‘Shipping’. Sounds straightforward enough, right? Put your product in a carton, slap on the label, hand it off to the carrier, and off it goes to land on your customer’s doorstep. But any e-commerce pro worth their salt will tell you that the world of shipping is brimming with cryptic acronyms, confusing jargon, and mysterious codes that make you feel like Indiana Jones hunting for an age-old artefact.
This is where shipping terms come in. Think of this as an insider tongue that can either leave you scratching your head in perplexity or ensure operations run smooth like butter.
Whether you’re negotiating with your shipping carriers, putting documents together for customers, or trying to decode ‘FOB’ (spoiler alert: it doesn’t stand for ‘Free of Bother’), understanding and mastering common shipping lingo is a must.
Luckily, you have the ultimate guide to shipping terms right here. Being a leading name in post-purchase experience software, we’ve heard it all, and so we’ll break down common shipping terms, explore terms, and discuss how knowing the difference between your EXWs and your DPUs can help you save time, resources, and eliminate headaches. Get ready to clear out your e-commerce logistics terms!
Common Shipping Terms
Not all retail businesses have an exclusive shipping department. Regardless, as a retailer, it is critical to be aware of important shipping terms to be on top of your contract negotiation game. Here is a glossary of shipping terms that will give you the upper hand when you approach your carrier.
1. Air Waybill (AWB)
It is a contractual document agreed between the shipper and the carrier. As long as the airway bill is valid (signed by the carrier), the carrier is responsible for the goods that are transported. Once delivered to the respective consignee, the contract expires. More importantly, an airway bill number is a unique eleven digit number that is assigned to a shipment. Using this unique number, the shipment can be monitored in real time.
2. Bill of Lading
This is also a contract between the shipper and the carrier that gives detailed information about the quantity, type, and destination of the goods shipped. The difference between an Airway Bill and a Bill of Lading is that the former is non-negotiable, while the latter can be negotiated.
The Bill of Lading also acts as a receipt to confirm delivery of the shipment.
3. Bonded Warehouse
Whenever businesses ship packages internationally, bonded warehouses provide a safe and secure place to store these goods. They also benefit a retailer as storing in a bonded warehouse could aid them in deferring any additional duty tax. Most warehouses offer up to 5 years of storage with deep storage, bulk storage and dry container storage facilities.
4. Certificate of Origin
Whenever goods are imported or exported, a certificate of origin is required as an attestation to the place where the item was originally manufactured or produced. This also acts as a determinant while deciding if the goods should be allowed to pass duty-free or not.
5. Commercial Invoice (CI)
An invoice for an international shipment that describes in detail the total number of goods sold and the total outstanding payment. While a shipping invoice gives basic details that include the shipper’s name, shipment quantity, and total cost of items, a commercial invoice provides exhaustive information such as description of packaging, volume of goods, per sale price, insurance cost, and shipping charges.
6. Consignee
A person to whom the goods are shipped.
7. Customs Entry
All internationally shipped goods need to be declared at the time of transportation. The importer also has to pay a duty on all imports. The declaration is compared against the shipping manifests of the imported goods. FedEx customs clearance fee ranges from $29.50 to $97.50, depending on the shipment value.
8. Dangerous Goods
Certain substances that could prove hazardous to the environment need to be handled with special care. Transportation of dangerous goods are controlled by various stringent regulations to prevent a spillover of potential hazards. Some of the regulatory frameworks include United Nations Recommendations on the Transport of Dangerous Goods, ICAO’s Technical Instructions, IATA’s Dangerous Goods Regulations and the IMO’s International Maritime Dangerous Goods Code. Both FedEx and UPS allow the shipment of hazardous materials through service types such as ground, express and custom-critical.
There are different classes of dangerous goods, to name a few:
- Class 1 – Explosives
- Class 2 – Gases
- Class 3 – Flammable liquid and combustible liquid
- Class 4 – Flammable solid, spontaneously combustible, and dangerous when wet
- Class 5 – Oxidizer and organic peroxide
- Class 6 – Poison (toxic) and poison inhalation hazard
- Class 7 – Radioactive
- Class 8 – Corrosive
9. Declared Value for Carriage
The cost of shipment that is declared to the carrier by the shipper. In case of loss or damage, the value declared will limit the liability of the carrier.
10.Delivered/Duty Paid
When shipping internationally, in addition to the shipping costs, ancillary charges such as customs duty and residential address charges are included in the shipping invoice. Retailers have to ensure that delivery duty is paid so that customers are not burdened with these charges.
11.Dimensional Weight
While calculating the weight of the package, carriers consider either the actual weight or the volumetric weight, whichever is greater.
Dimensional weight = (length × breadth × height) / Dimensional Factor
Here’s an updated list of dim divisor used in the calculation of dimensional weight for UPS, FedEx and DHL packages:
| Carrier | Service Type | DimDivisor |
|---|---|---|
DHL | Express | 138 |
FedEx | International/Domestic | 139 |
UPS | International/Domestic | 139 |
USPS | International | 166 |
USPS | Domestic | 194 |
12.Electronic Manifest (E-Manifest)
While shipping in bulk, a list of packages that are shipped is created by the retailer before handing over to the carrier. Electronic manifests list the number of packages that are being shipped.
13.ETA
Estimated time of arrival or estimated time of availability. It refers to the date and time a package is expected to arrive at its designated destination.
14.Foreign Trade Zone (FTZ)
A duty-free zone where goods can be stored, transported, exported or imported. These are classified as special economic zones that are exempt from customs duty.
15.POD
Proof of delivery or port of dispatch. FedEx and UPS generate electronic proof of delivery which is instantly updated to the shippers’ account.
16.Import License
Document issued by the national government authorising the import of certain goods. Although the US does not require import licences, retailers shipping goods to international destinations must be aware of the regulatory framework to ensure safety and conformity.
17.Multiple Package Shipments
When a package is oversize or exceeds the stipulated weight, it could be shipped by splitting into multiple packages with the same tracking number. Most global carriers such as UPS, FedEx and DHL offer multi-piece shipping options for select packages.
18.NAFTA Certificate of Origin
The North American free trade agreement was established to eliminate trade barriers between the US, Canada and Mexico.
19.Non-Document Shipments
Shipments that would be subjected to a customs duty when transported to the destination country.
20.Pro Forma Invoice
A preliminary invoice that states the estimated value of the orders sent by the seller to the buyer. Businesses issue a pro forma invoice in order to get the Purchase order approved. It is also considered essential by customs while clearing imported goods.
21.Shipper’s Export Declaration (SED)
A document issued by the government of the United States for export of goods valued at $2500 or greater.
22.Shipping Weight
The gross weight of a shipment expressed in kilograms that includes packaging.
23.Tariff
A duty that is levied on imported goods.
24.Value Added Tax (VAT)
An incremental tax imposed on goods based on the value of the goods. While 160 countries have VAT, the US has no VAT as of yet.
25.Waybill
A document issued by the carrier that accompanies shipments including details such as the name of consignor, consignee, origin and destination.
What are Incoterms?
Now, as you make your way around shipping terms, you’ll also find something called ‘Incoterms’. Short for International Commercial Terms, Incoterms are rules that lay down responsibilities, risks, and costs in global trade. These are published by the International Chamber of Commerce (UCC) and form a critical part of the contract of sale.
The concise list of 11 Incoterms helps you simplify transactions, ensuring unambiguous agreements between sellers and buyers, and facilitating clear and easy negotiations, thanks to international standardization. They help you answer questions like:
- Who arranges the transportation and chooses the carrier?
- Where and when does the ownership title of goods transfer to the buyer from the seller?
- Who foots the bill for the transportation?
These were first laid down in 1936 and have since been revised every 10 years (starting in 1980) to ensure they stay in step with the evolving trade landscape. The latest revision was made in 2020. Now, without further ado, let’s discuss these in detail:
1. Carriage Paid to (CPT)
In this case, goods are delivered to the carrier by the seller or another party nominated by the seller at a specified place (if one has been agreed on between the parties). The seller is bound to pay for the cost of transporting the goods to the destination.
2. Carriage and Insurance Paid To (CIP)
Carriage and Insurance Paid To, in this case, the seller’s responsibilities are the same as CPT, but they must also facilitate insurance cover against the buyer’s risk of damage or loss of the goods during the shipping journey.
As per the CIP, the seller is bound to obtain the insurance only on a minimum cover. In case the buyer wants to have a higher insurance cover, they must either have the seller expressly agree to the costlier insurance cover or make their own insurance arrangements.
3. Delivered At Place (DAP)
DAP involves the seller delivering the goods at the disposal of the buyer on the arriving transport mode, making it ready for unloading at the destination. The seller bears the risk of bringing the goods to the specified location.
4. Delivered At Place Unloaded (DPU)
Delivered At Place Unloaded, this Incoterm was introduced in 2010 and replaced DAT or ‘Delivered at Terminal’. The seller delivers the goods when they are unloaded and put at the disposal of the buyer at the specific destination.
5. Ex-Warehouse (EXW)
Ex-work or Ex-Warehouse, this Incoterm is used when the seller delivers the products at the disposal of the buyer within the seller’s own premises or at a specific location (factory, warehouse, etc.). The seller doesn’t need to load the goods on any vehicle or clear them for export in case a clearance is applicable.
6. Delivered Duty Paid (DDP)
DDP is used when the seller delivers the goods once they are placed at the disposal of the buyer and have been cleared for import on the arriving mode of transport, being ready for unloading at the destination.
The seller foots the cost as well as the risk of bringing the goods to the destination and must clear all goods not only for export but for import as well. They must also pay the import and export duty and facilitate customs formalities.
7. Free Carrier Agreement (FCA)
Short for ‘Free Carrier Agreement’, it involves the seller delivering the goods to the shipping carrier or any other party nominated by the buyer at the former’s premises or another specific location.
Both the buyer and the seller must specify as clearly as possible the point at the specific delivery place where the delivery should take place, as once delivered to this location, the risk shifts to the buyer from the seller.
Here’s a look at the Incoterm rules for Sea and Inland Waterway Transport:
8. Cost, Insurance and Freight (CIF)
This Incoterm is used to denote that the seller will deliver the products on board the vessel or will procure the delivered goods. The risk of damage or loss will pass to the buyer when the goods are on board the ship. Further, the seller must contract for and foot the cost of bringing the goods to the destination and the insurance (minimum coverage) as well.
9. Cost and Freight (CFR)
Cost and Freight (CFR) involves the seller delivering the goods to the vessel or procuring the delivered goods. The risk of damage or loss of the goods shifts to the seller once the goods are onboard the vessel. Further the seller must contract for and bear the costs and the freight necessary to transport the goods to the destination.
10. Free On Board (FOB)
Free On Board or FOB refers to the seller delivering the goods onboard the vessel that is nominated by the buyer at the specific port of shipment or procuring the delivered goods. The buyer bears the costs and risk of damage or loss once the goods are boarded on to the vessel and hence they will pay for the insurance, international transportation and any other additional charges.
11.Free Alongside Ship (FAS)
Free Alongside Ship or FAS involves the seller delivering when the goods are placed on the quay, barge, or alongside the vessel, as nominated by the buyer at the specific shipment port. The risk of damage to or loss of the products passes to the buyer once the goods are deposited alongside the vessel.
We’ve discussed what Incoterms are and what they cover, but to understand these thoroughly, we must also discuss what they don’t cover. Incoterms don’t:
- Identify or detail the goods that are being sold, or for how much
- Discuss the conditions of sale
- Discuss the when and the how of the payment negotiated between the buyer and the seller
- Specify when the ownership of the goods is shifted to the buyer from the seller
- Identify or detail, and document what the seller must provide to the buyer in order to optimize the customs clearance process in the latter’s country
- Specify liability in case the goods aren’t provided as per the contract of sale, are delayed, or any other dispute resolution protocols
Commonly Used Shipping Terms and Acronyms
Apart from the 25 shipping terms we’ve discussed above and the 11 crucial Incoterms, there are still some commonly used shipping terms and acronyms that should make it to your shipping vocabulary. We break these down here:
1. Barcode
Existing in 2025, there is no way you haven’t seen a barcode. This rectangle or square image includes skinny and stripey black lines and typically has about 12 numbers that are read by a scanning device. Being a unique pattern of lines and series of digits, barcodes facilitate quick and accurate identification of packages.
2. Cargo
Cargo is a word used to describe goods or merchandise transported from the seller’s location to the buyer’s via train, plane, ship, or truck. It can include all kinds of products, from raw materials to consumer products or even machinery.
3. Freight Forwarder
This is a company that integrates Less than Carload (LCL) and Less than Truckload (LTL) into one combined truckload or carload lot. Freight forwarders issue bills of Lading (BOLs) and take responsibility for the goods shipped during their journey, akin to a shipping carrier. The term ‘Freight Forwarder’ can also be used to refer to a company that fills railroad trailers or trains.
4. Consolidator
A consolidator is a shipping carrier that leverages the freight forwarder method to save costs and time for multiple journeys of the entire trip and ultimately transfers the cost savings from transit to the buyer or the customer. The cost and time can be further reduced with multiple freight forwarding and consolidation stops optimized by zone locations.
5. Dock
This is a specific location within a warehouse or transportation terminal where shipments are loaded and shipped to the buyer, or unloaded and received after being sent by the seller.
6. Kitting
Kitting refers to the process of grouping or packaging individual items that are otherwise separate but share a common trait or characteristic into one single unit.
7. Pallet
A Pallet is a shipping device and is a flat structure that is used to support goods during transportation from a shipping container or truck to a warehouse or storage facility. Inventory or goods that require a pallet are usually referred to as ‘palletized inventory’ and are also called LTL.
8. Transit Time
This one is pretty intuitive (phew!). Transit time refers to the period of time that the shipment will take to be transported from the place of origin to its final destination. In e-commerce terms, this means the time it will take for the package to reach your customer’s doorstep from your warehouse.
9. Detention (DT)
Detention or simply ‘DT’ refers to the fee imposed by the container line when you might have collected the containers on time, but defaulted in returning the empty container within the free period. The container line will impose a fee for the number of days it takes you to return the empty container to them after collecting it.
10.Demurrage (DM)
This is the flip side of DT. If you’re unable to collect your container within a specific timeframe, the container line offers you a free period during which the container is stored at the port. If you fail to pick up your container even after this period lapses, the container line will levy a fee for the number of days for which your container remains uncollected. This fee is referred to as Demurrage or DM.
11.Ready to Dispatch
Ever seen the ‘Ready to Dispatch’ message light up your device and wondered what this is? This notification is shared by shipping carriers to inform you that your package is about to begin its shipping journey and is usually shared once the package’s Airway Bill number, or AWB number, has been processed.
Those were some common shipping terms used in the industry. Now, let’s take a look at some acronyms you should know:
12. Door to Door (D2D)
D2D is used to describe the process of shipping your package from a pick-up point to a drop-off location.
13.Electronic Data Interchange (EDI)
EDI is used to refer to the exchange and communication of documents between businesses via technology. EDI can apply to shipping invoices, tracking information, Bills of Lading (BOLs), etc.
14.Electronic Logging Device Mandate
ELD mandate stands for Electronic Logging Device mandate and is a requirement for freight drivers to log their hours into a software electronically. It is used to track freight drivers’ working hours and maintain meticulous records.
15.Estimated Time of Departure (ETD)
Estimated Time of Departure or ETD is a term to denote the date and time an e-commerce package is believed to depart from its point of origin. Gaining insight into your package’s ETD allows you to make a reliable calculation as to when your package will reach your customer.
16. Full Container Load (FCL)
Short for Full Container Load, FCL is used when a shipment load takes up the entire space in a container. In other words, there are no other packages other than the one belonging to a specific batch or load. If you ship an FCL, it means that the container has only your products and offerings.
17. Freight of All Kinds FAK
This is short for Freight of All Kinds and is used to denote that a shipment load will have mixed products and goods from different sources. This shipment term is especially important for small and medium businesses since creating a single shipment load with different packages is often a cost-effective strategy.
18. Full Truckload Freight
FTL Freight or Full Truckload Freight refers to a freight shipment that takes up a truck’s entire space, either by volume or weight.
19.Gross Vehicle Weight (GVW)
Short for Gross Vehicle Weight, GVW refers to the entire weight of a transport vehicle, including its shipment load.
20. Less than Truckload Freight
LTL Freight is short for Less than Truckload Freight and refers to a freight shipment that doesn’t fill the entire truck’s space, both by volume and weight.
21. National Motor Freight Classification (NMFC)
National Motor Freight Classification, or simply NMFC, is a shipping acronym that is used to classify freight. There are 18 different freight classifications that vary depending on liability, value, storage capability, pricing, and handling. NMFC helps identify which classification the freight falls into.
22. Port to Port (P2P)
P2P or Port to Port is a shipping term that is used to refer to the process of shipping packages or cargo from one port to another. It’s important to note that this acronym refers exclusively to a package’s journey within two ports, and no prior or subsequent transportation.
23. Stock Keeping Unit (SKU)
Short for Stock Keeping Unit, SKU is a unique numerical identification number assigned to products in an inventory or product catalogue. It is used to identify and track the product, its size and type, with the manufacturing details as well.
24. Third Party Logistics Provider (3PL)
A Third Party Logistics Provider or 3PL is a logistics firm that manages your logistical requirements like inventory storage, management, warehousing, shipping, packaging, picking, etc.
The Importance of Understanding Shipping Terms
We’ve explored a whopping 60 shipping terms now. It might feel like a crash course, and well, it is! But why are we doing all this in the first place? Here’s a look at the why behind understanding and mastering shipping terms:
1. Ensures Clarity in Responsibilities
Shipping terms leave nothing to ambiguity. They define who’s responsible for what, and even when. Whether it’s covering insurance or specifying the shift of the risk of damage or loss, there’s no room for finger-pointing when things are clearly spelled out.
This clarity helps you avoid potential misunderstandings and sets expectations with customers, carriers, and business partners, ensuring everyone’s on the same page.
2. Eliminates Ambiguity in Cost Allocation
Who pays for what and when can quickly become tricky when it comes to shipping. But, by using the right terms, there’s no guessing about who is bearing the cost of insurance, transport, and everything else. This clarity helps e-commerce businesses plan budgets to the T, avoid surprise costs, and foster strong relationships with suppliers, carriers, customers, and business partners.
3. Aids Informed Decision-Making
Shipping terms might just look like a bunch of acronyms, but in reality, they’re strategic tools. Mastering these positions enables you to choose the most cost-effective and resource-efficient shipping processes. Now, when you negotiate with your shipping carriers or browse fulfillment partners, your knowledge of common shipping terms will help you make informed decisions that align with your business goals
4. Facilitates Efficient Operations
When all stakeholders understand their duties, responsibilities, liabilities, costs, and the like, shipping processes run smoothly with zero bottlenecks. This translates to minimal delays, reduced back-and-forth between you and your customers and business partners, and ensures your shipping operations run like a well-oiled machine.
5. Ensure Compliance with Regulations
If you’re shipping internationally, you’re no stranger to how complicated customs rules, trade regulations, etc., can be. Understanding and knowing your shipping terms can help you ensure compliance with these, reducing delivery slowdowns, fines, etc. After all, it’s not about just ticking boxes. It’s about protecting your business from very avoidable issues.
Conclusion
Understanding, learning, and mastering the above-mentioned shipping terms may not be the most glamorous part of running an e-commerce business, but it is one of the most essential aspects, nonetheless.
Whether it’s making sense of terms and acronyms that seem to have come to be only to confuse you or decoding incorations, becoming fluent in shipping lingo can very well be the difference between logistical hiccups and unhappy customers and smooth, on-time deliveries. The faster and better you understand shipping-speak, the more confident and cost-effective you can make your shipping decisions.
That said, even with all the right words, acronyms, and terms in your vocabulary, logistical nightmares can still take place once your customer places the order. This is where you can turn to LateShipment.com.
Our post-purchase experience software helps you keep customers happy by updating them regularly and managing shipping delays and refunds, all while encouraging customers to continue buying from your brand. If you’re ready to transform your post-purchase experience to the best in the industry, book a demo with LateShipment.com today!
Related Reading
- What is a Shipping Audit and How to Conduct One
- What is Shipping Insurance? A Complete Guide
- Top Shipping and Inventory Management Tools for SMBs
- Top E-Commerce Shipping Best Practices You Should Know
- Shipping Surcharges: What Are They and Why They Matter
- Shipping Delays: Causes, Impact & How to Minimize Them
