Understanding the terminology in international trade is key to ensuring smooth transactions, avoiding misunderstandings, and optimizing costs. Here are the most frequently used terms, grouped by category for easy comprehension.
Category 1: Parties Involved
- Exporter / Shipper: The party (company or individual) that sells and sends goods abroad.
- Importer / Consignee: The party that buys and receives goods from abroad. The Consignee is the name listed on the documents as the receiver of the goods.
- Freight Forwarder: A service company that acts as a “travel agent” for cargo. They do not own their own ships or planes but manage all shipping logistics, from picking up the goods, booking space on a vessel/aircraft, handling documentation, to customs clearance.
- Shipping Line / Carrier: The company that owns the mode of transport (sea vessel, cargo plane) and physically transports the goods from one place to another. Examples: Maersk, MSC, Garuda Cargo.
- Customs Brokerage Service Provider (PPJK): A business entity licensed to handle customs formalities (the customs clearance process) on behalf of the exporter or importer. This is often part of a Freight Forwarder’s services.
Category 2: Key Documents
- Bill of Lading (B/L or BoL): The most vital document in sea freight. It has three main functions:
- Receipt of Goods: Proof that the carrier (Shipping Line) has received the goods from the exporter.
- Contract of Carriage: An agreement between the owner of the goods and the shipping company to transport the goods to the destination.
- Title of Ownership: Whoever holds the original B/L has the right to claim the goods at the destination port. This document is negotiable.
- Air Waybill (AWB): The air freight equivalent of the B/L. The main difference is that an AWB is not a document of title; it only serves as a receipt and a contract of carriage.
- Commercial Invoice: A sales invoice from the exporter to the importer. It contains details of the goods, price per unit, total price, and payment terms. This document is used by customs to calculate taxes and import duties.
- Packing List: A detailed list of the contents of each package (case/carton/crate). It includes the quantity of goods, net weight, gross weight, and dimensions of each package. This document complements the Commercial Invoice.
- Certificate of Origin (COO): An official document stating the country where the goods were produced. It is important for obtaining preferential tariff treatment (lower or zero import duties) if a trade agreement exists between the countries (e.g., AFTA in ASEAN).
- Export Declaration (Pemberitahuan Ekspor Barang – PEB): A customs declaration document that must be filed by the exporter when sending goods out of Indonesia.
- Import Declaration (Pemberitahuan Impor Barang – PIB): A customs declaration document that must be filed by the importer when bringing goods into Indonesia.
Category 3: Shipping Terms (Incoterms 2020)
Incoterms are a set of international trade rules published by the International Chamber of Commerce (ICC) to clarify the responsibilities of sellers and buyers regarding the delivery of goods. The most common are:
- EXW (Ex Works): The seller is only responsible for making the goods available at their own premises (factory/warehouse). All subsequent costs and risks (local transport, export, main carriage, import) are borne entirely by the buyer.
- FOB (Free On Board): The most common term for sea cargo. The seller is responsible for all costs and risks until the goods are loaded on board the vessel at the port of origin. Once the goods are on the vessel, the costs and risks transfer to the buyer.
- CFR/CNF (Cost and Freight): The seller pays for the freight to bring the goods to the destination port. However, the risk of loss or damage to the goods transfers to the buyer once the goods are on board the vessel at the port of origin (same as FOB).
- CIF (Cost, Insurance, and Freight): Same as CFR, but the seller is also required to purchase insurance for the goods during the sea voyage. It’s important to remember that the risk still transfers at the port of origin.
Category 4: Payment Terms
- L/C (Letter of Credit): The most secure payment method for both parties. It is a guarantee from the importer’s bank to the exporter’s bank. The bank will pay the exporter upon the submission of complete and compliant shipping documents as stipulated in the L/C.
- T/T (Telegraphic Transfer): A standard bank wire transfer. It usually involves a percentage as a down payment before production/shipment, and the balance payment after the goods have been shipped or have arrived. It is widely used due to its simplicity compared to an L/C.
- D/P (Documents Against Payment): The exporter sends the title documents through a bank. The importer can only obtain these documents (to claim the goods at the port) after making full payment to the bank.
- D/A (Documents Against Acceptance): Similar to D/P, but the importer can obtain the documents by “accepting” (signing a promise to pay) a bill of exchange with a future due date. This is riskier for the exporter.
Category 5: Other General Terms
- HS Code (Harmonized System Code): A global classification system for goods. Every product has a unique numerical code used by customs authorities worldwide to determine applicable tariffs and regulations.
- Customs Clearance: The process of handling customs formalities to release goods from customs control, for either export or import purposes.
- Port of Loading (POL) & Port of Discharge (POD): The port where goods are loaded onto a vessel and the port where they are unloaded.
- ETD (Estimated Time of Departure) & ETA (Estimated Time of Arrival): The scheduled time of departure and arrival for a vessel or aircraft.
- Demurrage & Detention: Penalty fees. Demurrage is a charge for failing to pick up a container from the port area within the allotted free time. Detention is a charge for failing to return an empty container to the shipping line’s depot on time.
- FCL (Full Container Load): A shipment where one party (the shipper) hires a full container for their own goods.
- LCL (Less than Container Load): A shipment where multiple parties share space within a single container. The goods are consolidated (combined) at a warehouse before being loaded.
