Acceptance (in shipping)
Acceptance is the process of a carrier completing the assigned delivery to the consignee's indicated address. This step signals the end of the carrier transportation contract.
Also known as Accessorial service or Accessorial charge.
An accessorial service is a carrier-provided service not normally included in regular transportation services, such as address correction after a shipment is picked up or demurrage in ocean freight. An accessorial charge is the fee charged for an accessorial service.
Ad valorem (in shipping, logistics)
A Latin phrase that means “according to the value.” An ad valorem tax levies a fixed percentage of the value of goods when calculating customs duties and taxes.
The carriage of freight via air carrier; may also refer actual freight transported by a air carrier.
A non-negotiable document issued by an air carrier to acknowledge possession of a shipment and which serves as a receipt for the consignor (shipper). The air waybill indicates the shipment's destination address and includes contact information for the consignor and consignee (receiver).
Assignment (shipping assignment)
The transfer of a shipment's rights, title and interest to a consignee (receiver). This is most frequently used in relation to ocean freight when the "Conditions of Assignment" have been met and the Bill of Lading is endorsed to the consignee.
Beneficiary (in shipping)
A firm or person upon whom a Letter of Credit has been drawn. The beneficiary is usually the seller or exporter.
Space at a seaport where a marine vessel loads or unloads cargo, or a designated space within a ship, railcar, motor vehicle or aircraft that is used to transport cargo.
Bill of Lading (BoL)
The consignor's (shipper's) receipt of good shipped, the Bill of Lading, or BoL, is a legal document that authorizes the carrier to execute the movement of goods on the consignor's behalf.
A facility where imported and dutiable goods may be temporarily stored without payment of customs duties.
A unique number assigned to a scheduled transportation movement which allocates assets and space needed.
Truck with a cube-shaped cargo area; also commonly referred to as a cube truck or box van. Typically the cargo area is 24' - 28' in length.
Break bulk cargo
Non-containerized cargo that is shipped as a single unit, whether on pallets, in boxes or other method of packaging.
Cargo that is broken into smaller shipments for delivery to consignees (receivers.) Examples of such cargo may be liquids, grains, coal and minerals.
A shipper has the option to add carbon neutral to a shipment at the time of shipping. This means the sender cares about climate change and wants others to be aware of this commitment.
UPS's carbon neutral option supports projects that offset the emissions of the shipment's transport. UPS has supported projects that include reforestation, landfill gas destruction, wastewater treatment, and methane destruction.
Our carbon neutral option is verified by Société Générale de Surveillance (SGS), an inspection, testing, and verification company. This means that you can have confidence in the UPS carbon neutral method. Additionally, our carbon offset process is certified by The CarbonNeutral Company.
Cargo insurance generally refers to supplemental insurance purchased to protect the shipper from loss, damage or theft of cargo while in transit. This coverage is above and beyond basic claims insurance that may be provided. Cargo insurance policies can cover cargo carried by land, or cargo carried by air and sea (Marine Cargo Insurance); policies and options vary greatly.
Goods carried on a ship, aircraft, rail or motor vehicle.
See common carrier and contract carrier.
Cash in advance (CIA)
A method of payment whereby the buyer agrees to pay the seller before merchandise is shipped. This is normally used for one-time shipments, or where the creditworthiness of the buyer is not ascertainable.
Cash on Delivery (COD) - Also known as Collect on Delivery/Driver Collect/Freight Collect
Shipment for which 1) the delivery driver collects the cost of the goods from the consignee (receiver) to remit to the shipper or other designated party, or 2) the driver collects the delivery fee from the consignee on behalf of the carrier.
Certificate of Insurance - Also known as Insurance Certificate
A document issued by an insurance company or broker that confirms an entity has purchased insurance coverage. At a minimum, a certificate of insurance includes the type of coverage, types and dollar amount of applicable liability, and the policy's effective date.
Certificate of Origin (COO)
A certificate of Origin (COO) is generated by the exporter or their agent. COOs indicate the country of manufacture of the goods being exported in order to verify that the goods qualify for preferential trading terms, for example, as part of a free trade agreement (FTA). COOs often must be validated by a chamber of commerce or other designated government authority.
The demand made upon a carrier for payment due to loss, damage, delay or overcharge alleged to have occurred in the course of carrier transportation.
Cold chain - Also known as cool chain
A continuous climate-controlled supply chain. A cold chain extends the life and preserves the safety of perishable foods, drugs, chemicals and other products by assuring consistent refrigeration through the product's passage from manufacturing, through transport and warehousing, to final delivery.
Collect Shipment - Also known as Freight collect.
A billing option in which the consignee (receiver) is responsible for paying the transportation charges.
A document containing information required for customs clearance and to determine appropriate tariffs. Entries include contact details for consignor (shipper) and consignee (receiver) as well as description of the contents, quantity, value, country of origin and other important details.
Economic risk resulting from the normal course of business operations such as financial, legal and market risk, among others.
Common carrier - Also known as carrier
A legal entity providing transportation for-hire to the public via equipment they own or operate.
Consign (in shipping) - Also known as Consignment
To address or ship goods to another person or entity via a contract or common carrier.
Consignee - Also known as shipment receiver
A person or firm to whom goods are shipped.
Consignment (in shipping)
The shipper, or consignor, is the party initiating a shipment from one location to another via carrier.
Consolidator (in shipping)
A company that provides the service of combining related or unrelated shipments with the objective of lowering transportation costs for consignors (shippers).
Container (in shipping) - Also known as shipping container
A large metal box, similar to a truck trailer, into which freight is loaded. The container is then sealed, loaded and shipped by vessel, truck or rail and unloaded as a single unit at its destination.
A location designated by a carrier for the delivery, pickup or return of loaded or empty shipping containers.
A legal entity providing for-hire transportation of people or goods to its customers on a contract basis.
Cost, Insurance and Freight (CIF)
Indicates a seller is responsible for paying the costs associated with the ocean or inland waterway transport of goods to a named port of destination. The seller is also responsible for purchasing marine insurance.
Country of Origin
The country in which item(s) contained within a shipment were produced or manufactured.
Cross docking or Cross dock
The process of transferring goods directly from one transport vehicle to another, or by moving them through a warehouse loading or staging area to another vehicle. The goal of cross docking is to reduce or eliminate the need for onsite receiving and storage.
An agent or entity with authorization on behalf of the importer to help secure customs clearance for goods to enter the destination country(ies).
Customs (in shipping)
The term can refer to 1) a designated government authority that collects duties on imported and exported goods, or 2) the customs collection process itself.
Damage (in shipping)
Partial or complete destruction of goods in storage, staging or transit. See Claims.
See Hazardous Materials (HAZMAT)
In international shipping, de minimis is the threshold set by countries under which no customs duties or taxes are applied to goods.
How small is too small? When it comes to international trade, the answer will differ from country to country.
The threshold for de minimis shipments, where the value of imported goods is small enough to normally be exempt from customs duties and taxes under the law, varies greatly around the world. In some countries, de minimis shipments are subject to a low cap or tight restrictions, while customs authorities elsewhere set a more generous level.
What is de minimis’ role in e-commerce?
A generous de minimis threshold reduces the cost of moving goods internationally and means more goods can clear customs faster. This is good news for cross-border e-commerce.
In a 2016 move widely seen as a boon for online selling, the United States introduced one of the highest de minimis values in the world, increasing it from $200 to $800. Indeed, reports that the United States may reduce its threshold as part of 2019 trade negotiations with Mexico and Canada quickly raised the hackles of e-commerce platforms such as eBay, among others.
While de minimis duty exemptions are a benefit to e-commerce, they’re not without complexity. Above all, e-commerce sellers must clearly understand when and how de minimis exemptions apply to shipments. For example, in the United States, shipments of certain goods, including, but not limited to, alcohol and tobacco, do not qualify for de minimis. In addition, de minimis, which is authorized pursuant to Section 321(a)(2)(C) of the Tariff Act of 1930, only applies to a shipment of merchandise imported by one person on one day having a fair retail value not exceeding $800 and it does not apply if the shipment is one of several lots covered by a single order or contract which was sent separately for the express purpose of avoiding duty/fee payment. Knowledge of de minimis is not only good for vendors but buyers. Understanding de minimis helps sellers arrive at an accurate landed cost they can share with customers.
It works in the other direction too. By alleviating some of the intricacy of customs taxes and duties, de minimis helps make international returns easier.
Changes to de minimis rules
De minimis rules change regularly. Take Australia, which in 2018 nullified its de minimis provision that allowed the import of up to 1000 AUD of goods exempt from Goods and Services Tax (GST).
Similarly, in 2017 the European Union adopted measures to scrap its de minimis of 22 EUR, which exempted low-value imports from value added tax (VAT). This was part of a broader reform of the EU’s VAT regime for cross-border e-commerce.
As these examples illustrate, it’s important for exporters to stay informed of changes to de minimis rules.
Exporters must also remain vigilant when preparing customs paperwork, notably the commercial invoice. Under-valuation of goods to qualify for de minimis is not permitted and may lead to customs fines and costly delays. Currently, in the United States, U.S. Customs and Border Protection (CBP) is running Section 321 programs to enable the agency to monitor and protect against illegitimate trade while providing the public the benefits of duty-free shipments for qualified imports.
De minimis may be about small things, but its implications are big. Exporters should seek expert guidance on how best to navigate de minimis when clearing customs.
Declared Value/Insured Value
Declared Value or Insured Value is the combined value of the merchandise and cost of freight, packaging, forwarding charges and consular fees for which insurance is obtained.
Enter a Declared Value amount of up to US$25,000. Pre-authorization is required for Declared Value amounts greater than US$25,000.
For additional information refer to the UPS Air Freight Terms and Conditions of Contract.
Dedicated contract carriage
A contract with a third-party provider to move a company's goods through the provider's independent network.
A transportation fleet exclusively dedicated to the movement of goods for a company, whether the fleet is owned, leased or contracted through a third-party.
Exclusive, contracted use of a warehouse or warehouse space by a customer. This service is often provided by third-party logistics providers (3PLs).
Delivery order - Also known as Shipping order
A document from a shipping carrier instructing a terminal operator or shipping agent to release cargo or freight to the agent or consignee designated on the Bill of Lading. This document is required for the agent or consignee to clear customs and marks the end of the transport contract between the shipping carrier and consignee.
Delivery receipt - Also known as Proof of Delivery
Delivery receipt, also referred to as proof of delivery, is confirmation the shipment was delivered as intended.
Demurrage - See also Detention, Per Diem Driver Detention
Charges incurred when a container is not out-gated/picked up before the designated free time at the port.
The weight of a package or unit of freight divided by its volume; also commonly referred to as weight per cubic foot. Density can directly influence shipping rates charged.
Department of Homeland Security (DHS) | Customs and Border Protection (CBP)
U.S. Customs and Border Protection is the agency of the Department of Homeland Security responsible for security at over 300 air, sea and land points of entry into the U.S.
Dimensional weight reflects package density which is the amount of space a package occupies in relation to its actual weight. Dimensional weight is calculated using this formula (in inches): (Length x width x height) ÷139.
Dimensions (shipping) - Also known as Dimension
The length, width and height measurements used to calculate the dimensions of a shipment.
Direct to consumer
Direct to consumer (D2C) is a sales approach by which manufacturers and e-commerce brands sell directly into the marketplace without going through a traditional distribution network.
In retail, the traditional supply chain starts with the manufacturer. Products get bought in bulk by wholesalers or handled by distributors specializing in certain categories. Eventually the product makes it into retailers’ inventories and from there it is sold to the public.
Direct to consumer breaks the mold by cutting out intermediaries and establishing an open channel between manufacturer and end consumer.
What is direct to consumer’s appeal?
D2C can be highly attractive to both manufacturers and buyers for several reasons:
D2C is increasingly common in business-to-business (B2B) sales too. Buyers like dealing with manufacturers and enjoy the opportunity to ask questions directly of the product’s maker before and after the sale.
The challenges of D2C
Despite its benefits, selling D2C is no walk in the park. Cutting out intermediaries may make aspects of the sale easier. But there’s a lot more work involved that D2C operations must take on -- or risk not selling.
Marketing is one such area. With D2C, brand development is at a premium. A compelling look and feel is critical to differentiating a D2C -- from product photography to its tone of voice. Without the trusted hand of distributors and retailers to promote their products, manufacturers must get good at executing promotional strategies themselves.
There’s also the question of logistics. Product needs to be picked, packed, and shipped. From inventory management to returns, direct-to-consumer brands must offer levels of customer service on par with e-commerce best practice. They must quickly take ownership of client complaints too. When things go wrong, D2C brands have nowhere to hide.
Pricing is another sensitive area. This is particularly true for companies operating a sales model that pairs D2C with retail distribution. Such brands must be careful to avoid creating channel conflict and confusion. For this reason, some large brands have been reluctant to sell D2C for fear of undermining their channel partners and cannibalizing sales.
Not all big brands harbor such reservations. Industry leaders such as Nike and Apple are renowned for their D2C approaches and the caliber of their direct-to-consumer marketing. And though most large brands understand the need to adapt to the changing retail landscape, they may not have the luxury of choice. A bunch of new of D2C start-ups are jockeying to disrupt the retail establishment.
Facing such headwinds, the willingness of manufacturers to embrace direct to consumer as a sales approach will likely only grow.
A warehouse outfitted for inventory storage and the efficient fulfillment of product orders.
Supply chain distribution is the process by which products and services are made available to end-users. Every item commercially manufactured is earmarked for distribution in some shape or form.
But distribution is more than simply getting products to users: it’s a critical feature of a properly functioning supply chain. Without effective distribution, products don’t reach consumers at the right time or in the right place. This creates a poor customer experience and generates inefficiency in the supply chain.
Neither does distribution take a one-size-fits-all approach. Different models for distributing goods from manufacturer to end user include:
The role of an effective distributor
An effective distributor is more than simply an intermediary: in helping manufacturers shift goods, a distributor’s role is to add value to the product while moving it through the supply chain. Areas where distributors support the supply chain include:
Effective distributors work with manufacturers to set the distribution strategy across products: a luxury goods range may remain exclusive to high-end stores, for example, and not made available to mass retailers. They also work with manufacturers to determine which sales channels—from brick-and-mortar stores to online marketplaces—to target. The range of sales channels is wide, from traveling sales reps and online affiliate networks to direct response advertising and mail order catalogs.
In addition to getting products into the hands of users, the practice of distribution helps manufacturers test new markets and drive growth. From every angle, distribution is a critical aspect of a healthy supply chain and a continual source of feedback for all participants.
The transport of goods that originates and ends within a country's borders.
Door to door
The physical movement of goods from the point of pickup to end user. This may also be the name of a service provided, for example, "door to door service."
Charges incurred when a driver is kept waiting longer than the allowed wait times.
Drop shipping is a supply chain method in which the seller does not own or stock the goods for sale. Instead, the goods are stored and shipped to the buyer by someone else. This may be the manufacturer, a wholesaler, or a distributor. It may even be another retailer.
The pros and cons of drop shipping
Before launching an e-commerce operation based around drop shipping, it’s important to understand the pros and cons of this method of fulfillment.
For the seller, the main advantages of drop shipping are the low overheads involved: the responsibility for purchasing inventory and fulfilling orders rests with the third party. This ultimately comes at a cost to the vendor, however, whose margin on the sale is squeezed by competitors selling at rock bottom prices. It’s also squeezed by the seller’s shipping partners, who will often take a healthy slice of the difference between the wholesale and retail price as their compensation for supplying the inventory and fulfilling the order.
There’s also the issue of customer experience: with drop shipping, the seller exerts less control over the logistics of fulfillment. Managing returns through a third-party shipper can prove frustrating for vendor and customer alike, while a seller’s lack of direct control over inventory increases the risk of stock-outs. Brand control is weaker: it’s hard to create a memorable unboxing experience, for example, when drop shipping.
Despite the challenges, drop shipping has its place in the logistics mix. Retailers appreciate the flexibility it offers when handling seasonal spikes, and it can be a cost-effective way of testing new products and exploring new markets.
Setting up a drop shipping business
For merchants of all sizes, establishing a drop shipping business requires dedication. Sellers must perform due diligence before entering into commercial arrangements with drop shipping suppliers , vetting them for trustworthiness, reliability, and the strength of their delivery options.
Strong marketing, from quality product photography to compelling product descriptions, is another key element. Merchants should also invest in a comprehensive e-commerce platform that supports the needs of everyone involved in the drop shipping arrangement, starting with the customer.
By developing strong supply chain relationships supported by robust channels of communications and smart marketing techniques, retailers can set their drop shipping operation apart from the pack.
Materials used to stabilize and guard freight during transport, and may include foam, air bags, carboard or other materials.
Duty (in shipping) - See also Customs, Ad Valorem
A government tax imposed on imported goods. See ad valorem.
Electronic Data Interchange (EDI)
A standardized, secure electronic process allowing one company to send information or payment to another company.
Embargo (in shipping and logistics)
In shipping, an embargo is any law or event that prevents goods from being handled or accepted for shipping. For example, embargoes may be instituted when travel or trade is prohibited due to sanctions, or when a natural or man-made disaster has occurred.
An emerging market is a country whose economy is in a state of accelerated development. The high-growth environment of emerging markets may yield opportunities for exporters looking to expand.
What defines an emerging market? Although the precise characteristics of an emerging market spark debate among economists, commonly accepted features include high per capita GDP growth and an increase in foreign direct investment: emerging markets represent attractive, but often risky, propositions for investors. They also serve as potential new markets for exporters.
Rapid industrialization and a growth in consumer debt are additional hallmarks of emerging markets. The development of internal infrastructure, from public transportation networks to contract logistics, is another. In this vein, it’s common for emerging markets to begin to
Since the turn of the 21st century, much discussion of emerging markets has focused on the BRICS alliance of Brazil, Russia, India, China, and South Africa, which comprises some of the largest emerging economies in the world. Often included alongside BRICS are Turkey and Indonesia: together these countries constitute the so-called E7—a term coined by PricewaterhouseCoopers in 2006 as a counterpoint to the G7 network of advanced industrialized countries.
Emerging markets definition: a moving target
There is long-standing debate over how exactly to define an emerging market. For its part, the International Monetary Fund offers a variety of indicators based around GDP. Another well-established index is maintained by international investment firm MSCI. Under its classification, countries are divided into ‘developed,’ ‘emerging,’ and ‘frontier’ status. Analysts elsewhere argue the ‘emerging market’ classification is outdated and doesn’t accurately reflect the complex relationship between advanced and high-growth economies.
Regardless of the criteria for making the list, once a country is designated as an emerging market, its pathway toward advanced economy status is far from assured. Growth can falter and foreign direct investment can cool—an upsurge in political unrest will almost certainly give foreign companies pause before renewing their investment programs. Mindful of this, the International Monetary Fund suggests a continuous effort among emerging economies toward structural reform. Changes to governance will accelerate closing the income gap with their counterparts in advanced economies, the IMF argues.
Structural reform is not only important in accelerating the transition to advanced economy status but maintaining it. The deep fiscal problems that afflicted Greece in the wake of the 2007-08 global financial crisis saw it revert to emerging market status after years of being considered an advanced economy.
At a fundamental level, emerging markets bring dynamism and disruption to the global economy—which, in turn, yields commercial opportunities. Amid uncertainty over the future of globalization, exporters should seek assistance from logistics experts with experience operating in high-growth markets.
Ex works (EXW)
An arrangement in which a buyer assumes all other shipping and regulatory responsibilities of transporting goods from the seller's point of origin.
Export license - See also Import license
A government-issued document certifying a business or agent to export specific commodities to specific countries. In some countries, most or all exports may require an export license.
The total financial value of all goods and services sold by an entity across its borders; also describes the process by which goods are sold from one entity to another and pass through both countries' governmental customs processes.
Federal Maritime Commission
The U.S. regulatory agency overseeing ocean carrier commerce to and from the United States.
Free on Board (FOB) - Also known as FOB shipping point, FOB origin, FOB destination
The shipping phrase preceding the party responsible for a shipment in transit. When FOB is combined with "origin" or "shipping point," the consignee (receiver) retains responsibility for the shipment from origin to destination. FOB "destination" signifies that the consignor (shipper), or shipper's agent, is liable until the goods are received at the destination.
Free Trade Agreement (FTA)
A trade agreement between two or more countries that provides reduced customs duties for member countries if they import products originating from another member country.
Free Trade Zone (FTZ) - Also known as Foreign trade zone
A government-designated port or area where goods can be stored or used for manufacturing duty-free prior to re-export or entry into the national customs territory.
Freight broker or 3PL
3rd Party Logistic companies (3PLs) and freight brokers connect shippers looking to move goods with carriers who are available to move them.
A broker can make money through different methods. They can earn via an incremental margin to the customer on the carrier’s rates or by agreeing on a flat or variable rate with the shipper for services provided.
What does a freight broker do?
A freight broker’s responsibilities are varied. Brokers secure loads from shippers, research lanes, and identify available carriers for the shipment.
In addition, freight brokers can:
Brokers also organize special transit requirements, such as refrigerated containers for temperature-sensitive loads. Importantly, they determine the reliability of the carrier and, similarly, the bona fides of the shipper.
Becoming a freight broker
Freight brokers may work for a freight brokerage or operate independently. Either way, they must be licensed by the Federal Motor Carrier Safety Administration (FMCSA), the federal agency that regulates the trucking industry. To maintain their license, freight brokers must adhere to FMCSA conditions: they are required to carry a $75,000 surety bond, for example, in the event the broker breaches the terms of an agreement.
While some freight brokers manage all aspects of a shipment, others enlist the help of a freight agent to handle logistics. In such arrangements, the freight broker plays the role of senior coordinator: negotiating rates and ensuring paperwork is in order, while delegating the logistics of a shipment to the agent.
For their efforts, the freight agent will normally take a percentage of the broker’s margin—which is the difference between what the shipper pays to have the load moved and the carrier’s fee to move it.
Freight broker vs freight forwarder
With any definition of a freight broker, it’s important not to confuse the freight broker role with that of a freight forwarder that accepts carrier liability. Although the two functions overlap, significant differences exist.
Freight forwarders may take possession of cargo as required, and may consolidate shipments from multiple parties.
Despite these differences, freight brokers remain essential players in the complex landscape of logistics. By meeting shipper demand with carrier supply, freight brokers help keep shipping moving efficiently.
An industry standard motor freight classification process that relies on a commodity's characteristics to determine which shipping rate card is most appropriate.
Freight forwarder - Also known as global freight forwarder
A company that aggregates shipments from multiple parties to create efficiencies and manage further routing to the final destination(s). Often, a forwarder acts as a shipping agent and owns few or none of the vehicles or vessels being used for transport.
Girth (in shipping)
A dimension equal to the distance around an object at its widest point.
The gross weight of an object refers to the sum of the object's weight plus its contents. For vehicles, the gross weight is the sum of the weights of the vehicle, occupants and cargo.
Harmonized system code - Also known as HS code, harmonized code
An international standard for classifying goods to help promote consistent classification and application of duties for customs purposes.
Hazardous materials (HAZMAT)
Also known as dangerous goods
Hazardous materials and dangerous goods each refer to substances and articles that are capable of posing a risk to health, safety, property and the environment when transported. The term hazardous materials tends to be used more in the United States while dangerous goods is more commonly used in the rest of the world.
In the U.S., hazardous materials transport is regulated by Title 49 of the U.S. Code of Federal Regulations which defines it as: "... a substance or material that the Secretary of Transportation has determined is capable of posing an unreasonable risk to health, safety, and property when transported in commerce, and has designated as hazardous under section 5103 of Federal hazardous materials transportation law."
The International Air Transport Association (IATA) defines dangerous goods as one and the same. Note that descriptions and classifications of dangerous goods may vary from country to country.
Hazardous materials and dangerous goods are classified according to various sets of regulations for both air and ground transport. Due to the seriousness and complexity of these regulations, it is recommended that consigners (shippers) first consult with a logistics provider offering expertise in this area prior to preparing goods for transport.
Height (in shipping)
One of three main dimensions (the others being length and width) for an object. Height is measured from the base of an object to the top.
Hub and spoke
The hub and spoke strategy is the consolidation of transportation assets through "hub" locations that then connect to and from multiple "spokes," or destinations, along the network. Conversely, transportation networks that do not rely on hubs are typically called "point to point" networks.
Import (in shipping) - Also known as imports
Goods or services purchased outside of a country's borders for use inside the purchasing country. The phrase may also express the financial value of all goods and services imported from other countries.
Import license - See also Export license
A government-issued document certifying a business or agent to import specific commodities to specific countries. In some countries, most or all exports may require an import license.
Importer of Record (IOR)
The party responsible for ensuring that imported goods comply with all customs and legal requirements.
See Certificate of Insurance
Interline (in shipping and logistics)
Transport synchronized between two or more transportation carriers.
The coordinated transport of goods across different modes of transportation, for example, from ocean freight to air freight to road freight to package delivery.
International Maritime Organization (IMO)
A global organization affiliated with the United Nations that represents maritime countries on marine transport issues. For example, the IMO is involved in discussions regarding the movement of dangerous goods and environmental issues.
International trade, a core driver of the world economy, comprises the movement of goods and services across borders.
This basic definition belies the fact that global commerce is a complex subject that touches countless products we rely on daily to enrich our lives.
From the time of China’s Silk Road centuries ago to the hyper-connected trade routes of today, people have been moving goods across regions and countries.
While the silks and spices of antiquity may still be traded, modern international trade-turbocharged by the explosion of e-commerce-has dramatically expanded the range of available exports. The Harmonized System, an international directory that categorizes goods for customs purposes, carries more than 5,000 product descriptions alone.
The most frequently traded products are commodities such as petroleum and big-ticket items like cars. Integrated circuits and computers are key movers. Pharmaceuticals and precious metals like gold also routinely appear in the list of top internationally traded goods.
Supporting this activity are global logistics providers. From air freight service for urgent deliveries to hands-on assistance with customs brokerage, companies such as UPS offer comprehensive solutions to help shippers move products around the world.
What is the function of global trade?
International trade greases the wheels of the global economy in several ways.
It enables countries to specialize in the production and distribution of certain items. For example, Mediterranean countries have found great success in recent decades exporting olive oil to the United States and elsewhere. Meanwhile, Chile and Argentina have expanded their domestic wine production by exporting beyond South America.
In this way, international trade opens up new markets for exporters and generates opportunities for foreign direct investment. It also frees up importing countries to focus resources on producing goods they’re best equipped to produce and, in turn, export.
Overseeing and defining international trade
Global trade needs rules to operate. Founded in 1995 and comprising 164 countries, the World Trade Organization is both rule setter and global umpire for international trade.
The WTO’s mandate is to support international trade, not hinder it. The organization points to a fourfold increase in the dollar value of cross-border commerce since its inception and a near halving in average tariff levels worldwide. Countries that enact overly protectionist measures may find themselves on the wrong side of a WTO ruling.
Individual countries and trading blocs retain significant latitude to negotiate bilateral and multilateral agreements with their global counterparts. These free trade agreements promote international commerce by making it advantageous for signatories to do business with one another. This often takes the form of reduced customs duties and taxes. The United States, for example, has free trade agreements in place with many countries across the world.
Support with international trade
Of course, international trade is not all sweetness and light. Exporting a product is almost always more expensive than selling it domestically, though the financial reward of successfully tapping export markets can justify the risk for investors.
Exporters also need help navigating the complexities of cross-border logistics if they are to maximize their opportunities, while navigating trade regulations, on the international stage. Global logistics providers such as UPS offer deep expertise with customs clearance alongside the tools and technology that businesses need to help make international shipping easier.
Indeed, the upsides of international trade can be significant for businesses that get it right. The export market is vast. While only about 5% of U.S. businesses with paid employees exported in 2016, more than three-quarters of consumer spending power exists outside of the United States.
Another key upside is the opportunity to source a greater range of products from different corners of the world at lower prices.
Overseas trading markets represent a sizeable opportunity for companies of all shapes and sizes to pursue. With the right support from partners deeply experienced in international trade like UPS, businesses may surpass their expectations for growth.
According to the U.S. Interstate Commerce Act, interstate commerce is the transport of goods or persons between states of the United States including the District of Columbia. This includes transportation that originates and resumes in the U.S. after having passed through a foreign country.
A shipment of goods that travels via carrier across more than one U.S. state including the District of Columbia.
A shipment of goods that travels via carrier within the boundaries of a single U.S. state.
Companies looking to improve efficiency sometimes consider a production strategy called just-in-time (JIT) manufacturing. JIT is all about timing.
It aims to reduce inventory by timing and coordinating the arrival of supplies with customer orders and the production of goods. If all goes well, a company’s inventory of products is perfectly balanced in real time, to handle customer orders.
Very basically, here’s how the just-in-time concept works: A manufacturer focuses on maintaining a limited inventory of supplies -- just enough to produce products for existing or expected orders. This avoids the possibility of developing a bloated inventory, which in turn cuts waste and lowers costs.
Keep in mind, just-in-time doesn’t come without risks.
JIT manufacturing increases a company’s dependency on its supply chain. If a company can’t obtain necessary supplies quickly, they won’t be able to create their product.
Compare JIT with a similar approach called just-in-case manufacturing. Under just-in-case, extra stockpiles of supplies are stored by the manufacturer to protect against an unexpected disruption in the supply chain.
The rise of JIT manufacturing
Just-in-time manufacturing has an interesting history. It took root in Japan in the early 1970s as an alternative approach to inventory management. Japanese automaker Toyota is widely credited with spearheading the practice. In fact, just-in-time is also commonly referred to as the Toyota Production System (TPS). As a methodology, the TPS commits Toyota to "making only what is needed, when it is needed, and in the amount needed," according to the company.
Western companies began experimenting with just-in-time in the late 1970s, although uncertainty persisted for a while among North America manufacturers about the best ways to implement just-in-time into their workflows.
References to just-in-time often get confused with another concept called lean manufacturing, which aims to minimize total waste. JIT is just one aspect of the lean approach – although it’s an important one. There are many ways beyond inventory optimization to cut waste.
The case for just-in-time production
There are significant commercial and environmental benefits to JIT manufacturing, such as the potential for:
Just-in-time, however, doesn’t happen by itself.
To implement JIT effectively, companies must be committed to a culture of improvement, referred to in Japanese as "Kaizen." A scheduling system, such as Kanban, helps ensure the right parts get ordered at the right time. Real-time visibility across the supply chain into inventory needs is another critical element.
The challenges of JIT
Meeting unexpected or unusually high-volume orders can prove difficult under just-in-time. If orders come in on a steady basis, it tends to be ideal for JIT. Partners who supply product components and other supplies must be willing to accept smaller orders from manufacturers on a more regular basis.
Just-in-time manufacturers may also be more vulnerable to supply chain shocks, including natural disasters.
The future of JIT manufacturing
Supply chain optimization is a continual work in progress, with technological development a key driver of change. Advances in 3D printing are helping expedite turnaround for just-in-time orders, as is the emergence of drone delivery in manufacturing and other improvements in final mile delivery, such as the increasingly intelligent use of forward stocking locations.
For many manufacturers nowadays, adopting the core principles of just-in-time is a necessary step to staying competitive.
A process in which inventory from multiple product or package codes are combined and assigned a new product code.
Label (in shipping)
A label or document providing information essential to accurate and efficient transportation of a shipment. At minimum, information includes name and address of the consignor (shipper), the name and address of the consignee (receiver), the origin and destination. More detailed information is required for shipping internationally to facilitate customs review.
Lading may refer to either cargo in a shipment or a detailed list of contents contained in a shipment.
Last mile delivery
Last mile delivery is the movement of goods from a transportation hub to its final delivery destination, whether a residential or commercial address.
Our streets are getting busier than ever. With the relentless rise of e-commerce, the final mile delivery of goods can mean the difference between a happy customer and a dissatisfied one.
From trucks and cars to bikes and drones, there are many ways of getting a package from a transportation hub to its destination. The mode of transportation will largely depend on the delivery area—what works for densely populated cities may not work well for remote locations.
Optimizing final mile logistics
For logistics providers, the line between making a margin or a loss on a package can be thin. For this reason, carriers eagerly explore ways of gaining efficiencies in last mile delivery and reducing associated costs.
The emergence of Uber-style platforms for connecting packages with carriers is one development, as is technology such as UPS’s Orion that optimizes a driver’s daily route and improves the fuel economy of each package delivered. Building new transportation hubs to better accommodate the forward stocking of goods is another way of improving last mile logistics . It’s easier to meet spikes in demand if the right goods are already placed close to the point of need.
Security across last mile delivery
Being able to receive packages from the convenience of your home is great, but is not without its challenges—nobody wants a rain-soaked package or a delivery that went missing to a porch pirate.
Security solutions like Latch, which allows delivery drivers to leave packages inside multi-unit buildings, reduce the risk associated with unattended packages. Similarly, the growth of secure pick-up locations within communities gives customers increasing control over how they receive their deliveries.
The future of final mile delivery
In the coming years, the demand for efficient last mile delivery will only intensify. Residential streets and central business districts will get busier, as delivery vehicles service the burgeoning needs of the on-demand economy—from e-commerce requests to home healthcare services. Drone technology may disrupt last mile logistics, bringing a radical new delivery mechanism to healthcare, manufacturing, and e-commerce.
Length (in shipping)
One of three main dimensions for a shipment (the others being width and height.) Length is typically the longest dimension and is measured from one end of the shipment to the other.
Less than Truckload (LTL)
A freight shipment that does not meet the specifications required for a full Truckload (TL) shipment. LTL shipments are typically aggregated with other movements to maximize trailer utilization.
Letter of Credit (LOC)
A Letter of Credit is an instrument for purchasing goods through a buyer's line of credit with a bank or lender. That financial entity issues a document assuring payment to the sellers upon fulfillment of the agreement's terms. The buyer pays the financial entity prior to taking possession of the goods. If payment is not made, the financial entity pays the seller and takes possession of the goods.
Access points at a warehouse, factory or port where goods in trucks, ocean vessels or rail can be loaded or unloaded for storage, distribution, manufacture or further transportation.
Manifest - Also known as shipping manifest.
A document providing a detailed description of a shipment's contents.
Marine cargo insurance
Insurance purchased to protect against losses of air cargo or cargo at sea. This is supplemental coverage and typically protects against losses the ocean carrier does not cover.
Most favored nation (MFN)
A policy offering special trading privileges from one country to another. One example of trade privileges may include reduced customs duties or tariffs on certain product classifications.
NAFTA Certificate of Origin - See also NAFTA
A form used for trade between NAFTA countries (Canada, Mexico, and the U.S./Puerto Rico) that declares goods originated in one of the included countries and is, therefore, eligible for reduced or eliminated duties.
Net weight (in shipping)
Net weight denotes the weight of goods minus the weight of packing or packaging. In ground freight, net weight is the weight of only the goods being shipped and does not include the vehicle weight.
North American Free Trade Agreement (NAFTA)
A trade agreement between Canada, Mexico and the U.S./Puerto Rico providing reduced customs duties for countries importing products originating from a member country.
Omnichannel retailing is a strategic approach to selling that involves marketing to customers across a range of channels, whether physical or digital, in a coordinated way.
It’s an omnichannel world these days. With the convergence of e-commerce and brick-and-mortar, retailers have never had more channels at their disposal to engage the attention of consumers. From pop-up stores to online marketplaces and everything in-between, there’s a head-popping number of places to meet prospective (and current) customers.
Omnichannel retailing involves marketing and selling to customers through whatever channels make sense, whether physical or digital. Omnichannel retailing is not about trying to make the sale on the first contact. Instead, it’s about nurturing the prospect and steadily moving them toward a purchase.
Let’s say you sell mountain bikes. A prospective customer starts by researching bikes online. Your company’s blog appears in her search engine results, and she spends a few minutes browsing your content. Next, she heads over to an online marketplace to research prices and read customer reviews.
Two days later, she sees a paid post for your bikes in her favorite social media feed. Although she doesn’t click on the ad, she’s feeling positive about your brand.
That weekend, she stops by her local bike store, which is listed on your website as an authorized reseller of your bikes. She takes advice from the staff and places an order. Although the bike costs her more from the store than she could get on an online marketplace, she is willing to pay a little extra for local expertise. As she completes her purchase, the customer’s email address is added (with her permission) to the store’s mailing list, which regularly contains updates about your brand.
Six months of weekend training later and after several visits back to the store for tune-ups and advice on maintenance, she participates in a regional race sponsored by your company. This is omnichannel retailing in action, supported by an omnichannel strategy that is consumer-oriented and helpful.
The benefits of omnichannel retailing
Done intelligently, omnichannel retailing achieves several goals. It raises brand awareness and provides product education. It offers different pathways to purchase and establishes a conversation between the brand and the customer past the initial sale. Ultimately, it nurtures a customer and creates the conditions for a longer-term relationship.
Omnichannel marketing doesn’t mean your brand must always be everywhere. Be selective in your channels. Pick one or two social media platforms, for example, and aim to do them well, rather than spreading your efforts thinly across many platforms.
Above all, develop customer purchase touchpoints that are integrated with one another while remaining natural in themselves. Whereas nudging a shopper toward a purchase is one thing, making them feel pushed into a sale is never a good move. When devising your omnichannel strategy, aim to strike a balance between helpfulness and persuasion. And make sure you have the logistics support in place to fulfill the order once you have finally secured the sale.
Overage, short & damaged (OS&D) - Also known as Overage
Discrepancies that can occur during a normal shipping journey. Overages refer to quantities received that are in excess of that noted on the shipping documentation. Coversely, shortages, or "short" denotes shipments that contain a lower than reported quantity. Damaged product may be obvious or concealed, with "concealed" in this instance meaning that part or all of the shipment was not visible for inspection during transport. Each of these instances creates the need for additional steps and can cause delays and additional charges.
Overage, Short & Damaged - Also known as Overage
Discrepancies that can occur during a normal shipping journey. Overages refer to quantities received that are in excess of that noted on the shipping documentation. Conversely, shortages, or "short" denotes shipments that contain a lower than reported quantity.
In shipping, packaging typically refers to materials used to enclose, bind or secure goods being shipped. Exterior packaging may include cardboard boxes, mylar envelopes and wooden freight pallets. Interior packaging may include air bags, styrofoam pellets or braces and shredded materials.
Packing list - Also known as shipping manifest
A document providing a detailed description of a shipment's contents.
Pallet (shipping pallet) or Pallets
A platform upon which freight is stacked and wrapped for transportation. Pallets may be made of wood, plastic or other materials and are built to enable easy lifting by forklifts.
Parcel (small package)
A parcel, often called a "small package," is for most carriers a packaged, individual shipment under 150 pounds. Parcels may be shipped in a variety of forms including the standard envelope and box packaging available from the carrier, or self-packaging by the consignor (shipper).
Payment method (in shipping)
For most shipping carriers, consignor (shipper) payment options include credit cards, debit cards, electronic funds transfer and letters of credit. Cash is accepted in limited circumstances. Consignors holding a customer account with a carrier may also have the option of billing on account, billing to third parties or shipping collect.
Peak season (in shipping)
A period of high demand for products, services and shipping capacity. Peak seasons vary among industries and geographies. Other variables include whether a company is positioned upstream or downstream in a manufacturing supply chain, and whether it sells to customers who buy for a business or for personal use. Ocean freight carriers typically experience demand peaks earlier than ground freight or parcel shipping.
Per Diem Container Detention - See also Demurrage, Driver Detention
Charges triggered when a container has been away from the port longer than the free time allowed by the carrier.
Port of entry
A designated location where goods from foreign countries are processed for entry into the home country. This term may also be used to describe physical stations maintained for management of immigration or transportation commerce.
Prepaid shipments are paid by the consignee (shipper).
Many carriers provide consignors (shippers) with options for printing shipping labels needed to send a package to the intended destination.
Pro forma invoice
An invoice sent by a seller to an international buyer detailing the goods to be purchased and the precise terms of the purchase, including purchase price and currency. This document should also provide the Harmonized code(s) of the goods to ensure the correct calculation of customs duties. A buyer typically relies on the pro forma invoice to secure a Letter of Credit which enables payment to the seller and puts the transaction and shipment in motion.
Pro rata (in shipping)
A Latin term that means "in proportion." Generally, pro rata billing strategies are applied when a fee must be divided among shipping parties according to contractual or mutually-agreed terms, often based on time or distance.
Proof of delivery (POD)
See Delivery Receipt
Province (in shipping)
A geographical area designation by local or national governments. For example, Canada has 10 provinces which might be loosely compared to U.S. states. In addition to name and street address, province names, or their accepted abbreviations, are vital to timely and accurate delivery of shipments.
Quarantine (in shipping)
In logistics, quarantine is the process of setting aside goods until appropriate tests and controls can certify the integrity and safety of the goods.
Receipt (in shipping)
In shipping, the actual receipt of goods can occur at various phases of a journey based upon the terms the buyer and seller agreed upon prior to transport. Shipping terms are a critical factor in a sales transaction as they specify not only who is responsible for costs but also who has liability for the goods during transit. Another meaning for receipt can be a paper document or electronic record signifying the arrival of goods at the designated destination.
A logistics service focused on management of shipments after the sale. Examples may include management of warranties and recalls or retail returns, exchanges and credits.
The address of the consignor (shipping party).
The shipper, or consignor, is the party initiating a shipment from one location to another via carrier.
Shipping order - Also known as Delivery Order
A document from a shipping carrier instructing a terminal operator or shipping agent to release cargo or freight to the agent or consignee designated on the bill of lading. This document is required for the agent or consignee to clear customs and marks the end of the transport contract between the shipping carrier and consignee.
Skid - Also known as storage skid, shipping skid
A storage platform that lies flush with the ground as opposed to the raised platform of pallets.
In logistics, storage facilities are often warehouses or similar structures that provide a secure environment in which goods can be inventoried and easily accessed for future use. Some supply chains require specialized storage facilities and equipment, such as cold chain capabilities for medical and pharmaceutical products.
Supply chain - Also known as value chain
An interlocking network of entities working together to produce a product or service for sale to businesses or consumers. The objective is for each entity to add unique value to the chain which has also led to a supply chain being called a value chain.
Surcharge (in shipping)
A charge above the usual or customary shipping charge, such as charges required to offset costs due to fuel price fluctuations.
Tariff (in shipping)
A government imposed tax on goods entering or exiting the country. The term may also refer to the transportation rates charged by a carrier.
Terminal - Also known as shipping terminal, transportation terminal
Designated stops and facilities along transportation routes where cargo can be loaded, unloaded or transferred from one carrier vessel to another.
Billing of shipping costs to a third-party that is not the consignor (shipper) or consignee (receiver.)
Tracking number - Also known as tracing number
A unique number assigned to a shipment by a carrier for use in shipment tracking and identification.
Truckload (TL) is a method of ground freight shipped via tractor-trailer. As the term implies, the trailer is filled by weight or volume.
Uniform Commercial Code
What is a Uniform Commercial Code (UCC)?
Note: This article is for informational purposes only. This article was not written by an attorney and is not intended as legal advice. If you have questions concerning the Uniform Commercial Code (UCC) or other legal issues, consult an attorney.
The Uniform Commercial Code is a system of rules that governs trade between states and territories in the United States. To determine the UCC’s requirements and its impact on you or your shipments, consult an attorney.
Uniform Commercial Code
First published in 1952, the Uniform Commercial Code is maintained by a board of experts appointed from the Uniform Law Commission (ULC), which oversees all uniform laws, and the American Law Institute.
The Uniform Commercial Code, as published by the ULC, is organized into nine articles. Some states, such as California and Louisiana, call the code’s articles by another name to avoid confusion with existing terminology at the state level. In California, UCC articles are referred to as divisions, for example.
The body of UCC law is complex and stretches across all 50 states, the District of Columbia, and U.S. territories. Adoption is widely observed at the state level, although it is not entirely universal and states can choose to make changes to the recommended code before a rule enters the statute book. As such, it is always important to check a state’s laws and consult an attorney. A reference version of the Uniform Commercial Code that presents each section of the UCC in the version most widely adopted by states is published by Cornell Law School.
Are UCC rules and Incoterms® the same thing?
No. Uniform Commercial Codes are not to be confused with Incoterms®, an international system of terms used by buyers and sellers in cross-border transactions. Although Incoterms are widely used outside of the United States, awareness of the different terms is lower in the U.S., where they sometimes get confused for UCC designations, and vice versa. Learn more about Incoterms and how they are used in international shipping.
Need help with shipping needs? Talk with the experts at UPS. For help with the UCC or other related matters, consult an attorney.
Value added tax (VAT)
A tax assessed on the value of goods that is typically levied at the rate legislated for that commodity in the country it is used or consumed. In simplistic terms, the VAT taxation rate for the jurisdiction is static but the tax collected will increase as the value of the commodity increases.
Waybill - See also air waybill
A non-negotiable document issued by an air or ocean carrier to acknowledge possession of a shipment, and which serves as a receipt for the consignor (shipper). The air waybill indicates the shipment's destination address and includes contact information for the consignor and consignee (receiver).
Weight (in shipping)
The total weight of a shipment of goods including all packaging. Weight is one several factors that can be used in calculating the cost of a shipment.
Width (in shipping)
The horizontal distance between the edges of a package or other packaging or object. In contrast, height is the measure of the vertical distance from the bottom of the object to the top.