurance
Application-Instructions (IAI) or similar form. However, in some countries it is
not uncommon that the policy is mailed to the exporter 2-3 days after the receipt
of the Insurance Application-Instructions (IAI) or similar form. Considering that
the national mail in some countries may take four (4) or more days to reach the
addressee, the deadline to meet the L/C latest negotiation date may not be met.
In an open policy the exporter may have the documentary proof of insurance
coverage in a matter of minutes by simply completing and signing the blank
insurance certificates supplied by the insurer.
Shipments Insured Automatically
Under the open policy the insurer most often does not know the shipments made
by the exporter before the receipt of the insurance declaration form and/or copy of
the insurance certificates, but such shipments are insured (please refer to the
Utmost Good Faith for related information).
Principles of Cargo (Marine) Insurance

The cargo (marine) insurance works on the principles of insurable interest, utmost good
faith, and indemnity.
Insurable Interest
When the goods are lost or damaged and the owner of the goods (i.e., the title
holder in the goods) suffers a loss, fails to realize an expected profit, or incurs
liability from the loss or damage, the owner (the title holder) is deemed to have an
insurable interest in the goods.
When the exporter delivers the goods, the insurable interest in such goods
transfers at the point and time where the risk shifts from the exporter to the
importer, as determined by the international commercial terms used. For example,
the point and time where the risk shifts in:
 CIF
(Cost, Insurance and Freight to the named port of destination) ---
the point the risk shifts is on board the ship at the named port of loading,
as such the insurable interest transfers from the exporter to the importer at
the time the goods pass over the ship's rail.
 CIP
(Carriage and Insurance Paid To the named place of destination) ---
the point the risk shifts is at the depot in the country of shipment, as such
the insurable interest transfers from the exporter to the importer at the time
the goods are loaded on truck or container, rail car, or airplane (or goods
placed in the custody of an air carrier) at the named point of departure.
The time the insurable interest transfers from the exporter to the importer is,
technically, the time the exporter endorses the specific policy or the insurance
certificate to the importer, as the case may be.
The insurance certificate bears the open policy number of the exporter and,
like in a specific policy, the claim agent at port of destination and that claim
payable at destination are also indicated.
The importer relies on the specific policy or the insurance certificate and the
supporting claims documents as proof that the goods have been insured and that
he/she has the insurable interest in the goods when filing for insurance claims
against loss or damage.
In the trade terms DDU and DDP, the exporter is responsible for the risks up
to the delivery of goods to the final point at destination (the project site or
importer's premises usually), as such the insurable interest in the goods does not
transfer from the exporter to the importer in the shipment.
Some countries may require that the import and/or export shipments be
insured with their national insurance companies.
Utmost Good Faith
The principle of utmost good faith is indispensable in any insurance contract.

Under the open policy the insurer usually knows only of the shipments made by
the exporter after the receipt of the insurance declaration form and/or the copy of
the insurance certificates. Under such circumstances, a consignment may have
reached the importer in:
 good condition, that is, without sustaining any loss or damage, before the
insurer knows of such consignment. If the exporter knows that the
consignment has safely reached the importer and deliberately does not
declare such consignment in the insurance declaration form in order to
avoid paying the insurance premium, such action is a breach of good faith.
Consequently, the insurer may cancel the insurance policy issued to the
exporter when the exporter's bad faith is known.
 bad condition, that is, sustaining loss or damage, before the insurer knows
of such consignment. Whether or not the exporter knows that the
consignment has not safely reached the importer and fails to declare such
consignment in the insurance declaration form, the insurer is liable to pay
for the loss or damage out of good faith.
Indemnity
Cargo insurance is a contract of indemnity, that is, to compensate for the loss or
damage in terms of the value of the insured goods. The amount insured as agreed
between the insurer and the assured forms the basis of indemnity.
Institute Clauses
The Institute Clauses of the Institute of London Underwriters, often referred to as the
London Clauses or English Clauses, form the basis of the cargo insurance contract in
many countries.
In U.S.A. and some other areas, the Institute Clauses of the American Institute of
Marine Underwriters, often referred to as the American Institute Clauses or
American Clauses, are used. The American Clauses and the London Clauses can be
different from one another.
The most common Institute Clauses include the Institute Cargo Clauses, Institute
War Clauses, Institute Strike Clauses, and Institute Air Cargo Clauses.
Institute Cargo Clauses
The Institute Cargo Clauses specifically excludes the risks of war (in the
F.C.&S. Clause---Free of Capture and Seizure Clause) and the risks of strikes,
riots and civil commotions (in the F.S.R.&C.C. Clause---Free of Strikes, Riots
and Civil Commotions Clause). The risks of delay in delivery and inherent vice
are not included in the Clauses.
Institute War Clauses (Cargo)
The Institute War Clauses (Cargo) specifically exclude the loss, damage or
expense arising from any hostile use of any weapon of war employing atomic or
nuclear fission and/or fusion or other like reaction or radioactive force or matter.
The Clauses cover:
the risks excluded in the Institute Cargo Clauses by the F.C.&S. Clause;
 the loss of or damage to the interest insured caused by: hostilities, warlike
operations, civil war, revolution, rebellion, insurrection or civil strife
arising therefrom; mines, torpedoes, bombs or other engines of war;
 the general average and salvage charges incurred for the purpose of
avoiding, or in connection with the avoidance of, loss by a peril insured
against by these clauses.
Under the War Clauses, the insurance takes effect only as the interest insured
are loaded on an overseas vessel and terminates either as the interest are
discharged from the overseas vessel at final port or place of discharge, or on
expiry of 15 days counting from midnight of the day of arrival of the vessel at the
final port or place of discharge, whichever shall first occur. In other words the
goods are covered only while they are on a vessel.
In the case of transhipment, the overseas vessel arrives at an intermediate

port or place to discharge the interest for on-carriage by another overseas vessel,
the insurance terminates on expiry of 15 days counting from midnight of the day
of arrival of the vessel at the intermediate port or place, but reattaches as the
interest are loaded on the on-carrying overseas vessel. During the period of 15
days such insurance remains in force after discharge at such intermediate port or
place of discharge.
Institute Strike Clauses (Cargo)
The Institute Strikes, Riots and Civil Commotions Clauses is commonly

referred to as the Institute Strike Clauses.
The insurance covers the loss of or damage to the property insured caused by
strikers, locked-out workmen, or persons taking part in labor disturbances, riots or
civil commotions, and persons acting maliciously. However, it does not cover the
loss or damage proximately caused by delay, inherent vice or nature of the
property insured and the loss or damage caused by hostilities, warlike operations,
civil war, revolution, rebel-lion, insurrection or civil strife arising therefrom.
Institute Air Cargo Clauses (All Risks)
The Institute Air Cargo Clauses (All Risks) are used specifically in air freight.
The terms and conditions of cover closely follow the Institute Cargo Clauses (All
Risks) revised to suit air shipments. The Clauses exclude sendings by Post (i.e.,
postal shipments not covered).
Other Institute Clauses
Transit Clause
It names the points of voyage (i.e., the commencement of the transit, continues
during the ordinary course of transit and terminates on delivery) between which
the insurance is in effect. It may incorporate the Warehouse to Warehouse
Clause (see Duration of Insurance Coverage).
Termination of Adventure Clause
It provides for the insurance to remain in effect in the event that the contract of
affreightment or the adventure is terminated at a port or place other than the
named destination (i.e., before the named destination is reached), subject to
prompt notice being given to insurer and to payment of an additional premium, if
required.
Craft Clause
It provides for coverage including transit by craft, raft or lighter to or from the
vessel.
Change of Voyage Clause
It provides for continuous coverage in case of change of voyage or of any

omission or error in the description of the interest vessel or voyage, subject to
payment of an additional premium.
Constructive Total Loss Clause
It gives the insurer the right to pay the assured for the total loss when the goods
are so damaged that the cost of recovering and reconditioning would exceed their
original value.
G.A. Clause
(General Average Clause)
It gives the rules to be followed to settle the general average claims and the
salvage charges.
Seaworthiness Admitted Clause
It provides that in the event of loss the assured's right to recovery shall not be
prejudiced by the fact that the loss may have been attributable to the wrongful act
or misconduct of the shipowners or their crews, committed without the privity of
the assured.
Bailee Clause
It requires the assured and their agents, in all cases, to take such measures as may
be reasonable for the purpose of averting or minimizing a loss and to ensure that
all rights against carriers, bailees or other third parties are properly preserved and
exercised---it obligates the assured to file a claim against third parties who may be
liable for the loss or damage.
Not to Inure Clause
It prohibits the assured from assigning any right of recovery in the policy to the
carrier or other bailee (warehouse owner, truck owner, etc.). Therefore, it
prevents the carrier or other bailee from becoming the assured from such
assignment of the right of recovery, otherwise the insurer could not bring action
against them in case of loss or damage.
Both to Blame Collision Clause
It protects the assured against any claim that he/she may have as a result of
collision.
F.C.&S. Clause
(Free of Capture and Seizure Clause)
It excludes coverage of risks against
 the capture, seizure, arrest, restraint or detainment, and the consequences

thereof or of any attempt thereat;
 the consequences of hostilities or warlike operations, whether there be a

declaration of war or not;
 the collision or contact with a mine or torpedo; and
 the consequences of civil war, revolution, rebellion, insurrection or civil

strife arising therefrom, or piracy.
F.S.R.&C.C. Clause
(Free of Strikes, Riots and Civil Commotions Clause)
It excludes the loss or damage
 caused by strikers, locked-out workmen, or persons taking part in labor

disturbances, riots or civil commotions;
 resulting from strikes, lock-outs, disturbances, riots or civil commotions.

Reasonable Despatch Clause
It requires the assured to act with 'reasonable despatch'---how the owner would
act in case the goods are not insured---in all circumstances within his/her control.
Sue and Labour Clause
It provides for reimbursing the assured for the expenses to protect the interest
insured from further loss or damage.
T.P.&N.D. Clause
(Theft, Pilferage and Non-Delivery Clause)
It covers theft, pilferage and non-delivery of goods, includes theft and pilferage
by the crew.
Institute Malicious Damage Clause
It covers deliberate damage to or deliberate destruction of the property insured or

any part thereof by the wrongful act of any person(s).
Institute Dangerous Drugs Clause
It provides that no claim will be paid in respect of drugs to which the various
International Conventions relating to opium and other dangerous drugs apply
unless: the drugs are expressly declared as much in the policy, the exporting and
importing countries are specifically stated, the route by which the drugs were
conveyed was usual and customary, and the proof of loss is accompanied by a
license, certificate or authorization issued by the government of the exporting or
the importing country, as the case may be.
Standard Cargo Insurance ---

Three Basic Policies (in the Old Cargo Clauses)
Institute Cargo Clauses (All Risks)
The term All Risks is misleading as not all the risks are covered. The All Risks
(A.R.) is the broadest form of coverage commonly encountered in exporting. It
covers all risks of physical loss or damage from any external causes irrespective
of percentage.
If the assured wishes to be covered against the risks of war, strikes, riots, and
civil commotions, the insurer deletes the exclusions in the Institute Cargo Clauses
and endorses the special clauses, that is, the Institute War Clauses and Institute
Strike Clauses, on the insurance policy and the assured pays an additional
premium.
Institute Cargo Clauses (With Average)
The With Average (W.A.) is sometimes called the With Particular Average. In
insurance parlance, the word "particular" means partial, and the word "average"
means loss. As such, the words "with average" and "with particular average"
mean including partial loss.
The With Average (W.A.) is a less inclusive form of coverage than the All
Risks. It covers against total loss and partial loss caused by the perils of the sea
(i.e., the vessel has been stranded, sunk, burnt or been in a collision with other
vessels or external substances other than water, such as ice), jettison of cargo,
barratry (i.e., negligence, fraud or wrongful acts of the ship's master and/or crew
resulting in injury or loss to the ship's owner), and other like perils.
The partial loss, however, is subject to a franchise being written into the
policy. The percentage of franchise can be 3% (or other percentage as specified)
of the value of the shipment as agreed between the insurer and the assured. If the
loss is less than the indicated franchise of 3% (or other percentage as specified)
the assured cannot claim the loss. However, if the loss is equal to or more than the
indicated franchise, the assured can claim the loss in full amount without any
deduction from the insurer.
Instead of a franchise the insurer and the assured may agree on an excess
(deductible). The percentage of excess can be 3-10%. If the loss is equal to or
less than the indicated excess, the assured bears the loss, that is, cannot claim the
loss. However, if the loss is more than the indicated excess, the assured can claim
the loss minus the deduction of the percentage of excess specified. In other words,
the assured will always shoulder a percentage of the loss regardless of the amount
of the loss.
Institute Cargo Clauses (Free of Particular Average)
In insurance parlance, the words "free of" mean the insurer (the insurance
company) is not liable for whatever follows the words "free of". The words
"particular average" mean partial loss. As such, the words "free of particular
average" mean excluding partial loss.
The Free of Particular Average (F.P.A.) is the narrowest form of coverage.

It covers against total loss. When partial loss is specifically covered in the policy,
it is recoverable from the insurer only if the loss is the result of the carrying vessel
being stranded, sunk or burnt, on fire, or in collision.
The New Institute Cargo Clauses
The new clauses are not exact replacements of the old clauses. Some companies may still
use the old clauses. The counterparts of the new cargo clauses are as follows:
New Cargo Clauses Old Cargo Clauses
Institute Cargo Clauses (A) Institute Cargo Clauses

(All Risks) (A.R.)
Institute Cargo Clauses (B) Institute Cargo Clauses
(With Average) (W.A.)
Institute Cargo Clauses (C) Institute Cargo Clauses
(Free of Particular Average) (F.P.A.)
Comparison of
Institute Cargo Clauses (A), (B) and (C)
LEGEND:
Risks covered
Risks not covered (or Exclusions)
Risks Covered and the Exclusions Institute Cargo Clauses
(A) (B) (C)
Loss or damage to the subject matter insured

proximately caused by [in Clauses (A)] and
reasonably attributable to [in Clauses (B) and (C)]:
Fire or explosion
Vessel or craft stranded, sunk,
burnt or capsized
Land conveyance overturned
or derailed
Collision or contact of vessel,
craft or conveyance with any
external object except water
Discharge of cargo at port of distress
(A) (B) (C)
Earthquake, lightning or
volcanic eruption
Malicious damage
Theft
Delay
Inherent vice or nature of the
subject matter insured
Willful misconduct of the assured
(A) (B) (C)
Loss or damage to the subject matter insured

caused by:
General average sacrifice

Jettison
Washing overboard
Entry of sea, river or lake water into
vessel, craft, conveyance,
container or place of storage
Total loss of any package lost
overboard or dropped whilst
loading on to, or unloading from,
vessel or craft
Piracy
(A) (B) (C)
War
Strikes, riots and civil commotions,
includes terrorists or any persons
acting from a political motive
Use of any atomic or nuclear weapon
Ordinary leakage, ordinary loss in
weight or volume, or
ordinary wear and tear
Insufficiency or unsuitability
of packing
The assured privy to the
unseaworthiness of vessel or craft
and/or unfitness of vessel, craft,
conveyance or container
at the time of loading
Insolvency or financial default of the
owners or operators of the vessel
Endorsement of the Insurance Clauses

The term endorsement used in the endorsement of insurance clauses refers to the
modifying of insurance to include risks not covered in the basic policies by adding
suitable clauses and paying additional premium. For example, in the Institute Cargo
Clauses none of the three basic policies covers the risks of war, strikes, riots, and civil
commotions. In order to cover against such risks, the F.C.&S. Clause (Free of Capture
and Seizure Clause) and the F.S.R.&C.C. Clause (Free of Strikes, Riots and Civil
Commotions Clause) are deleted from the policy (by stamping the word "DELETED"
over such clauses usually) and the Institute War Clauses and the Institute Strike
Clauses are endorsed.
The endorsement usually is in the form of pre-printed clauses attached (i.e., stapled,
gummed or taped) to the policy. Some policy forms may be provided with an
endorsement space wherein the clauses are typed and/or attached.
There are clauses which are approved by certain associations (e.g. bank, trade, etc.) to
suit the particular market needs. For example, the Bank Clause:
"It is warranted and agreed to by the Assured and the Company that in the event of loss
or damage becoming recoverable under this Policy, the Company will not be liable for
more than its share of the loss or damage at the rate of exchange mentioned in this
Policy." (The word "Company" above refers to the insurance company.)The exporter
may consult the insurance company or its agents for any specific endorsements that may
be required in a particular market and trade
Duration of Insurance Clauses
In the Warehouse to Warehouse Clause, the insurance coverage commences from the
time the goods leave the warehouse or place of storage at the place named in the policy,
continues during the ordinary course of transit and terminates either on delivery
 to the consignee's or other final warehouse or place of storage at the destination

named in the policy,
 to any other warehouse or place of storage, whether prior to or at the destination

named in the policy, which the assured elect to use either for storage other than in
the ordinary course of transit or for allocation or distribution,
 on the expiry of 60 days after completion of discharge overside from the overseas
vessel at the final port of discharge (or the 30 days limit applies in the case of air
freight),
whichever shall first occur.
In certain countries, the insurance company may have the marine extension clauses
to override the main clauses, for example the Fifteen (15) Days Clause, in which the
insurance coverage terminates on the expiry of 15 days after completion of discharge
overside from the overseas vessel at the final port of discharge.
Under the American Institute Clauses, the number of days of the expiry of
insurance coverage after completion of discharge overside from the overseas vessel at the
final port of discharge is 15 days (or 30 days if the destination to which the goods are
insured is outside the limits of the port)
Insurance Premiums
The general guiding rate of the insurance premium is 1% of the amount insured. The
premium rates may vary, for example, from 0.5% to 2.5% or more depending on factors
such as:
 Type of goods ---

The goods that are more susceptible to damage demand a higher premium. For
example, glassware has a higher premium rate than the hammer.
 The country and distance of destination ---

Countries with a history of higher risks of loss or damage or at a war zone require
a higher premium.
The longer the distance of voyage, the greater is the risks of loss or damage, thus
a higher premium rate.
 Value of the goods ---

The higher the value of the goods, the higher the amount the insurer will
compensate in the event of loss or damage, thus a higher premium rate. For
example, the precious jewellery has a higher premium rate than costume
jewellery.
 Mode of transportation ---

Generally, ocean freight has a higher premium than land freight, and land freight
has a higher premium than air freight. Air freight, in general, has better cargo
security than ocean and land freight and it is faster to reach the destination by air,
thus there is less exposure to the risks of loss or damage.
 The type of risks covered ---

The more risks are covered, the higher the premium. In the Institute Cargo
Clauses (A), (B) and (C), the Clauses (A) have the greatest extent of cover,
followed by the Clauses (B), and then the Clauses (C). Any endorsement of the
insurance clauses requires payment of an additional premium.
 Container or break-bulk shipment ---

Containers provide better protection for the cargo. Therefore, container shipments
have a lower premium than break-bulk shipments.
 Type of packing ---

The better the goods are protected, the lower the premium. The risks of
insufficient and unsuitable packing have been excluded in the new Institute
Cargo Clauses.
Contingency Insurance
In the trade contract terms FOB and CFR, the insurable interest transfers from the
exporter to the importer at the time the goods pass over the ship's rail. It is very important
that the exporter provides the details of the shipment to the importer promptly, so that the
insurance can be arranged on time.
In practice, it is not uncommon that the importer arranges for insurance after the
vessel has left the port of origin in the FOB and CFR terms. While it is the responsibility
of the importer to arrange the insurance, the exporter may suffer loss if the goods are
damaged before the insurable interest is transferred. As such, the exporter may insure the
goods from the warehouse to the loading on board the vessel to overcome the
contingency, without letting the importer know.
If the goods are exported on the open account basis where no letter of credit (L/C) is
involved, there is a risk that the importer may reject the shipment if the goods are
damaged on arrival. Contingency insurance may minimize the exporter's loss in such a
circumstance. It is possible for the exporter to insure the goods from warehouse to
warehouse. However, if the importer insures the goods too and claims the damage, the
exporter cannot file for claims as he/she no longer has the insurable interest, and the
exporter may not be able to provide the supporting insurance claim documents used by
the importer to substantiate losses.
Insurance Claims
In the trade contract terms CIF and CIP, arrangement is usually made for any claims to be
paid at destination to the consignee or issuing bank. However, should a loss occur prior to
the passing of title to the goods to the consignee, such loss is payable at origin to the
shipper or financing agent.
The assured is obligated in the policy to do everything to minimize the loss or

damage, to file claims against the carrier or any other party who could be responsible for
the loss or damage, and to notify the insurer or claim agent immediately of the loss or
damage. The insurer or claim agent then appoints a marine surveyor (the adjuster) to
inspect the subject matter insured and report on the cause of the loss or damage, the value
of the cargo, and the extent of damage.
In some cases, the surveyor is named in the policy and the policy may require that
request for survey to the surveyor or that claims against the carrier or any other party be
made within a specified period of time after discharge of the goods from the vessel.
The surveyor issues a Certificate of Loss (Certificate of Survey), accompanied

usually by the report of findings, to the consignee. The consignee may be required to pay
a surveyor's fee, which may be refunded by the insurer or claim agent if the loss is
recoverable under the policy.
When making an insurance claim, the claimant (the assured) usually is required to
submit the following documents:
 Original insurance policy or insurance certificate ---

It proves that the claimant has the insurable interest. It helps the insurer or claim
agent to establish that the cargo in question is the subject matter insured and to
check the amount and risks covered.
 Original bill of lading or other transport document ---

It evidences the contract of carriage where the insurer or claim agent may take
action against after paying the claimant. It helps the insurer or claim agent to
determine that the claim is not the cause of a foul bill of lading, for example, a bill
of lading with the "insufficient packing" notation where such risk is excluded in
the coverage.
 Commercial invoice ---

It helps the insurer or claim agent to determine the percentage of loss in a partial
loss. It may prove that the cargo in question is the subject matter insured.
 Packing list ---

It determines where in the consignment the loss or damage occurred. It may point
to the cause of damage that might be excluded in the coverage, for example
unsuitable packing.
 Certificate of Loss (Certificate of Survey) ---

It shows the cause, value and extent of the loss or damage. It is issued by the
marine surveyor appointed by the insurer or claim agent.
 The landing account or weight notes (notes on weight) at destination ---

It helps the insurer or claim agent to identify where the loss or damage may have
actually occurred. The records from the carrier or stevedoring contractor at
destination may pinpoint that the loss or damage has happened on the vessel, in
the container, during unloading, or while in the dock warehouse.
 Any correspondence with the carrier or any other party who could be
responsible for the loss or damage ---
It helps the insurer or claim agent to verify that the Not to Inure Clause is not
violated.
 Master's protest ---

A written declaration by the ship's master giving details of disaster, accident or
injury at sea. This document is particularly important when a general average
claim is involved.
Subrogation
When the assured is fully paid in an insurance claim, he/she normally signs a
subrogation form giving the insurer the rights to the lost or damaged cargo. It is
only then the insurer may take actions against the carrier or any other party who
could be responsible for the loss or damage.
Payments in the Particular Average Claims

and the General Average Claims
While the payment in a particular average claim (either partial or total loss) usually is
prompt, in a general average claim it may take many months. Referring to the general
average sacrifice, the appointed marine surveyor (the adjuster) carefully calculates the
value of each shipment---the wholesale price of each type of goods less the applicable
customs duties, taxes and other charges---in proportion to the total value of the shipments
and vessel.
Cargo owners whose goods are fully insured---the amount insured equals or exceeds
the value of the goods---the insurers may put up immediately a general average guarantee
to cover the contribution in the general average sacrifice, so that the cargo owners may
obtain the goods from the carrier instead of waiting for many months for the settlement
date. In some cases, the assured is required to post a general average bond in addition to
the insurer's guarantee.
The insurers are liable for the cost of the claim in a general average claim as
provided in all three basic types of policies in the old and the new Institute Cargo
Clauses.
In the case of uninsured goods, the cargo owners must wait until the settlement date
to obtain the goods from the carrier, unless the cash is put up to cover their shares of the
contribution. Still, it may be weeks before the amount of the individual contribution is
available.
Insurance Application-Instructions
Please see the sample Insurance Application-Instructions (IAI) below. The exporter may
use the IAI to apply for a specific policy. Some exporters supply the original letter of
credit (L/C) or its photocopy without supplying the IAI, and let the forwarder handle the
insurance application.
(1)
" NAME OF THE ASSURED (Beneficiary - Payable to the order of) "
Unless otherwise stipulated in the letter of credit (L/C), the exporter's complete
name and address is entered in the field (NAME OF THE ASSURED). The
exporter endorses the insurance document in blank---without specifying to whom
the document is endorsed---before presenting it to the bank.
(2)
" AMOUNT INSURED "
Amount of Insurance Coverage
Unless otherwise stipulated in the letter of credit (L/C), the minimum amount of
insurance coverage the insurance document must indicate should be the CIF or the CIP
value of the goods, as the case may be, plus 10%.
If the CIF or the CIP value cannot be determined, the minimum amount of
insurance coverage would be 110% of the amount requested under the L/C for
payment, acceptance or negotiation, or 110% of the total amount of the invoice,
whichever is the greater.
The insurance coverage of 10% more than the CIF or the CIP value is
intended as insurance against the loss of expected profit.
The L/C may call for an amount of insurance coverage over 110% as settled
between the exporter and importer, for example, 120% CIF value or 130% CIP
value.
In the case of trade terms DDU and DDP, the insurable interest in the goods
is not transferred to the importer and the amount of insurance coverage depends
on the exporter's requirement.
In the case of a transferable letter of credit transferred to the second

beneficiary, the percentage of insurance coverage may be increased to provide the
amount of cover stipulated in the original L/C.
In the sample letter of credit the amount of insurance coverage required is

110% CIF value, as such enter "USS$27,500.00" in the field (AMOUNT
INSURED).
(3)
" TERMS OF INSURANCE COVERAGE (Clauses) "
If the trade terms call for insurance, the letter of credit (L/C) normally will
stipulate the type of insurance required and the additional risks which are to be
covered, if any. The terms "usual risks", "customary risks" or similar imprecise
terms should not be used in the L/C.
In the sample letter of credit the DEF Imports requires insurance covering
Institute Cargo Clauses (A), plus the additional risks Institute War Clauses and
Institute Strikes Clauses.
Unless otherwise stipulated in the L/C, the insurance document which

indicates that the cover is subject to a franchise or an excess is acceptable.
(4)
" LATEST ISSUING DATE OF INSURANCE POLICY "
The insurance policy or insurance certificate, as the case may be, must bear a date
of issuance not later than the date of loading on board or dispatch or taking in
charge as indicated in the transport document, unless otherwise stipulated in the
L/C.
(5)
CLAIM AGENT:
" Indicate complete name and address of claim agent at port of destination "
" Indicate claims payable in ________ (city, country) in ________ currency "
The sample letter of credit specifically requires "insurance policy ... evidencing
that claims are payable in Import-Country", as such enter "Sunlight City,
Import-Country" or "Import-Country" in the space (blank) provided.
The exporter must check the insurance policy upon receipt to ensure that the
claims and the claim agent at destination are properly indicated.
Unless otherwise stipulated in the letter of credit (L/C), the insurance

document must be expressed in the same currency as the L/C. Further to the
sample letter of credit, enter "U.S. Dollar" in the space (blank) provided.
Sample Form:
Insurance Application-Instructions
UVW EXPORTS
88 Prosperity Street East, Suite 707
Export-City and Postal Code, Export-Country
Tel: (07) 1234-5678 Fax: (07) 1234-8888
Insurance Application-Instructions E-mail: [email protected]
Sales Confirmation No.

Shipper's
Reference
Commercial Invoice No.
Name
Insurance
Tel. No. Fax. No.
Company
Contact Person Ref. No.
1. NAME OF THE ASSURED (Beneficiary - Payable to the order of):
2. AMOUNT INSURED:
3. TERMS OF INSURANCE COVERAGE (Clauses):

4. LATEST ISSUING DATE OF INSURANCE POLICY:
Loading On Board date:
Dispatch/Taking In Charge date:
5. CLAIM AGENT:
Indicate complete name and address of claim agent at port of destination.
Indicate claims payable in __________________________ (city, country)

in ____________________ currency.
6. DESCRIPTION OF PACKAGES & GOODS:
7. MARKS & NUMBERS:
8. CONTAINER NUMBER:
9. CARRIER - VOYAGE/FLIGHT NO.
10. SHIPMENT ON OR ABOUT
11. FROM (Port of Loading)
12. FROM (Place of Dispatch/Taking In Charge)
13. TO (Port of Discharge)
14. VIA (Tranship At)
15. THENCE TO (For Transhipment To)
Other Instructions
Insurance Rate Original

No. of copy of the
Insurance Policy required
Premium Copy (Duplicate)
Issued by: Date:
Export Credit Risk Insurance
Exports not only face the risks of physical loss or damage, they may also face the risks of
non-payment due to buyer's insolvency or default, government blockage of currency
transfer, and other risks, known as credit risks. There are specialized organizations, often
government owned, which insure credit risks. Credit risk insurance usually is applied in
overseas projects and the coverage may run for a number of years.
In some countries, credit risk insurance may cover open account sales, but is subject
to credit terms such as the destination country, the terms of sales, and the amount
involved. Some insurers may require that the products for export have a minimum
percentage of domestic content (51% or more usually) to qualify for coverage.

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Customs Brokers

The customs broker---broker or customhouse broker or customs house broker---is an

Freight Forwarders or Consolidators

The freight forwarder---forwarder---is an individual or firm who renders cargo

In such a case, XY Consolidator operates as a NVOCC and issues a freight

The Forwarding Practices of Exporters

Referring to Case Sample: Freight Consolidation (1), XY Consolidator may offer

Importer's Specified Forwarder

XY Branch notifies XY Consolidator of the contract and requests it to coordinate

ISO Freight Containers

Containers for Intercontinental Use

General Cargo Container

(1) General purpose (dry

It is suitable for the widest

(2) Specific purpose container

It is used to facilitate the packing (loading) and emptying (unloading) of

 Closed ventilated container

 Platform (flat rack)

 Platform based containers open sided

Specific Cargo Container

(1) Thermal container (reefer)

 Refrigerated container (with expendable refrigerant)

 Mechanically refrigerated container

(2) Tank container

(3) Dry bulk container

(4) Named cargo types

It consists of various types of containers, such as automobile (car) containers and

Unit Load Device (ULD)

Several other types of ULD are also in use worldwide.

Container Dimensions and Capacity

Length ----- 9.8125 feet (2.991m) as 10 feet;

Width ----- 8 feet (2.438m)

Height ----- 8.5 feet (2.591m) and

All above dimensions have permissible tolerances.

Rating, Tare Mass and Payload of Containers

In exporting, it is common to encounter a payload of 17,500 kgs. or less in

The Marking and Identification of Containers

Each container has an identification code or container number---a combination of

Table and Diagram:

Rear view of 20' x 8.5' container

Miscalculated capacity may result in a

Theft, Pilferage, Damage, and Insurance

Importer's Specified Container Shipping Company

Container Size, Number and Load Options

Some of the shipping companies having high cube containers include:

20' x 8.5' deep 12 rows 19 rows

20' x 8.5' deep 12 rows 19 rows

Container Method (A) Method (B)

40' x 8.5' deep 26 rows 39 rows

40' x 8.5' deep 26 rows 39 rows

40' x 9.5' deep 26 rows 39 rows

40' x 9.5' deep 26 rows 39 rows

Maximized Use of a Container Capacity

Quotation - Ocean Freight

FROM : FOB Port of Origin

The Std. Container refers to the

Palletized Cargo in Container Shipments

Table: Pallet Count