A freight rate is not meaningful without its cargo-handling basis. Two offers at the same dollars per metric ton can produce very different voyage results when one includes terminal handling and the other leaves those costs to the charterer.
Core freight terms
| Term | Loading cost | Discharging cost | Practical meaning |
|---|---|---|---|
| FIOST | Charterer | Charterer | Free In and Out, Stowed and Trimmed. Cargo handling, stowage and trimming are outside the owner's freight responsibility, subject to wording. |
| FILO | Charterer | Owner | Free In, Liner Out. Loading is for charterer's account; discharge is included on a liner basis. |
| LIFO | Owner | Charterer | Liner In, Free Out. Loading is included; discharge is for charterer's account. |
| LILO | Owner | Owner | Liner In, Liner Out. Loading and discharging are included on the agreed liner basis. |
Why the exact wording matters
The abbreviations are commercial shorthand, not complete clauses. The recap should clarify who arranges and pays stevedores, cranes, grabs, shore equipment, dunnage, lashing, securing, stowage, trimming, taxes and overtime. Local terminal tariffs can divide these charges differently from the parties' general expectation.
For bulk cargo, trimming can affect safety, stability and cargo quantity. For bagged or project cargo, labour intensity, gear requirements and lashing can dominate the handling cost. The chosen term should therefore match both the cargo form and the operational plan.
How the terms affect a freight comparison
To compare offers, bring them to the same cost basis. A FILO rate may look higher than a FIOST rate because the owner is carrying discharge cost. The broker should estimate the included operation, add or remove it consistently and then compare the net voyage contribution.
- Confirm quantity and freight unit.
- Identify which operations are included in each quote.
- Obtain realistic port and stevedoring estimates.
- Check vessel gear and shore-equipment requirements.
- Normalize commission and address commission.
- Compare the resulting net revenue or time-charter equivalent.
Common mistakes
- Writing FIO instead of FIOST while assuming stowage and trimming are excluded.
- Comparing liner and free terms without adjusting handling costs.
- Ignoring overtime, shifting, barging or compulsory equipment.
- Assuming a port's customary liner charge includes every terminal item.
- Failing to align the recap wording with the proforma disbursement account.