Get Familiar With Some Common Shipping Terms

Bunker Adjustment Factor (BAF): Indicates that the freight rate may change depending upon movements in the price of bunkers. Bill of lading holders should be aware that if the BAF comes into effect, additional sums might need to be paid before the ship owner delivers the cargo to the bill of lading holder.

Booking Note: A contract of carriage giving the conditions negotiated between the cargo owner and the ship owner/charterer.

Cape Size: Vessels having the economically optimum size to go around the Cape of Good Hope. Typically over 80,00 tonnes deadweight.

Carrier: The party that undertakes the liability to carry the cargo to the destination, on the terms, conditions and exceptions stated. Beware of a carrier, which does not have the financial capacity or, insurances in place, to meet its liabilities on your cargo.

Cellular Container Vessel: A ship which is built, exclusively, to carry containers. A container vessel cannot carry break-bulk cargo, general cargo and definitely not bulk liquids unless containerized.

Charter Party: Contract of carriage between the shipowner and the charterer detailing the terms and conditions of carriage. It provides inter alia for the amount and mode of payment of freight/hire, lien on the cargo and the issuance of bills of lading.

Charterparty Bills of Lading: Bills of lading, which are subject to the terms, conditions and exceptions of a charter party. It binds the bill of lading holder to the terms of a contract, which the holder may have no knowledge of. It may allow the carrier to hold on to the cargo if there has been a breach of the terms by the charterer, such as non-payment of freight, demurrage, etc.

Clean on Board: A statement by the carrier on the bill of lading that a cargo has been received without damage on board the ship. He is thus bound to deliver the cargo at the destination in the same condition.

Claused Bill of Lading: A bill of lading which contains remarks with respect to the condition of the cargo or the payment of freight. A claused bill of lading is not usually accepted under letters of credit, which call for a clean bill of lading.

Combined transport bills of lading (or a through transport bill of lading): This is a bill of lading, which covers the transport of a cargo through different modes, for example, truck - ship - train - truck. The carrier remains liable from the point of delivery of the cargo to the final destination stated on the bill of lading. This is not usually applicable to bulk liquid cargo flowing through pipelines! It is usually associated with unitized cargoes like containers. It is not to be used for bulk liquid cargoes except where they are loaded in special containers or by other unitized means.

Conline Bill of Lading: A bill of lading usually used for liner shipments.

Container Numbers: Every container has a unique number, which identifies the container. The first four digits indicate the owner of the container. There is a system of check digits that can confirm whether the container number is genuine. In today's containerized transport it is impossible to try and locate a cargo without a container number. Bankers, beware of bills of lading for container cargoes without container numbers.

Container Seal Numbers: When a cargo is stuffed into a container, the container is sealed. The seal has a seal number, which identifies it. The seal number is often on the shipping documents. If a seal is found broken at the point of discharging, it would normally indicate that there is a possiblity that the container was broken into in transit.

Consignee: The party to whom the cargo on the bill of lading is consigned to. In cases where the cargoes are financed by letters of credit, the consignee is usually the financing bank.

Currency Adjustment Factor (CAF): If this appears on the shipping documents, it would indicate that if the currencies in which the freight is paid fluctuate widely then the ship owner might apply a currency adjustment factor to the freight. Unless this additional sum is paid, the ship owner may hold on to the cargo.

CY/CY (Container Yard to Container Yard): Indicates that the duration of transit covered by the bill of lading is from the container yard, where delivery of the container was taken by the carrier, to the container yard where the container is to be delivered to the consignee.

Dates - Received for Shipment: The date that the container (usually) is received by the carrier for shipment. Some letters of credit allow for payment upon the containers "being received for shipment" by the carrier. In practice, it may be the case that the names of the vessels stated on a received for shipment bill of lading might not be the ones that finally carry the cargo. This notation does not mean that the cargo has been loaded on board the ship.

Dates - Loaded on Board/Shipped on Board: The date the cargo physically goes on board the vessel. This is often the date which is manipulated by sellers, NVOCCs and ships agents to match the final date of shipment specified in the letter of credit.

Dates - Issue of Bill of Lading: The date the bill of lading is issued by the carrier. Under a letter of credit, the presentation of the documents have to take place usually within a specified period after the date of issue of the bill of lading.

Deadweight (DWT): A unit of the vessel's carrying capacity including cargo, stores and provisions.

Demurrage: A payment in damages by the charterer to the shipowner if the vessel exceeds the agreed period for loading or discharging the cargo. In certain circumstances the shipowner has a lien on the cargo for the payment for demurrage and may try to prevent delivery of the cargo until demurrage is paid.

Feeder Vessel: Typically, large mother ships transport containers between the main hubs (large transhipment ports) around the world. Feeder ships carry the cargoes to and from the main hubs to the ports of origin and destination. In containerized shipments, the name of the vessel appearing on the bill of lading may be either the feeder vessel or the mother ship.

Fixture Recap: A summary in short form, between brokers, of the terms of a charter party, which have been negotiated and agreed between their respective principals. The charter party is a formality and usually follows much later. Cargoes are often carried based upon the fixture recap.

Free in: Where the cargo owner pays for the costs of loading the cargo on to the vessel.

Free out: Where the cargo owner pays the costs of discharging the cargo from the vessel.

Free in/out stowed (FIOS): A combination of free in and out, but including the costs of stowage of the cargo on board a ship.

Freight pre-paid: A clause on a bill of lading which indicates that the freight has been paid to the shipowners. In practice, the freight is often paid after a freight pre-paid bill of lading has been issued. A freight pre-paid bill of lading in the hands of a third party consignee would be deemed to be prima-facie evidence that the freight has been paid.

Freight Collect: A clause that appears on the bill of lading indicating that freight is to be paid before the cargo is delivered to the consignee at the discharge port. If this freight is not paid the owners may be able to execute a lien on the cargo for freight.

General cargo vessel: A vessel capable of carrying break-bulk general cargo as opposed to containerized/unitized cargo.

Gross Registered Tonnage (GRT): A unit based on a calculation of the volume of certain enclosed areas of a vessel. It has nothing to do with weight.

Handy size: Handy size refers to bulk carriers usually from 10,000 to 35,000 tonnes deadweight.

Liner discharge (Liner out): Where the ship owner is obliged to pay the costs of the discharge of the cargo. This term appears on the bill of lading.

Liner in: Where the ship owner is obliged to pay the costs of the loading of the cargo. A term that appears on the bill of lading.

Liner Terms: A combination of liner in / liner out.

LO/LO: A vessel where the cargo has to be lifted off the ship or lifted into the ship as opposed to RoRo.