If you run a business that ships goods to consumers or other companies, it is important to know some key shipping terms. These terms allow you to communicate correctly with the shipping department. Take a look at this list of key shipping terms and use it to prevent misunderstandings from messing up your orders.
Indicia are postal markings that are used in place of stamps. A marking usually appears in the upper right of an envelope to indicate that postage has been paid. Buying and using stamps can be inconvenient for businesses, which is why there are services that allow you to print indicia.
2. Bill of Lading
A bill of lading, commonly referred to as BOL, is a document that the shipper provides to the carrier. Although a BOL is not commonly used for parcels, most pallet shipments come with a BOL. This important document says what is in the boxes on the pallet. The carrier often needs to show it to customs and it is eventually given to the buyer on delivery to confirm what has been delivered.
3. Consignee vs. Consignor
The consignee is another term for the ship-to address of a shipment. Traditionally, the consignee is the buyer, but today this is not always the case due to the popularity of drop-shipping. In contrast, the consignor is the organization that is shipping the goods.
4. Drop Shipping
Drop shipping is a practice where a supplier ships to the end consumer on behalf of a retailer. For example, Dicks Sporting Goods lists Oakley products on its online store. When a customer purchases one of these products, Dicks can pass the order through to Oakley, who then ships the item directly to the customer, rather than first sending it to Dicks.
Drop shipping allows retailers to sell goods without having to store them in their own warehouses, leading to lower costs.
Incoterms is an abbreviation that stands for International Chamber of Commerce Terms of Sale. It refers to a set of terms that must be defined for international shipments. Most importantly, Incoterms define who has ownership of shipped goods at each point along their journey.
For example, ownership can transfer from seller to buyer when the goods leave port, or when they arrive at a foreign dock. Incoterms are important for determining which party takes the loss if a product is destroyed en route, for example by the sinking of a ship. Incoterms also determine which party pays custom duties and taxes when crossing a border.
In general, it is considered bad customer service to ship items DDU (duties and taxes unpaid), as it means that the consumer receives a customs bill along with the package. Instead, most companies ship items DDP (duties and taxes paid) and absorb the cost of customs duties and taxes into their pricing structure.
6. List Rate
The list rate is the standard rate that a company such as UPS charges for shipping. Many companies instead pay a discounted rate, which they negotiate with the shipping company. It is possible to bill customers the list rate for shipping even though you pay a discounted rate, but many companies instead pass part of the discount on to the customer to keep their delivery charges competitive.
7. Tracking Number
A tracking number is a series of digits that you can use to track a package with a carrier, such as UPS, FedEx or the postal service.
8. Carrier vs. Service
Many people confuse the terms carrier and service. The carrier is the company you hire to ship your package, such as UPS, FedEx or DHL. Each carrier offers a range of services, such as priority, overnight and ground shipping.
9. Carrier Surcharge
Carrier surcharges can cover a range of line items, including residential fees, fuel surcharges, remote destination fees, etc.
10. Third-Party Billing
Third-party billing occurs when you bill freight to a customers account instead of your own. This typically occurs so they can take advantage of their discounts.
11. Dimensional Weight
Parcel carriers have a formula to calculate a dimensional weight for a box based on its size (dimensions). This is compared to the actual weight, and whichever is higher is used as the billed weight.
12. Customs Invoice
Also referred to as a CI, this is a document used to clear goods through customs for international shipments by providing pertinent box content information.
13. Harmonized Code
Also referred to as Commodity Code, this is a universally accepted classification system for trade goods, used to classify products and their corresponding tariff.
14. Importer of Record
The IOR is the owner or purchaser of the goods or the purchaser, or consignee, or a licensed customs broker.
15. Pro Forma Invoice
These are invoices generated by the shipper before shipping the goods informing the buyer of the goods to be sent.
16. Carrier Manifest
A carrier manifest is a report of shipments for a specific carrier usually given to the driver when the packages are picked up. Normally sent via EDI for parcel carriers.
17. Declared Value
This is the estimated value of the shipment and also the upper limit of the carriers liability in connection with that shipment, assuming the shipper has insured the package with the carrier.
18. Electronic Data Interchange
EDI is a transfer of data between different networks. In shipping mostly used for sending manifests to parcel carriers or order data to trading partners.