International Trade & Cargo Insurance Glossary: 50+ Essential Terms

A

Air Waybill (AWB)

Non-negotiable transport document issued by an air carrier or its agent that simultaneously serves as a receipt of goods, evidence of the contract of carriage and an invoice for freight. Unlike the ocean Bill of Lading, the AWB is not a document of title: the consignee named on the document takes delivery at destination simply by identifying itself, with no requirement to surrender an original. The AWB is governed by the Montreal Convention of 1999, which caps the carrier's liability at 22 SDR per kilogram unless a higher value is declared and the corresponding additional freight is paid.

All-Risks coverage

Commercial name for the broadest standard cover available in the marine cargo market, today wording-aligned with the Institute Cargo Clauses (A) of 2009. It does not list the perils it covers; instead, it covers any physical loss or damage to the insured cargo except for a closed list of exclusions (war, strikes, wilful misconduct, inherent vice, insufficient packing, delay, among others). See our analysis of the Institute Cargo Clauses A, B and C.

Average (particular / general)

In marine insurance, "average" means partial loss or damage — as opposed to total loss. Particular average is a partial loss that affects exclusively one interest (one cargo, one vessel) and is borne by the insurer covering that interest. General average, in contrast, is the proportional sharing of a deliberate sacrifice (for example, jettisoning cargo to save the vessel) among all the interests in the maritime adventure, calculated by an average adjuster under the York-Antwerp Rules.

Avoidance

The right of the insurer to declare a contract void from inception when the insured has breached the duty of utmost good faith — typically by misrepresenting or omitting material information at the moment of placement. Avoidance is the strongest remedy available to the underwriter and results in the policy being treated as if it had never existed; any claims paid must be returned and the premium is refunded.

B

Bill of Lading (B/L)

The master document of ocean transport. It performs three simultaneous functions: it is a receipt by which the carrier acknowledges having taken the cargo on board; it is evidence of the contract of carriage between shipper and line; and it is a document of title, meaning that whoever holds the original is entitled to take delivery of the cargo at destination. There are two main variants: the "straight" B/L (consigned to a named party) and the "to order" B/L (negotiable by endorsement, typical of letter of credit transactions).

Bonded warehouse

Customs-authorised facility where imported goods can be stored, manipulated, repackaged or processed without payment of import duties or taxes until they are released for domestic consumption or re-exported. Bonded warehouses are widely used by importers to delay cash outflow on duties, to consolidate shipments before final distribution, or to keep merchandise in transit for re-export operations such as the drawback regime.

Booking

Reservation of cargo space on a specific vessel or flight, made by the shipper (or its freight forwarder) with the carrier or NVOCC. The booking confirmation generates a booking number, defines the cut-off date for receiving the container at the terminal, the estimated departure (ETD) and the estimated arrival (ETA), and constitutes the operational starting point of the international transport.

Bunker Adjustment Factor (BAF)

Variable surcharge applied by ocean carriers to compensate for fluctuations in the price of marine fuel ("bunker"). It is invoiced on top of the base freight rate and is reviewed periodically — usually monthly or quarterly — depending on the spot price of low-sulphur fuel oil (VLSFO) and the trade lane.

C

Cargo Insurance

Insurance contract that protects the owner of the cargo against physical loss or damage during international transport, regardless of whether liability falls on the carrier. It is essential because carrier liability is severely capped by international conventions (Hague-Visby, Montreal, CMR), so the insured value of the cargo would never be fully recovered without a dedicated marine policy.

Carrier liability

Limited financial responsibility of the carrier (shipping line, airline, trucker) for damage or loss of cargo under its custody, defined by the applicable international convention: 2 SDR per kilo or 666.67 SDR per package under Hague-Visby for sea, 22 SDR per kilo under Montreal for air, and 8.33 SDR per kilo under CMR for international road. See the difference with cargo insurance in our article on carrier liability vs cargo insurance.

CFR (Cost and Freight)

Maritime Incoterm under which the seller pays the cost of the goods and the ocean freight to the named port of destination, but does not contract insurance. Risk transfers to the buyer when the goods are loaded on board at the port of shipment, leaving the entire ocean leg unprotected unless the buyer purchases its own cargo policy.

CIF (Cost, Insurance and Freight)

Maritime Incoterm equivalent to CFR with the addition of a marine insurance obligation: the seller must contract minimum cover — ICC (C) under Incoterms 2020 — for 110% of the invoice value to the named port of destination. Risk still transfers when the goods cross the ship's rail at origin, which generates the well-known mismatch between cost transfer and risk transfer. Read more in our guide on how much cargo insurance from China costs.

CIP (Carriage and Insurance Paid)

Multimodal Incoterm equivalent to CIF for any mode of transport. Under Incoterms 2020, the default insurance obligation rose from ICC (C) to ICC (A), making CIP markedly more demanding for the seller than CIF. The full transit, including the inland legs, is covered up to the named place of destination.

Cleared / clearance

Status reached by a cargo when customs has finalised its review, accepted the import declaration, applied the corresponding duties and taxes and released the goods for free circulation in the destination country. Without clearance, the cargo cannot leave the port or airport, even if it has already been physically discharged from the vessel.

Commercial invoice

Document issued by the seller to the buyer that itemises the description of the goods, the unit price, total value, currency, the agreed Incoterm and the payment terms. It is the cornerstone of customs valuation in most countries, the base on which import duties and VAT are calculated, and the document the insurer uses to verify the insurable value declared in the certificate.

Consignee

Party named in the transport document as the recipient of the cargo at destination. The consignee has the right to take delivery and, in the case of a "to order" B/L, to endorse the original to a third party. It must not be confused with the notify party, which is simply the contact to be advised on arrival but does not necessarily hold any title to the goods.

Container (FCL / LCL)

Standardised metal box of 20', 40' or 40' High Cube used in intermodal transport since the ISO standard of the 1960s. Operates in two main commercial modes: FCL (Full Container Load), where a single shipper books the whole container, and LCL (Less than Container Load), where several shippers share the same container through a consolidator. See FCL vs LCL: which to insure.

Cross-docking

Logistics operation in which incoming cargo is transferred directly from the inbound vehicle to the outbound vehicle, with minimal — or zero — intermediate storage. It reduces handling cost and inventory time, but increases handling exposure during the transfer and is operationally incompatible with FCL container shipments.

D

Damage certificate

Document issued by an independent surveyor (loss adjuster) that records, describes and quantifies the physical damage suffered by a cargo. It is one of the essential pieces of proof of loss in any insurance claim and the technical basis on which the insurer determines the indemnity.

DAP (Delivered at Place)

Multimodal Incoterm under which the seller delivers the goods at the named place of destination, ready for unloading but without assuming import clearance. The buyer is responsible for unloading the vehicle and for completing import customs.

DDP (Delivered Duty Paid)

Incoterm representing the maximum obligation for the seller: it bears all costs and risks, including import duties and taxes, up to delivery at the named place inside the buyer's country. Commercially equivalent to a turnkey domestic delivery from the buyer's standpoint.

Demurrage

Charge applied by the shipping line when a container remains inside the port terminal beyond the agreed free time (typically 5 to 7 days). It compensates the line for the immobilisation of its equipment and accumulates on a daily basis, escalating in tiers. Customs delays are the most frequent cause — see how to release your cargo from customs in 24 hours.

Detention

Charge applied when the container leaves the terminal but is not returned empty within the agreed free time. Unlike demurrage, it accrues outside the port premises (at the importer's facility) and is invoiced separately, although both are often loosely lumped together as "extended container use" charges.

DPU (Delivered at Place Unloaded)

Incoterm introduced in the 2020 revision, replacing the old DAT. The seller delivers the goods at the named place of destination already unloaded from the arriving vehicle. It is the only Incoterm that explicitly obliges the seller to unload at destination.

Drawback

Customs regime allowing an importer to recover, totally or partially, the duties paid on inputs that are later incorporated into goods that are subsequently exported. It is a key tool for export competitiveness in countries with a high import-export industrial profile.

E

ETA / ETD

ETA (Estimated Time of Arrival) and ETD (Estimated Time of Departure) are the projected dates on which the vessel or aircraft will dock at the destination port and depart from the origin port, respectively. They are estimates: actual arrival (ATA) and actual departure (ATD) can differ by hours or days due to weather, port congestion or operational issues.

EXW (Ex Works)

Incoterm with the minimum obligation for the seller: it merely makes the goods available at its premises (factory, warehouse). The buyer collects the cargo and bears all costs and risks from that point onward, including export clearance — which often becomes a practical obstacle, since the buyer is rarely the legal exporter in the seller's country.

F

FCA (Free Carrier)

Multimodal Incoterm under which the seller delivers the goods, already cleared for export, to the carrier nominated by the buyer at the agreed place. It is the modern alternative recommended by the ICC to replace FOB in container traffic, because risk transfers at a logistical point that actually corresponds to the operational handover.

FCL (Full Container Load)

Container mode in which a single shipper books an entire container for its exclusive cargo. The seal is placed at origin and broken at destination, minimising handling, theft and contamination from neighbouring cargo. The economic break-even versus LCL is usually reached above 12-15 cubic metres.

FOB (Free on Board)

Maritime Incoterm under which the seller fulfils its obligation when the goods are loaded on board the vessel at the named port of shipment. Ocean freight, insurance and risk transfer to the buyer from that point. It remains the most widely used Incoterm worldwide despite the ICC's recommendation to migrate to FCA for containerised cargo. See Incoterms 2026: who must insure.

Freight forwarder

International logistics operator that organises the transport of goods on behalf of the shipper, contracting carriers (ocean lines, airlines, truckers), consolidating cargo, issuing house transport documents (HBL, HAWB) and managing documentation throughout the chain. It is the natural commercial counterpart of the importer in any complex international operation.

G

General average

Ancient principle of maritime law codified today in the York-Antwerp Rules (latest revision 2016). When the captain of a vessel makes an extraordinary sacrifice to save the common maritime adventure — for example, jettisoning cargo to refloat a stranded ship — the loss is shared proportionally among all the interests involved: vessel, cargo owners and freight earned. Each importer must post a general average bond to take delivery of its cargo, even if it suffered no direct damage.

GRI (General Rate Increase)

Periodic increase in base freight applied by shipping lines on a specific trade lane, normally at the start of each month or quarter. The GRI is announced in advance and reflects the operational and market situation (capacity, demand, fuel) on the affected route.

H

Hague-Visby Rules

International convention of 1968 (a protocol to the original Hague Rules of 1924) that regulates the carrier's liability in ocean transport under bill of lading. It establishes the standard limit of 666.67 SDR per package or 2 SDR per kilogram of gross weight, whichever is higher. It is the legal framework applied in most international ocean traffic.

Hamburg Rules

UN Convention of 1978 designed to replace the Hague-Visby Rules with a more shipper-friendly framework. It expands the carrier's liability period (port-to-port), raises the cap to 835 SDR per package and 2.5 SDR per kilo, and removes some classic carrier defences. Ratified by only a minority of states; in practice it has limited application in mainstream international trade.

HS Code (Harmonized System)

International six-digit tariff classification administered by the World Customs Organization (WCO). Each country adds additional national digits — 8 in the European Union (CN), 10 in the United States (HTS) and 8 in most of Latin America (NCM/NALADISA) — to determine duties, non-tariff restrictions, certificates of origin and trade statistics. Correct classification is a critical compliance milestone in any import.

Hub port

Large concentration port operating as a transhipment node in global maritime networks. Shipping lines move cargo on mother vessels between hubs (Singapore, Rotterdam, Algeciras, Panama, Cartagena, Manzanillo) and then redistribute it on smaller feeders to regional secondary ports.

I

ICC A/B/C (Institute Cargo Clauses)

Three standard wordings drafted by the Institute of London Underwriters, today maintained by the Lloyd's Market Association (LMA), that define the scope of a marine cargo policy. ICC (A) covers all risks except a closed list of exclusions; ICC (B) covers a list of named perils of intermediate scope; ICC (C) covers only the most basic catastrophic perils. The current revision is the 2009 wording. See Institute Cargo Clauses A, B, C explained.

Incoterms

Set of 11 standard international trade terms published by the International Chamber of Commerce (ICC) that distribute costs, risks and customs obligations between seller and buyer. The current version is Incoterms 2020. They are classified by mode: seven multimodal (EXW, FCA, CPT, CIP, DAP, DPU, DDP) and four exclusively maritime (FAS, FOB, CFR, CIF). See Incoterms 2026: who must insure.

Insurable interest

Legitimate economic relationship between the insured and the cargo such that the insured would suffer a real financial loss if the cargo were damaged or destroyed. It is a prerequisite for any valid insurance contract: without insurable interest at the moment of the loss, the insurer is not bound to indemnify, even if a premium has been paid.

L

Letter of Credit (L/C)

Documentary payment instrument issued by a bank (the "issuing bank") at the request of the buyer, by which it commits to pay the seller a specified amount upon presentation of the agreed documents (B/L, commercial invoice, packing list, certificate of origin, insurance certificate) within a defined deadline. It is regulated by UCP 600 of the International Chamber of Commerce and remains the most common payment instrument in international trade with new counterparties.

LCL (Less than Container Load)

Consolidated container mode in which several shippers share the same container. Cargo is consolidated at the origin warehouse (CFS — Container Freight Station) and deconsolidated at the destination hub. LCL multiplies the handling exposure and therefore the theft and damage risk: many underwriters require ICC (A) by default for any LCL shipment, regardless of value.

Lloyd's of London

World's leading insurance and reinsurance market, organised as an association of underwriting syndicates that operates from London since 1688. It is the historical reference of the marine insurance market and the entity that, through the Lloyd's Market Association (LMA), drafts the standard wordings used worldwide (ICC A/B/C, War Clauses, Strikes Clauses).

M

Marine cargo policy

Insurance contract that covers physical loss or damage to goods during international transport, regardless of the mode used (sea, air, road, rail or multimodal). Despite the historical name "marine", today it also encompasses cross-border air and land transport. It can be issued as a single voyage policy or as an open cover (annual). For the full picture, see our international cargo insurance guide.

Manifest

Official document the carrier files with customs authorities at the destination port or airport, listing all the cargo on board the vessel or aircraft. It includes details of each B/L: shipper, consignee, description, weight, volume and packaging. It is the basis for the entry of cargo into customs jurisdiction and feeds the so-called "carrier manifest" or AMS.

Multimodal transport

Transport operation that combines two or more modes (sea, air, road, rail) under a single contract issued by a Multimodal Transport Operator (MTO), with a single transport document and a single party responsible from origin to destination. Differs from "intermodal" transport, where each leg has its own document and counterparty.

N

Notify party

Party named in the bill of lading to be notified by the carrier upon arrival of the vessel at the destination port. The notify party does not have rights over the cargo (those belong to the consignee) — its role is purely operational and informational. It is usually the customs broker or the freight forwarder at destination.

NVOCC (Non-Vessel Operating Common Carrier)

Operator that issues its own bills of lading (HBL — House Bill of Lading) and assumes the contractual role of carrier in front of the shipper, without owning vessels. It contracts space with shipping lines (master BL — MBL) and resells it to its own clients. Most international freight forwarders operate, in fact, as NVOCC in their consolidated traffic.

P

Packing list

Document issued by the seller that details the physical content of the shipment: number of packages, type of packaging, gross weight, net weight, volume and dimensions, often broken down by HS Code line. It is essential for customs inspection, for verifying the loading plan and for documenting the existence and integrity of the cargo at origin in case of a claim.

Port of discharge

Port named in the transport document where the cargo is to be physically unloaded from the vessel. It may differ from the "port of delivery" (the final destination point of the multimodal contract) when inland transport segments to the final destination follow.

Premium

Consideration the insured pays to the insurer in exchange for taking on the risk. In cargo insurance, it is expressed as a percentage of the insured value (typically between 0.10% and 0.60% depending on cargo, route and chosen clause) and is paid up front, before the policy attaches.

Proof of loss

Set of documents the insured must submit to the insurer to evidence the existence, cause and quantum of the claim. It typically includes the damage certificate issued by the surveyor, the commercial invoice, the B/L, the claim letter to the carrier and the photographic record of the damage. See the full procedure in how to file a cargo insurance claim.

R

Reefer container

Refrigerated container with its own cooling unit, used to transport temperature-controlled cargo (frozen, chilled or temperate). Available in 20' and 40' High Cube formats, with operating ranges from -30 C to +30 C. Requires a continuous power supply and constant monitoring, since any temperature deviation translates into a near-total loss of perishable cargo.

RoRo (Roll-on/Roll-off)

Maritime transport modality in which the cargo is loaded and discharged on its own wheels (cars, trucks, agricultural machinery, project cargo on chassis) through internal ramps of the vessel, without the use of cranes. Reduces handling time and minimises impact damage to the cargo.

S

Salvage

Reward, regulated by international maritime conventions, paid to anyone who voluntarily helps to save a vessel and its cargo in danger. Also refers, in insurance, to the residual value of the cargo recovered after an indemnified loss: the insurer is entitled to dispose of the salvage to mitigate the cost of the claim.

SDR (Special Drawing Right)

Reserve unit of account created by the IMF, composed of a basket of currencies (USD, EUR, CNY, JPY, GBP). It is used as a reference for liability limits in international transport conventions (Hague-Visby, Montreal, CMR), so its USD value fluctuates daily according to the IMF basket.

Subrogation

Legal mechanism by which the insurer, after paying the claim to the insured, takes the place of the latter to pursue recovery against the responsible third party (carrier, port, terminal, surveyor). It allows the insurer to recover totally or partially the amount indemnified and is the natural complement of the cargo insurance contract.

SRCC (Strikes, Riots, Civil Commotions)

Additional cover, materialised in the Institute Strikes Clauses (Cargo), that restores into the policy losses arising from strikes, locked-out workers, riots, civil commotions and acts of politically, ideologically or religiously motivated terrorism. By default excluded from ICC (A), (B) and (C); essentially mandatory for any route touching ports with a history of social conflict.

T

TEU (Twenty-foot Equivalent Unit)

Standard measurement unit for global container traffic. One 20' container equals 1 TEU; one 40' container equals 2 TEU. World port and ocean fleet statistics are expressed in millions of TEU per year; the largest container vessels today exceed 24,000 TEU of capacity.

Through Bill of Lading

Bill of lading covering the full transport from the port of loading to the final inland point of destination, including the segments operated by other carriers (feeder, rail, road). It is the predecessor of the modern multimodal transport document and is still used in routes with several maritime transhipments.

TPND (Theft, Pilferage, Non-Delivery)

Cover that responds to total theft, partial pilferage and partial non-delivery of cargo at destination. It is embedded by default in ICC (A) and available as a paid extension for ICC (B) and (C). It is the most common cover invoked in LCL consolidated shipments and in routes with heavy handling at hub ports.

Transshipment

Operation by which a cargo is transferred from one vessel to another at an intermediate hub port to continue its voyage to final destination. Each transshipment increases handling exposure and theft probability, and is one of the operational factors with the greatest impact on the cargo insurance premium.

V

Voyage policy

Cargo insurance contract that covers one single specific shipment, from origin to destination, on a defined route. It is opposed to the open cover (annual policy), which automatically covers all the insured's shipments under pre-agreed conditions for a continuous period — usually 12 months.

W

Warehouse-to-warehouse coverage

Standard cargo insurance clause that extends cover from the shipper's warehouse at origin to the consignee's warehouse at destination, including all the intermediate transport segments (origin inland, main international leg, transhipments, destination inland) and the reasonable storage stops along the route. It is the modern standard for any global marine cargo policy and the practical materialisation of the principle of continuity of cover.