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FILO, FIFO, LIFO, LILO: A Complete Guide to Sea Transport Terms
Greetings, I am Alexey Morozov, the leading specialist in international logistics at «WestComTrans». In my daily practice, I regularly face the need to choose the optimal conditions for sea transport for our clients.
The correct choice of freight conditions is not just a formality, but a strategic decision that directly affects the distribution of responsibility, cost, and efficiency of the entire supply chain. Depending on the chosen conditions, not only the price changes significantly, but also the responsibility of the parties for loading and unloading operations, as well as obligations for the execution of import and export procedures.
In international logistics, we operate with four main sea freight conditions: FIFO, LIFO, FILO, and LILO. Each of them has its unique characteristics and areas of application, which I will discuss in detail in this article so that you can make informed decisions when organizing sea transport.
What is FIFO (Free In and Free Out)
Definition and Principle of FIFO
FIFO (Free In and Free Out) is a sea freight condition where the customer separately pays for transportation services and separately for loading and unloading operations both at the port of departure (OTHC – Origin Terminal Handling Charges) and at the port of destination (DTHC – Destination Terminal Handling Charges). Under these conditions, the charterer is responsible for the cargo exclusively during the transportation stage, while loading and unloading are outside their scope of responsibility.
In the practice of «WestComTrans», we often apply FIFO (Free In/Free Out) conditions when working with clients who have their own agreements with terminals for loading and unloading or when the client prefers to independently control these processes.
It is important to emphasize that delivery conditions and transportation conditions are inseparably linked. The FOB (Free On Board) conditions from the set of Incoterms rules provide that the cost of the goods includes all expenses, including loading onto the vessel at the port of departure. Under such delivery conditions, both FIFO and FILO (Free In/Liner Out) can be applied, but not LIFO (Liner In/Free Out) and LILO (Liner In/Liner Out), since loading is already included in the cost of the goods according to the FOB conditions.
The choice between FIFO and FILO regulates what exactly is included in the cost of sea transportation. Even when using FIFO conditions, «WestComTrans» still expedites the cargo, as the company has contracts with the port and sea lines for the payment of terminal charges at the port of destination (DTHC – Destination Terminal Handling Charges).
Advantages and Disadvantages of FIFO
From years of experience working with various types of cargo, I have identified the following advantages of FIFO:
- Full client control over loading and unloading processes;
- Ability to choose optimal loading and unloading companies;
- Flexibility in planning and organizing terminal handling;
- Potential savings with long-term contracts with terminals.
However, this method also has certain disadvantages:
- Need to conclude additional contracts with terminals;
- Risk of delays with inefficient organization of loading and unloading operations;
- Additional administrative costs for process management;
- Responsibility for executing corresponding export/import procedures.
What is LIFO (Liner In and Free Out)
Definition and Principle of LIFO
LIFO (Liner In and Free Out) is a sea freight condition where the loading and unloading operations at the port of departure (OTHC) are included in the carrier’s service payment, while the unloading at the port of destination (DTHC) is paid separately by the client or the receiving party.
In my practice at «WestComTrans», I observe the application of this method mainly when working with clients who have well-established connections at the port of destination or when the cargo recipient prefers to organize the unloading independently.
LIFO conditions can be correlated with CIF (Cost, Insurance and Freight) conditions from the set of international Incoterms rules, where the seller pays for delivery to the port of destination, and the buyer takes on the expenses for unloading and further transportation.
Advantages and Disadvantages of LIFO
Based on our experience in organizing sea transport, I highlight the following advantages of LIFO:
- Simplified loading organization for the sender (included in the carrier’s services);
- Clear distribution of responsibility between the sender and the recipient;
- Recipient’s control over the unloading process at the port of destination;
- Cost optimization if the recipient has favorable conditions at the port of destination.
The disadvantages of the LIFO method include:
- Need for the recipient to conclude contracts with the destination terminal;
- Potential difficulties if the recipient lacks experience working with the local terminal;
- Additional administrative costs for managing the unloading process;
- Recipient’s responsibility for executing import procedures.
What is FILO (Free In and Liner Out)
Definition and Principle of FILO
FILO (Free In and Liner Out) is a sea freight condition where loading at the port of departure is carried out at the expense of the client/customer, and unloading at the port of destination is already included in the cost of the carrier’s services. These conditions are most often applied when transporting ISO containers.
In my practice at «WestComTrans», this method is often used when the sender has their own loading capabilities or favorable conditions at the port of departure, and the recipient prefers that all formalities at the port of destination be included in the total cost of transportation.
FILO conditions are identical in essence to the FOB (Free On Board) conditions from the international Incoterms rules, which assume that the seller bears the costs and risks until the moment the goods are placed on board the vessel.
Advantages and Disadvantages of FILO
Based on experience working with various types of sea transport, I highlight the following advantages of FILO:
- Sender’s control over the loading process;
- Simplified cargo receipt for the recipient (unloading included in the carrier’s services);
- Clear distribution of responsibility between the parties;
- Cost optimization if the sender has favorable conditions at the port of departure.
Among the disadvantages of the FILO method, the following should be noted:
- Need for the sender to conclude contracts with the departure terminal;
- Sender’s responsibility for executing export procedures;
- Potential delays with inefficient organization of loading;
- Limited recipient control over the unloading process.
Practical Examples of Applying Sea Transport Conditions
Examples of FIFO and LIFO Application
In my practice at «WestComTrans», there was a demonstrative case of applying FIFO when organizing the transportation of industrial equipment from Hamburg to St. Petersburg. Our client, a large manufacturer, had long-term contracts with terminals in both ports and preferred to organize loading and unloading operations independently. This allowed saving about 15% of the total transportation cost and ensured especially careful handling of sensitive equipment.
Another example is the application of LIFO when organizing the transportation of textile products from Shanghai to Novorossiysk. The Chinese manufacturer worked with a liner service that included loading at the port of departure, and the Russian importer had their own terminal service in Novorossiysk. Such a distribution of responsibility allowed optimizing costs and speeding up the customs procedures at the port of destination, as the importer could start the formalities even before the ship’s arrival.
Examples of FILO and LILO Application
Last year, our company «WestComTrans» organized the transportation of automobile parts from Rotterdam to Vladivostok under FILO conditions. The European exporter had their own logistics service at the port of departure and preferred to organize loading independently, while the Russian importer had no experience working with the Vladivostok port and preferred that unloading be included in the carrier’s services. Such a distribution of responsibility allowed reducing the total delivery time by 5 days.
An example of LILO application is the transportation of pharmaceutical products from Barcelona to Odessa organized by us. The client, a pharmaceutical company, had no experience in organizing sea transport and preferred to receive a comprehensive service that included all stages of transportation. Despite the higher total cost, this approach allowed minimizing the risks of cold chain disruption and ensured compliance with all regulatory requirements for the transportation of medicinal products.
What is LILO (Liner In and Liner Out)
Definition and Principle of LILO
LILO (Liner In and Liner Out) is a sea freight condition where the carrier includes in the cost of their services the expenses from the moment of transferring the goods/cargo at the port of departure to the unloading of this cargo at the port of destination. That is, the customer does not need to additionally pay for loading and unloading operations neither at the port of departure (OTHC) nor at the port of destination (DTHC).
In the practice of «WestComTrans», we apply this method for clients who prefer to receive a comprehensive “turnkey” service without the need to conclude additional contracts with terminals and organize loading and unloading operations.
LILO conditions can be conditionally correlated with DAT (Delivered at Terminal) conditions from the Incoterms rules, where the seller is obliged to deliver the goods, pay all transportation costs, including loading, unloading, and terminal handling, and transfer the goods to the buyer at the agreed terminal (for example, at the port, warehouse, or railway platform). After the goods are placed in the terminal, all further risks and costs are transferred to the buyer.
Advantages and Disadvantages of LILO
Based on the experience of organizing sea transport, I highlight the following advantages of LILO:
- Maximum simplification of transport organization for the client;
- Single responsibility of the carrier for the entire transportation process;
- Minimal administrative costs for the client;
- Predictability of total transportation costs.
The disadvantages of the LILO method include:
- Usually higher total service cost;
- Limited client control over loading and unloading processes;
- Potentially less flexible approach to organizing terminal handling;
- Dependence on the efficiency of the carrier’s work with terminals.
Comparative Characteristics of Sea Transport Conditions
In our daily work at «WestComTrans», we regularly analyze various transport conditions to choose the optimal option. Below is a comparative table that I compiled based on years of experience in organizing sea transport:
| Criteria | FIFO (Free In and Free Out) | LIFO (Liner In and Free Out) | FILO (Free In and Liner Out) | LILO (Liner In and Liner Out) |
|---|---|---|---|---|
| Loading at the port of departure | Paid separately by the client | Included in the freight cost | Paid separately by the client | Included in the freight cost |
| Unloading at the port of destination | Paid separately by the client | Paid separately by the client | Included in the freight cost | Included in the freight cost |
| Correspondence to Incoterms | Close to FOB | Close to CIF | Close to FOB | Close to CPT |
| Responsibility for export formalities | Client | Carrier | Client | Carrier |
| Responsibility for import formalities | Client | Client | Carrier | Carrier |
| Freight cost | Lowest | Medium | Medium | Highest |
| Administrative burden on the client | High | Medium | Medium | Low |
Practical Examples of Applying Maritime Transport Conditions
Examples of Applying FIFO and LIFO
In my experience at “WestComTrans,” there was a notable case of applying FIFO in organizing the transportation of industrial equipment from Hamburg to St. Petersburg. Our client, a major manufacturer, had long-term contracts with terminals at both ports and preferred to organize the loading and unloading operations independently. This allowed for savings of about 15% of the total transportation cost and ensured particularly careful handling of sensitive equipment.
Another example is the application of LIFO in organizing the transportation of textile products from Shanghai to Novorossiysk. The Chinese manufacturer worked with a liner service that included loading at the port of departure, while the Russian importer had its own terminal service in Novorossiysk. This distribution of responsibilities allowed for cost optimization and accelerated customs clearance procedures at the destination port, as the importer could begin documentation before the vessel’s arrival.
Examples of Applying FILO and LILO
Last year, our company “WestComTrans” organized the transportation of automotive parts from Rotterdam to Vladivostok under FILO conditions. The European exporter had its own logistics service at the port of departure and preferred to organize the loading independently, while the Russian importer lacked experience with the Vladivostok port and preferred the unloading to be included in the carrier’s services. This distribution of responsibilities allowed for a reduction in total delivery time by 5 days.
How to Choose the Optimal Maritime Transport Condition
Factors Influencing the Choice of Condition
In my practice at “WestComTrans,” I am guided by the following key factors when choosing the optimal maritime transport condition:
- The client’s agreements with terminals at ports of departure and destination
- The client’s experience in organizing loading and unloading operations
- Requirements for control over loading and unloading processes
- The need to optimize costs at certain stages of transportation
- Customs clearance specifics in the countries of departure and destination
- Specific cargo handling requirements
- Preferences for the distribution of responsibilities between parties
Each of these factors can be decisive when choosing between FIFO, LIFO, FILO, and LILO. For example, if the client has their own terminal services at both ports, it makes sense to choose FIFO, while in the absence of experience with maritime transportation, LILO would be optimal.
Recommendations for Choosing the Optimal Condition
Based on many years of experience at “WestComTrans,” I have developed the following recommendations for choosing maritime freight conditions:
| Situation | Recommended Condition | Justification |
|---|---|---|
| The client has experience and agreements at both ports | FIFO | Allows for maximum utilization of own capabilities and reduces overall cost |
| The client has experience only at the port of departure | FILO | Optimal distribution of responsibilities considering the client’s competencies |
| The client has experience only at the port of destination | LIFO | Allows leveraging the client’s advantages at the port of destination |
| The client has no experience in maritime transportation | LILO | Minimizes risks and administrative burden on the client |
| Special control over loading is required | FIFO or FILO | The client independently organizes loading and controls the process |
| Special control over unloading is required | FIFO or LIFO | The client independently organizes unloading and controls the process |
| Priority is cost minimization | Depends on the specific situation | A comparative analysis considering all factors is required |
| Priority is risk minimization | LILO | Single carrier responsibility for the entire process |
Legal Aspects and Documentation
Documentation Requirements
In my practice at “WestComTrans,” special attention is paid to the correct documentation under various transport conditions. Each condition requires a specific set of documents:
Mandatory for all types of transport:
- Bill of Lading with clear indication of freight conditions (FIFO, LIFO, FILO, or LILO)
- Commercial Invoice
- Packing List
- Insurance Certificate
When using FIFO, the following are additionally required:
- Contracts with terminals at ports of departure and destination
- Documents confirming payment of terminal handling charges (OTHC and DTHC)
- Export and import documents
For LIFO, the following are necessary:
- Confirmation of OTHC inclusion in freight cost
- Contract with terminal at the destination port
- Documents confirming payment of DTHC
- Import documents
For FILO, the following are required:
- Contract with terminal at the port of departure
- Documents confirming payment of OTHC
- Confirmation of DTHC inclusion in freight cost
- Export documents
For LILO, it is usually sufficient to have:
- Confirmation of OTHC and DTHC inclusion in freight cost
- General contract for comprehensive transportation service
Special attention should be paid to filling out the Bill of Lading. Freight conditions must be clearly stated in the relevant section to avoid misunderstandings and disputes.
Legal Regulation
Maritime transport is regulated by several international conventions, among which the Hague Rules, Hague-Visby Rules, and Hamburg Rules are key. In my work at “WestComTrans,” I always consider these regulations when processing documentation.
As noted by Mikhail Vorontsov, an expert in maritime law: “Proper documentation of freight conditions is critically important in disputes. About 65% of legal proceedings in maritime transport are related to inaccuracies in documentation or discrepancies between actual distribution of responsibilities and what is stated in the documents.”
To minimize legal risks, at “WestComTrans,” we always clearly record the chosen transport condition in all accompanying documents and coordinate it with all participants in the logistics chain.
Conclusion
Choosing the optimal maritime transport condition is one of the key factors in successful logistics. In my practice at “WestComTrans,” I am daily convinced that a well-chosen method of freight (FIFO, LIFO, FILO, or LILO) allows for significant cost optimization, clear distribution of responsibilities between parties, and risk minimization.
Each of the conditions discussed has its advantages and limitations, so there is no one-size-fits-all solution. I recommend approaching the choice individually, taking into account the specifics of the cargo, the experience of the transport participants, and the characteristics of the ports of departure and destination.
For non-standard cargo or complex routes, it is always advisable to consult with specialists. At “WestComTrans,” we are ready to offer an optimal solution for any logistical task, based on many years of experience and a deep understanding of the specifics of international maritime transport.
Article Author:
Alexander Morozov, Logistician at WestComTrans
Last Publication Date: 10.05.2025
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