Glossary of terms

Concise definitions of key industry terminology. for supply chains, logistics, and freight.

3PL

Third-party logistics (3PL) is a process in which companies outsource their distribution, warehousing and fulfilment services to a single partner, such as XPO, DHL, UPS or CEVA. Businesses can access more efficient and cost-effective solutions for managing their supply chain using a third-party provider.

CFR – Cost and Freight (named port of destination)

This Incoterm requires the seller to deliver the goods, cleared for export, on board the vessel at the named port of shipment and pay for the carriage of the goods to the named port of destination. The seller is responsible for origin costs, including export clearance and freight costs for carriage to the named port of destination. The risk of loss or damage to the goods is transferred to the buyer when the goods are placed on board the vessel at the port of shipment. The buyer is responsible for any charges after the goods arrive at the port of destination, such as import duty, taxes, customs and on-carriage.

CIF – Cost, Insurance & Freight (named port of destination)

This Incoterm requires the seller to deliver the goods, cleared for export, on board the vessel at the named port of shipment, pay for the carriage of the goods to the named port of destination, and obtain insurance for the goods while in transit. The seller is responsible for origin costs, including export clearance and freight costs for carriage to the named port of destination. The policy should be in the same currency as the contract and must allow the buyer, the seller, and any other parties with an insurable interest in the goods to make a claim. The risk of loss or damage to the goods is transferred to the buyer when the goods are placed on board the vessel at the port of shipment. The buyer is responsible for any charges after the goods arrive at the port of destination, such as import duty, taxes, customs and on-carriage.

CIP – Carriage and Insurance Paid to (named place of destination)

This Incoterm, CIP, is similar to CPT, with the exception that the seller is also required to obtain insurance for the goods while in transit. The seller is responsible for insuring the goods for 110% of the contract value under Institute Cargo Clauses (A) of the Institute of London Underwriters unless both parties agree to a different set of clauses. The policy should be in the same currency as the contract and must allow the buyer, the seller, and any other parties with an insurable interest in the goods to make a claim.

Unlike CIF, CIP can be used for all modes of transport.

CPT – Carriage Paid To (named place of destination)

The Incoterm CPT is a popular choice for transporting goods via all shipping modes outside of non-containerized sea freight. Under this term, the seller pays for the carriage of the goods up to the named place of destination. The risk of loss or damage to the goods is transferred to the buyer when the goods are handed over to the first or main carrier at the place of shipment in the exporting country. The seller is responsible for origin costs, including export clearance and freight costs for carriage to the named place of destination. If the buyer requires the seller to obtain insurance, then the Incoterm CIP should be used instead.

DAP – Delivered At Place (named place of destination)

This Incoterm requires the seller to deliver the goods, cleared for export, at a designated destination. This destination can be the seller's premises, a carrier nominated by the buyer, or another party appointed by the buyer. The seller is responsible for origin costs, including export clearance and freight costs for carriage to the named place of destination. The risk of loss or damage to the goods is transferred to the buyer when the goods are handed over to the first or main carrier at the place of shipment in the exporting country. The buyer is responsible for any charges after delivery, such as import duty, taxes, customs and on-carriage. The buyer is also responsible for unloading the goods from the delivery vehicle.

DDP – Delivered Duty Paid (named place of destination)

This Incoterm requires the seller to deliver the goods, unloaded, at the named place of destination. The seller covers all costs of transport (export fees, carriage, unloading from the main carrier at the destination port and destination port charges) and assumes all risk until the goods arrive at the destination port or terminal. This terminal can be a port, airport, or inland freight interchange, but must be a facility with the capacity to receive the shipment. All charges after unloading (such as import duty, taxes, customs and on-carriage) are to be borne by the buyer. Any delay or demurrage charges at the terminal will usually be for the seller's account.

DPU – Delivered At Place Unloaded (named place of destination)

This Incoterm requires the seller to deliver the goods, unloaded, at a designated destination. This destination can be the seller's premises, a carrier nominated by the buyer, or another party appointed by the buyer. The seller is responsible for origin costs, including export clearance and freight costs for carriage to the named place of destination. The risk of loss or damage to the goods is transferred to the buyer when the goods are handed over to the first or main carrier at the place of shipment in the exporting country. The buyer is responsible for any charges after unloading, such as import duty, taxes, customs and on-carriage.

EXW - Ex Works (named place of delivery)

The Incoterm EXW (Ex Works) term requires the buyer to bear the maximum amount of responsibility for the delivery of goods, with the seller having only minimum obligations. This means that the buyer is responsible for picking up the goods from the seller's premises or another specified location, and also for bearing the risks and costs of transporting them to the final destination. If the parties agree that the seller should take on the responsibility of loading the goods for export and bearing the associated risks and costs, this must be explicitly stated in the contract of sale.

FAS – Free Alongside Ship (named port of shipment)

This Incoterm requires the seller to deliver the goods, cleared for export, alongside the vessel at the named port of shipment. The seller is responsible for origin costs, including export clearance and freight costs for carriage to the named port of shipment. The risk of loss or damage to the goods is transferred to the buyer when the goods are placed alongside the vessel at the port of shipment. The buyer is responsible for loading the goods onto the vessel, and all charges after loading, such as import duty, taxes, customs and on-carriage.