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Foreign trade, in plain words.

The terms you will hear during an import, explained in one line, and the 11 Incoterms 2020 rules.

Advance declaration (declaración anticipada): Import declaration filed before the cargo arrives.
Advance ruling (resolución anticipada): Prior decision by DIAN on the classification, value or origin of goods.

B/L (Bill of Lading): Contract of carriage, receipt for the cargo and, in original, the title needed to claim it.
BAF (bunker adjustment factor): Fuel surcharge charged by the carrier.
Booking: Reservation of space on a vessel for a cargo.
Break bulk: Loose cargo that travels without a container, lifted piece by piece.

Cargo insurance: Policy that covers loss of or damage to the goods in transit.
Cargo manifest: List of all the cargo on board, which the carrier transmits to customs.
CBM: Cubic metre; the unit of cargo volume (length × width × height in metres).
Certificate of origin: Document that proves the country of origin; under a trade agreement it can reduce the import duty.
CIF value: Value of the goods plus freight and insurance to the port of destination.
Commercial invoice: Supplier's sales document showing price, quantities, Incoterm and payment terms.
Consignee: The party that receives the cargo at destination, according to the B/L.
Customs: Authority that controls the entry and exit of goods and collects duties and taxes; in Colombia it is DIAN.
Customs broker: Company authorized by DIAN to handle customs filings on behalf of the importer; mandatory when the FOB value exceeds USD 1,000.
Customs inspection (aforo): DIAN's review of a declaration, either documentary or physical.
Customs power of attorney (mandato aduanero): Authorization the importer gives the customs broker to act on its behalf.
Customs value: Basis for assessing the import duty (in Colombia, on CIF terms).
Cut-off: Deadline to deliver the cargo or the documents before the vessel sails.

Dangerous goods: Cargo with hazards (flammables, lithium batteries, chemicals) that requires declaration and special handling.
DAV (Andean Value Declaration): Declaración Andina del Valor: document supporting the customs value, required from USD 5,000 FOB.
Demurrage: Charge for keeping a full container inside the terminal beyond the free days.
Detention: Charge for keeping a container outside the terminal beyond the free days.
DIAN: Dirección de Impuestos y Aduanas Nacionales, Colombia's tax and customs authority.
Dry container: Standard closed container for dry cargo.
DTA (customs transit): Declaración de Tránsito Aduanero: movement of cargo under customs control to another customs office in the country.

ETA: Estimated time of arrival.
ETD: Estimated time of departure.

FCL: Full container load: a container used by a single shipper.
Flat rack: Container platform with end walls only, for heavy or oversized cargo.
FOB value: Value of the goods loaded on board at the port of origin.
Foreign exchange declaration (declaración de cambio): Form used to channel an import payment through the foreign exchange market.
Free days: Days the carrier allows the use of its container at no cost.
Free trade zone (zona franca, ZF): Area with a special customs and tax regime where cargo can enter without being cleared through customs.
Freight: Price of the main transport leg.
Freight forwarder: Company that organizes international transport and coordinates carriers, ports and documents for the client.

GRI (general rate increase): Across-the-board rate increase announced by carriers.
Gross weight: Weight of the goods including packaging.

High Cube (HC): Container about one foot (30 cm) taller than the standard one.
House B/L (HBL): B/L issued by the freight forwarder to its client.

IMDG Code: International Maritime Dangerous Goods Code, which governs the ocean transport of dangerous goods.
Import declaration (declaración de importación): Document used to declare the goods to DIAN and assess duties and taxes.
Import duty (arancel): Tax on imports, set by the tariff subheading and the origin of the goods.
Import registration (registro de importación): Authorization processed in VUCE, required when the product is subject to a government agency's requirements or is used.
Import VAT (IVA): Value added tax charged on the customs value plus the import duty; general rate 19%.
Incoterms: ICC rules that split delivery, costs, risk and formalities between seller and buyer.

Lashing: Securing the cargo so it does not move during the voyage.
LCL: Less than container load: consolidated cargo sharing a container, charged per m³ or per ton.
Legal abandonment (abandono legal): Status of goods that are not cleared or assigned another customs procedure within the permitted storage period; they may be lost.
Letter of credit (L/C): Bank instrument that guarantees payment to the seller against presentation of the agreed documents.
Lifting: Raising cargo with a crane.
Lowboy trailer (cama baja): Truck with a low-deck trailer for tall or heavy cargo.

Master B/L (MBL): B/L issued by the carrier to the freight forwarder or shipper.

Net weight: Weight of the goods without packaging.
Notify party: Person or company notified of the cargo's arrival.
NVOCC: Non-vessel operating common carrier: operator that issues its own B/Ls without owning vessels.

OEA (Authorized Economic Operator): Operador Económico Autorizado: DIAN certification for reliable operators, which grants facilitation in customs controls.
OOG (out of gauge): Cargo that exceeds the dimensions of the container.
Open top: Container without a rigid roof, loaded from above.

Packing list: Document listing the packages, contents, weights and dimensions of the shipment.
Pre-shipment inspection: Quality and quantity check at origin before shipping.
Prior approval (visto bueno): Advance authorization from an agency (INVIMA, ICA, etc.) required for certain products.
Prior import licence (licencia previa): Authorization from MinCIT (Ministry of Commerce, Industry and Tourism) required for certain products or conditions (for example, some used goods).
Proforma invoice: Supplier's formal quotation issued before the commercial invoice.
PSS (peak season surcharge): Surcharge applied by carriers in high season.

Reefer: Refrigerated container.
Release (levante): Authorization from customs to withdraw the goods once the import has been cleared.
RoRo (roll-on/roll-off): Vessel onto which vehicles and machinery are driven on and off, on their own wheels or on trailers.
RUNT: Registro Único Nacional de Tránsito, Colombia's national transit registry; it includes the registry of self-propelled machinery.
RUT: Registro Único Tributario, Colombia's tax registry kept by DIAN; required to import.

Sea waybill: Non-negotiable transport document; the cargo is released without presenting an original.
Shipper: Party that hands over the cargo for transport, usually the supplier.
Shipping line (carrier): Company that owns or operates the vessels.
Storage: Charge made by the terminal or warehouse for keeping the cargo.
Stowage: Arranging and securing the cargo in the container or on the vessel.

Tare weight: Weight of the empty container.
Tariff subheading: Code that classifies a product and determines its duty and requirements.
Telex release: Electronic surrender of the original B/L at origin so the cargo can be collected without paper originals.
Temporary storage facility (depósito temporal): Authorized place where the cargo waits for customs clearance.
THC (terminal handling charge): Charge for handling the container at the terminal.
Transit time: Days the vessel takes between the port of origin and the port of destination.
Transshipment port: Intermediate port where the container is transferred from one vessel to another.

VGM (verified gross mass): Verified gross mass of the loaded container, mandatory under SOLAS before it is loaded onto the vessel.
VUCE: Ventanilla Única de Comercio Exterior, Colombia's Single Window for Foreign Trade, where registrations, licences and prior approvals are processed.

Incoterms 2020: who pays for what

Incoterms do not define the price or the payment terms. They split delivery, costs, risk and formalities between seller and buyer.

Rule	In one line	Main freight	Insurance	Export customs	Import customs	Risk passes to the buyer
EXWEx Works	The seller makes the goods available at its premises; the buyer does everything else, including loading.	Buyer	Buyer (optional)	Buyer	Buyer	When the goods are made available at the seller's premises.
FCAFree Carrier	The seller delivers to the carrier chosen by the buyer, cleared for export.	Buyer	Buyer (optional)	Seller	Buyer	On delivery to the carrier at the agreed place.
FASFree Alongside Ship	The seller places the goods alongside the vessel at the port of origin.	Buyer	Buyer (optional)	Seller	Buyer	When the goods are alongside the vessel.
FOBFree On Board	The seller places the goods on board the vessel at the port of origin.	Buyer	Buyer (optional)	Seller	Buyer	When the goods are on board at origin.
CFRCost and Freight	The seller pays freight to the port of destination, but risk passes at origin.	Seller	Buyer (optional)	Seller	Buyer	When the goods are on board at origin.
CIFCost, Insurance and Freight	Like CFR, and the seller takes out minimum insurance (ICC C, 110% of the value).	Seller	Seller (minimum)	Seller	Buyer	When the goods are on board at origin.
CPTCarriage Paid To	The seller pays carriage to destination; risk passes on delivery to the first carrier.	Seller	Buyer (optional)	Seller	Buyer	On delivery to the first carrier.
CIPCarriage and Insurance Paid To	Like CPT, and the seller takes out broad insurance (ICC A, 110% of the value).	Seller	Seller (broad)	Seller	Buyer	On delivery to the first carrier.
DAPDelivered at Place	The seller brings the goods to the agreed destination, ready for unloading.	Seller	Seller (advisable)	Seller	Buyer	At destination, before unloading.
DPUDelivered at Place Unloaded	Like DAP, but the seller also unloads at destination (it replaced DAT).	Seller	Seller (advisable)	Seller	Buyer	At destination, once unloaded.
DDPDelivered Duty Paid	The seller delivers at destination with the import cleared and duties paid.	Seller	Seller (advisable)	Seller	Seller	At destination, ready for unloading.

With Chinese suppliers FOB is the most common, where the importer controls freight and insurance. CIF looks convenient, but the importer does not choose the carrier or control destination charges.

Not sure which Incoterm suits you?

It depends on your supplier, your cargo and how much control you want. We review it with you before you close the purchase.

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