In a quotation for container shipping, it is common to see a line like FI Shanghai LO Vladivostok or a note stating that rates are quoted LIFO. The letters F and L designate port charges: loading and unloading the container to and from the vessel. Confusing these terms means receiving an unexpected invoice for OTHC or DTHC.
The F and L Rule in Two Minutes
Liner Terms are not warehouse FIFO/LIFO inventory accounting methods, but abbreviations used in ocean freight quotations. Each four-letter term consists of two In/Out pairs: loading onto the vessel and unloading from the vessel at the port.
F (Free) means the operation is not included in the freight rate; it is arranged and paid for by the customer. L (Liner) means the operation is already included in the carrier's price. The first two letters refer to the port of origin, and the last two refer to the port of destination. This makes it instantly clear in the quote what you are paying the carrier for and what must be settled separately.
The mnemonic is simple: if a term starts with F (FI or FO), the corresponding port operation remains your responsibility. If it starts with L (LI or LO), the shipping line covers the cost.
Four Ocean Shipping Terms
LILO — Liner In Liner Out
The full service cost includes sea freight with surcharges, as well as container loading and unloading at both ports. The carrier oversees all logistics operations along the route. Typically, the rate includes basic terminal handling charges: OTHC at the port of origin and DTHC at the port of destination (Terminal Handling Charge at both ports).
LIFO — Liner In Free Out
Loading onto the vessel (OTHC) is included in the price, while unloading at the port of destination is handled by the consignee. This is suitable for contracts under Incoterms CIF and CFR: the seller pays for delivery including loading on board, while the buyer covers unloading costs. Food import deals are frequently concluded on CIF terms: the seller settles ocean freight and loading, leaving DTHC to the importer.
FILO — Free In Liner Out
Loading at the port of origin is excluded from the rate, while unloading (DTHC) is included. Goods from Asia are often purchased under Incoterms FOB: liability transfers to the buyer once the cargo is loaded on board, which closely aligns with FILO. Base ocean freight rates are most commonly quoted in the format FI Shanghai LO Vladivostok. When shipping from China under FILO, the shipper pays for loading in Shanghai, while unloading at the Port of Saint Petersburg is included in the freight.
FIFO — Free In Free Out
The price covers ocean freight only, excluding loading at the port of departure and unloading at the destination port. All port handling operations are the responsibility of the client. This is advantageous if you have trusted contractors at the ports and wish to control terminal expenses directly.
CY/CY Terms and the Container Yard
CY stands for Container Yard, an area or terminal within a port where containers are stored before loading onto a vessel or after discharge. Bills of lading often display CY/CY or a note following the port name, for example Houston, TX CY.
Under CY/CY, the ocean carrier's liability begins at the container yard of the loading port and ends at the CY of the discharge port. Pre-carriage to the origin terminal and on-carriage from the destination terminal are arranged by the client. The carrier is responsible for transport between yards, ocean freight, and vessel operations.
In practice, a container for export customs clearance is sometimes collected outside the CY, requiring transport to the yard at extra cost. The same applies to imports when a container is transferred to another facility for customs inspection or bonded storage. If CY/CY is indicated on the bill of lading, the risks and costs of such movements are borne by the shipper or consignee.
Comparison Table
| Term | Loading | Unloading | Included in Freight | When Appropriate |
|---|---|---|---|---|
| FILO | Client | Carrier | Unloading only | You have a contractor at the origin port and need full discharge in the RF |
| LILO | Carrier | Carrier | Loading and unloading | You need full service and a transparent total invoice |
| LIFO | Carrier | Client | Loading only | CIF/CFR contract where you plan DTHC separately |
| FIFO | Client | Client | Ocean freight only | Own agents at both ports, minimum carrier rate |
| CY/CY | Client up to CY | Client after CY | Between terminals | Comprehensive line service from yard to yard |
Connection with Incoterms FOB, CIF, and CFR
Liner Terms supplement but do not replace Incoterms. The sales contract specifies FOB, CIF, or CFR, determining who insures the cargo and where liability transfers. A freight forwarder's quote simultaneously indicates FILO, LIFO, or LILO, defining what is covered by the sea freight rate.
A critical mistake importers make is comparing quotes with different Liner Terms as if they were identical. LILO is always more expensive than FIFO on paper, but you will not receive an unexpected DTHC invoice on the final day. FILO and FIFO are beneficial when you have your own contractors at ports; LILO is preferred when you need to minimize risks and keep all port operations with a single carrier.
How to Choose Terms and Why You Need a Freight Forwarder
Choosing between FILO, LILO, LIFO, and FIFO depends on total costs, control over handling operations, and available resources at the ports. FILO is frequently chosen by exporters with access to loading in Asia; LILO is ideal for importers seeking a single invoice with no surprises; LIFO fits CIF/CFR agreements; FIFO is optimal for experienced FEA participants with agents at both ends of the route.
In practice, it is best to first verify the Liner Terms in the quote against the Incoterms rule in the contract, then confirm whether OTHC and DTHC are covered and ensure charges like DDF, DOC, or SEC are not billed on top of an agreed LILO rate. Correctly understanding abbreviations in a freight quote saves not just small percentages, but substantial expense items that can easily be missed upon initial review.
At TransGID, we clarify delivery terms before signing the agreement: clients clearly see who covers loading in Shanghai, who pays DTHC in Vladivostok or Saint Petersburg, and how this correlates with FOB or CIF in the supply agreement. You do not need to navigate ocean logistics alone: simply provide your contract and shipping line quotation, and we will align the terms and recommend an optimal solution tailored to your route, container type, and budget.
Submit a request for calculation: we will analyze your quotation line by line and select the best terms to ensure your final invoice matches your exact expectations.