Within the freight industry, there are a variety of different options when it comes to transporting a shipment from A to B. When you’re planning how to send or receive a shipment, one of the first decisions you’ll need to make is the method of transportation. For example, will you opt for land, sea or air? However, after you’ve chosen the most suitable method of freight transportation, you may need to consider other options for your shipment.
As with many different processes, freight services involve a lot of terminology that is specific to the industry. In this guide, we explain the meaning behind some of the abbreviated terms that are frequently used in freight services, such as DDP, DDU, LCL and COD.
What is a DDP shipment?
DDP stands for delivery duty paid – a delivery agreement where the seller or sender of the shipment accepts responsibility for all the fees involved with the shipment’s delivery. This includes the fee for getting the shipment into the destination country, as well as any import fees, export fees and taxes. The seller can choose to charge the buyer for these fees by adding them to the overall invoice.
An alternative to this is delivery duty unpaid (DDU), which means that the buyer will be contacted by the relevant customs office when the shipment arrives. At this point, it will be up to them to pay any charges or taxes to receive the shipment.
What is an LCL shipment?
Not all shipments completely fill the shipping container they’re being transported in. When this happens, the shipment is recognised as LCL, or less than container load. Shipping containers are often 20 or 40 feet in length, so it’s to be expected that some loads simply won’t need every inch of space. Freight forwarders will be keen to make the most of the space on sea freight ships. The solution to this problem is often to consolidate several different shipments into one container.
You may also have heard of full container load or FCL. This is the opposite to LCL, where the shipment has completely filled the shipping container to maximum capacity. Although it’s important for a freight forwarder to be aware of whether a shipment is LCL or FCL to get the best out of the space, these terms are also important for other reasons. For example, it will affect the cost of the freight services, as the person who is responsible for it will either need to pay the cost of transporting the shipment or, if the shipment takes up an entire container, the cost of transporting the whole shipping container.
What is a COD shipment?
Also known as cash on delivery or freight collect, collect on delivery (COD) is where the delivery driver that gets the shipment to the door of the person or organisation who ordered it is required to take the payment for it. You would often find a request to use this method of payment on an invoice or bill. It sometimes only refers to the shipment by itself with everything else paid separately, but it is possible to have all freight fees, delivery charges, taxes and custom fees included in a COD instruction.
When the delivery driver approaches the buyer to accept payment in exchange for the shipment, they would usually take the payment in cash or a cheque. CODs are appealing for situations where the buyer doesn’t want to pay for the shipment in advance and the seller doesn’t feel comfortable delivering the shipment until it’s been paid for.
There are advantages to CODs, such as the benefit of delaying a payment until a later date and having more security around tracking the shipment throughout the transportation process. However, it’s rare for a COD to be used as many delivery drivers don’t want the responsibility of accepting payments. Also, as taking payment during delivery is time consuming, it can be expensive to add a COD instruction to a delivery, so sellers will tend to use an alternative option.