In a commercial offer for container shipping, it's easy to see the line FI Shanghai LO Vladivostok or a note that rates are given LIFO. The letters F and L are responsible for port expenses — loading and unloading the container from the ship. Mixing up the condition means getting a bill for OTHC or DTHC in addition to the expected amount.
The rule of F and L in two minutes
Liner Terms are not warehouse FIFO/LIFO from inventory accounting, but abbreviations for sea quotes. Each term of four letters consists of two pairs In/Out — loading onto the ship and unloading from the ship at the port.
F (Free) — the operation is not included in the freight rate, it is organized and paid for by the client. L (Liner) — the operation is already included in the carrier's cost. The first two letters refer to the port of departure, the second ones — to the port of destination. So in the quote you can immediately see what you are paying the carrier for and what will have to be closed separately.
The mnemonics are simple — if the word starts with F (FI or FO), the corresponding port operation remains on your side. If it starts with L (LI or LO), the line takes the expense upon itself.
Four conditions for sea delivery
LILO — Liner In Liner Out
The full cost of the service includes sea freight with additional surcharges, loading and unloading of the container at both ports. The carrier controls all logistics operations on the route. Usually, the rate includes basic terminal fees OTHC at the port of departure and DTHC at the port of destination — Terminal Handling Charge at both ports.
LIFO — Liner In Free Out
Loading onto the ship (OTHC) is included in the price, unloading at the port of destination is on the side of the recipient. Suitable for contracts on CIF and CFR Incoterms terms — the seller pays for delivery with loading on board, and the buyer bears the costs of unloading. Food import transactions are often concluded on CIF — the seller covers sea freight and loading, DTHC remains with the importer.
FILO — Free In Liner Out
Loading at the port of departure is not included in the rate, unloading (DTHC) is included. Goods from Asia are often bought under FOB Incoterms — responsibility passes to the buyer from the moment the cargo is placed on board the ship, and this is close to FILO. Basic rates for sea transportation are most often given in the format FI Shanghai LO Vladivostok. When shipping from China under FILO, the sender pays for loading in Shanghai, and unloading at the port of St. Petersburg is included in the freight.
FIFO — Free In Free Out
The cost only includes sea freight — without loading at the port of departure and without unloading at the port of destination. All port operations fall on the client. It's profitable if you have trusted contractors in the ports and you want to control terminal expenses yourself.
CY/CY condition and container yard
CY stands for Container Yard — a container area or warehouse on the port territory where containers are stored before loading on the ship or after unloading. The bill of lading contains the entry CY/CY or a note after the port name, for example Houston, TX CY.
With CY/CY, the responsibility of the sea carrier starts at the container yard of the loading port and ends at the CY of the unloading port. The client organizes the delivery of the container to the departure terminal and the pick-up after the arrival terminal. The carrier is responsible for transportation between the yards, sea freight and operations with the ship.
In practice, the container for export customs clearance is sometimes received not in CY, but at another point — then it is taken to the site for extra money. The same happens with import when the container is moved to another warehouse for inspection or temporary storage. If the bill of lading shows CY/CY, the risks and costs of such movements are borne by the shipper or consignee.
Comparative table
| Condition | Loading | Unloading | In the freight | When appropriate |
|---|---|---|---|---|
| FILO | Client | Carrier | Only unloading | There is a contractor at the port of departure, full unloading in the Russian Federation is needed |
| LILO | Carrier | Carrier | Loading and unloading | Full service and transparent final bill needed |
| LIFO | Carrier | Client | Only loading | CIF/CFR contract, DTHC is planned separately |
| FIFO | Client | Client | Sea only | Own agents at both ports, minimum line rate |
| CY/CY | Client to CY | Client after CY | Between terminals | Integrated line from yard to yard |
Connection with Incoterms FOB, CIF and CFR
Liner Terms complement, but do not replace Incoterms. The purchase and sale contract specifies FOB, CIF or CFR — who insures the cargo and where the responsibility lies. The forwarder's quote параллельно indicates FILO, LIFO or LILO — what is included in the sea rate.
In my opinion, the main mistake of the importer is to compare two quotes with different Liner Terms as equal. LILO is always more expensive than FIFO on paper, but in the first case you will not receive a separate bill for DTHC on the last day. FILO and FIFO are profitable with their contractors at the ports; LILO is when you need to minimize risks and keep all port operations with one carrier.
How to choose a condition and why you need a freight forwarder
The choice between FILO, LILO, LIFO and FIFO depends on the cost, control over operations and your resources at the ports. FILO is often taken by exporters with access to loading in Asia; LILO by importers who need a single bill without surprises; LIFO by transactions on CIF/CFR; FIFO by experienced FEA participants with agents at both ends of the route.
In practice, I first check the Liner Terms in the rate with the basis of Incoterms in the contract, then check if OTHC and DTHC are included and if there is no DDF, DOC or SEC on top of the promised LILO. A correctly read abbreviation in the freight line saves not percentages, but a separate item of expenses that is easy to miss at first glance at the price.
At TransGID, we decipher the terms of delivery before signing the application — the client sees who pays for loading in Shanghai, who closes DTHC in Vladivostok or St. Petersburg, and how it fits with FOB or CIF in the agreement with the supplier. There is no need to understand sea logistics yourself — it's enough to bring the contract and the commercial offer of the line, and we will compare the terms and offer an option for your route, container type and budget.
Leave a request for a calculation — we will analyze your rate line by line and select a condition under which the total amount will match what you expect to see in the closing documents.