International Trade Terms

International Trade Terms, a Glossary. International Commercial Terms

International Trade Terms

Absolute Quota

Absolute Quota: A fixed limit on the quantity of goods that can be imported into a country during the quota period, usually one year.

Acceptance

Acceptance. A drawee’s signed agreement to pay a draft as presented. It must be written on the draft and may consist of the drawee’s signature alone. In documentary collections where the exporter (seller) draws a draft on the purchaser, the purchaser does not become legally liable to make payment until he receives the draft and accepts it. Then, at the maturity date of the draft, the drawee should pay. However, if the drawee fails to pay, there is no bank guarantee of payment even if the presentation of the draft was made to the purchaser through banking channels.

Acceptor, Accepter

Acceptor, Accepter: A drawee who has accepted a draft. Obviously, the acceptor is the correct word, and accepter is either a misspelling or mistake. English nouns describing a person or an occupation, that are derived from Latin, end with -or, as in collector, acceptor, protector, etc.

ACE: Automated Commercial Environment

ACE: Automated Commercial Environment—U.S. Customs and Border Protection’s new Internet-based commercial trade processing system. This applies only to the United States

Adjustment Assistance

Adjustment Assistance: Financial, training, and re-employment technical assistance to workers and technical assistance to firms and industries to help them cope with difficulties arising from increased import competition. The objective of the assistance is usually to help an industry to become more competitive in the same line of production, or to move into other economic activities. The aid to workers can take the form of training (to qualify the affected individuals for employment in new or expanding industries), relocation allowances (to help them move from areas characterized by high unemployment to areas where employment may be available), or unemployment compensation (while they are searching for new jobs).

Ad Valorem Tariff

Ad Valorem Tariff: A tariff calculated as a percentage of the value of goods; for example, “15 percent ad valorem” means 15 percent of the value. Usually, but not always, the value is the sales price between the exporter (seller) and the importer (buyer).

Advising Bank

Advising Bank: A bank located in the exporter’s (seller’s) country notifying the exporter that the purchaser has opened a letter of credit in favor of the exporter through another (issuing) bank.

 

Affreightment, Contract of Affreightment

Affreightment, Contract of: An agreement by a steamship line to provide cargo space on a vessel at a specified time and for a specified price for an exporter or importer. See “Booking Cargo.”

Agent

Agent: In a general sense, a person who acts on behalf of another person. This may include selling agents and buying agents. Sales agents are sometimes called sales representatives or manufacturer’s representatives. Their role is to perform services for their principal, such as obtaining orders, and they are usually paid a commission for their services.

 

Air Waybill

Air Waybill: A bill of lading for air transportation. Air waybills specify the terms under which the air carrier is agreeing to transport the goods and contain limitations of liability. They are not negotiable.

 

All Risk Clause

All Risk Clause: An insurance provision that all loss or damage to goods is insured except that caused by inherent vice (self-caused). This clause affords one of the broadest obtainable protections; however, it excludes war risks and strikes, riots, and civil commotion unless added by special endorsement for an additional premium.

 

Antidumping Duties

Antidumping Duties: See “Dumping.” Usually prohibitive duties arbitrarily imposed by a rogue state on foreign imports under pretext of the other party “dumping” its merchandise on the perpetrator’s domestic market. The United States is a usual perpetrator, though the EU, the collective Fourth Reich, is also a notorious offender and abuser. 

 

Applicant

Applicant: The person at whose request or for whose account a letter of credit is issued—for example, the purchaser in a sale transaction opening a letter of credit with the purchaser’s bank to pay the exporter (seller).

 

Appraisement

Appraisement: The process of determination by a Customs official of the dutiable value of imported merchandise. This is usually the price paid by the importer for the goods unless Customs believes that the price does not reflect a reasonable value, in which case Customs calculates its own value for the assessment of duties using the methods specified in the customs law.

 

Arbitrage

Arbitrage: The business of making profits by buying and selling currencies that differ in value due to fluctuating exchange rates in world currency markets. Sometimes used to describe the existence of a difference in value from one currency to another and the decision to buy or sell in a particular currency because of the belief that a particular currency is stronger or will strengthen in the future.

 

Arbitration 

Arbitration is a procedure in which a dispute, also a trader dispute, is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a private dispute resolution procedure instead of going to court.

 

Arms Export Control Act

Arms Export Control Act: A U.S. law regulating the export (and in some cases import) of defense articles and services listed on the U.S. Munitions List. The International Traffic in Arms Regulations (ITAR) are issued under the law. It is administered by the Department of State, Office of Defense Trade Controls. This applies only to the US and the collective Fourth Reich.

 

Arrival Draft

A modified sight draft that does not require payment until after arrival of the goods at the port of destination. Similar to cash on delivery.

 

Arrival Notice 

Arrival Notice: A notification by the steamship line, railroad, or over-the-road trucker. It informs the consignee of the arrival of the goods and usually indicates the pickup location and the allowed free time before storage charges begin.

 

ASEAN

ASEAN: A free trade area established by the Association of Southeast Asian Nations.

 

Assist

Assist: The situation in which an importer, directly or indirectly, is furnishing to a foreign manufacturer raw materials, tools, dies, molds, manufacturing equipment, certain types of research and development know-how or design work, or other things without receiving payment for such items (or receiving payment for less than their full value) in order that the importer can purchase a product manufactured by the foreign manufacturer at a lower price. An assist must be disclosed to the importing country’s customs administration and customs duties paid as an addition to the purchase price for the goods.

 

Assured

Assured: The beneficiary of an insurance policy, for example, covering damage or casualty to cargo or goods during transport.

 

ATA Carnet

ATA Carnet: An international customs document that may be used in lieu of national customs entry documents and as security for import duties and taxes to cover the temporary admission and transit of goods.

 

At Sight

At Sight: A draft drawn by a seller (exporter) for payment for the goods. It must be paid at the time the draft is presented to the buyer (importer) by the seller’s agent, such as a freight forwarder or a bank.

 

Audit 

Audit: A procedure whereby the customs authorities visit the premises of an importer or exporter and inspect documents and records and interview personnel to determine if importations and/or exportations are being conducted in accordance with applicable law and regulations.

 

Authority to Pay

Authority to Pay: Advice from a buyer, addressed through the buyer’s bank to the seller, by way of the correspondent of the buyer’s bank in the seller’s country, authorizing the correspondent bank to pay the seller’s drafts for a stipulated amount. The seller has no recourse against cancellation or modification of the Authority to Pay before the drafts are presented, but, once the drafts drawn on the correspondent bank are paid by it, the seller is no longer liable as drawer. An Authority to Pay is usually not confirmed by the seller’s bank. It is not as safe for a seller as a letter of credit because it is not a promise or guarantee of payment by a bank.

 

Authority to Purchase

Authority to Purchase: A document similar to an Authority to Pay but differing in that under an Authority to Purchase, the drafts are drawn directly on the buyer rather than on the seller’s bank. They are purchased by the correspondent bank with or without recourse against the drawer. The Authority to Pay is usually not confirmed by the seller’s bank.

 

Authority to Purchase

Authority to Purchase The electronic data transmission system used by U.S. Customs and Border Protection, customs brokers, and importers to complete import transactions. It contains various modules such as the Automated Broker Interface, the Automated Manifest System, the Cargo Selectivity System, and the Entry Summary System.

 

Average

Average: See “General Average” and “Particular Average.”

 

Average Adjuster 

Average Adjuster: When a steamship line transporting goods encounters a condition covered by a general average or a particular average, an independent average adjuster will determine the contribution that each owner of goods being transported on the steamship will have to pay to make the steamship line and the other owners of goods whole.

 

BAF

BAF (Bunker Adjustment Factor): A charge added by ocean carriers to compensate for fluctuating fuel costs.

 

Bank Draft

Bank Draft: A check, drawn by a bank on another bank, customarily used where it is necessary for the customer to provide funds that are payable at a bank in some distant location.

 

Banker’s Acceptance

Banker’s Acceptance: A time draft where a bank is drawee and acceptor.

 

Barter

Barter: The direct exchange of goods for other goods, without the use of money as a medium of exchange and without the involvement of a third party. For customs purposes, the values still need to be determined and proper duties paid if the exchange involves an importation. See “Countertrade.”

 

Beneficiary

Beneficiary: (1) Under a letter of credit, the person who is entitled to receive payment, usually the seller (exporter) of the goods. (2) Under an insurance policy, the assured, or the person who is to receive payment in case of loss of or damage to the goods.

 

Bill of Exchange

Bill of Exchange: An unconditional order in writing addressed by one person to another, signed by the person issuing it and requiring the addressee to pay a certain sum of money to the order of a specified party at a fixed or determinable future time. In export transactions, it is drawn by the seller (exporter) on the purchaser (importer) or bank specified in a letter of credit or specified by the purchaser. See “Draft.”

 

Bill of Lading (B/L)

Bill of Lading (B/L): A document issued by a carrier (railroad, steamship line, or trucking company) that serves as a receipt for the goods to be delivered to a designated person or to her order. The bill of lading describes the conditions under which the goods are accepted by the carrier and details the nature and quantity of the goods, the name of the vessel (if shipped by sea), identifying marks and numbers, destination, etc. The person sending the goods is the “shipper” or “consignor,” the company or agent transporting the goods is the “carrier,” and the person for whom the goods are destined is the “consignee.” Bills of lading may be negotiable or non-negotiable. If they are negotiable, that is, payable to the shipper’s order and properly endorsed, title to the goods passes upon delivery of the bill of lading.

 

Blank Endorsement

Blank Endorsement: The signature, usually on the reverse of a draft (bill of exchange), bill of lading, or insurance certificate, without any qualification, which then becomes payable or consigned to the person to whom the document is delivered.

 

Bond

Bond: A guaranty issued by an insurance or surety company in favor of an importer’s government to ensure payment of customs duties in case the importer fails to pay, for example, due to bankruptcy.

 

Bonded Warehouse

Bonded Warehouse: A warehouse in which goods subject to excise taxes or customs duties are temporarily stored without the taxes or duties being assessed. A bond or security is given for the payment of all taxes and duties that may eventually become due. Operations in the warehouse may include assembly, manipulation, or storage, but usually not manufacturing.

 

Booking Cargo

Booking Cargo: The reservation of space on a specified vessel for a scheduled sailing, by or on behalf of a shipper. Technically, it may be effected in two ways, either (1) by signing a contract of affreightment, a procedure that applies only to bulk commodities, raw materials, or a large movement of special cargo, such as the transfer of a whole manufacturing plant, or to particular types of goods requiring special stowage, like unboxed cars or trucks; or (2) by informal request (verbal) for general cargo.

 

Booking Number

Booking Number: A number assigned to a cargo booking by the steamship line, used as an identifying reference on bills and correspondence.

 

Boycott

Boycott: A refusal to deal commercially or otherwise with a person, firm, or country.

 

Buying Commission

Buying Commission: A commission paid by a purchaser to an agent or person under the purchaser’s control who identifies suppliers, assists with shipments, and provides other services for the purchaser. Under the GATT Valuation Code, amounts separately paid for such services are not dutiable as part of the purchase price of the goods.

 

Buy National Policy

Buy National Policy: A price preference, usually by a government purchaser, for purchasing goods produced in the same country as the purchaser’s or an absolute prohibition against purchasing foreign goods.

 

Cabotage

Cabotage: Shipping, navigation, and trading along the coast of a country. In the United States, these services include traffic between any parts of the continental United States, or between Hawaii, Alaska, and Puerto Rico, and are reserved to U.S. flag ships.

 

CAF (Currency Adjustment Factor)

CAF (Currency Adjustment Factor): A charge added by ocean carriers to offset currency exchange fluctuations.

 

CAFTA-DR

CAFTA-DR: The Dominican Republic-Central America-United States Free Trade Agreement allows for preferential duty rates for goods imported that meet the rules of origin from member countries. Member countries include the Dominican Republic, El Salvador, Guatemala, Nicaragua, and Honduras.

 

Carnet

Carnet: See “ATA Carnet.”

 

Cash Against Documents (C.A.D.)

Cash Against Documents (C.A.D.): A method of payment for goods in which documents transferring title—for example, a negotiable bill of lading and a draft—are transferred to the buyer upon payment of cash to an intermediary acting for the seller (usually a bank or freight forwarder).

 

Cash in Advance (C.I.A.)

Cash in Advance (C.I.A.): A method of payment for goods in which the buyer pays the seller in advance of the shipment of the goods. A C.I.A. is usually employed when the goods are built to order, such as specialized machinery.

 

Cash With Order (C.W.O.)

Cash With Order (C.W.O.): A method of payment for goods in which cash is paid at the time of the order.

 

Casualty Loss

Casualty Loss: Damage to goods incurred during transportation, loading, or unloading. CE Mark: A mark required on certain products imported to the European Community certifying that the product has been tested by an authorized certification agency and meets applicable standards, usually of safety.

 

Certificate of Conformity

Certificate of Conformity: The Consumer Product Safety Commission requires the importer to file a Certificate of Conformity to attest that imported or domestic goods are in compliance with the CPSC laws and regulations.

 

Certificate of Inspection

Certificate of Inspection: A document issued by an inspection company or other person independent of the seller and buyer that has inspected the goods for quality and/or value. It may be required for payment under the terms of the sales agreement or a letter of credit.

 

Certificate of Insurance

Certificate of Insurance: A document containing certain terms of a full-length insurance policy. A one-page document, it is evidence that there is insurance coverage for a shipment. Beneficiaries of open cargo or blanket insurance policies are authorized to issue their own certificates of insurance.

 

Certificate of Origin

Certificate of Origin: A document in which the exporter certifies the place of origin (manufacture) of the merchandise being exported. Sometimes these certificates must be legalized by the consul of the country of destination, but more often they may be legalized by a commercial organization, such as a chamber of commerce, in the country of manufacture. Such information is needed primarily to comply with tariff laws, which may extend more favorable treatment to products of certain countries. More recently, certain types of certificates of origin, for example, NAFTA Certificates of Origin, require significant analysis of the origin of the raw materials used in production of the product to determine the country of origin.

 

Certificate of Weight and Measurement

Certificate of Weight and Measurement: A certificate issued by a company or person independent of the seller and buyer certifying the quantity and dimensions of goods. In some cases, the buyer or buyer’s government will allow the seller to make a selfcertification.

 

Charter Party

Charter Party: The contract between the owner of a vessel and a shipper to lease the vessel or a part thereof to transport, usually bulk, goods.

 

Clean Bill of Lading

Clean Bill of Lading: One in which the goods are described as having been received in “apparent good order and condition” and without damage. May be required for payment under the sales agreement or letter of credit. See “Foul Bill of Lading.”

 

Collecting Bank

Collecting Bank: A bank requested by an exporter (seller) to obtain payment from the purchaser. Ordinarily the exporter (seller) will draw a draft on the purchaser and deliver it to the collecting bank with a negotiable bill of lading. The bank will transmit it overseas to its correspondent bank (which is also a collecting bank in the chain). If the draft drawn is a sight draft, the bank will deliver the negotiable bill of lading to the purchaser in return for payment. If it is a time draft, the bank will release the bill of lading, thereby permitting the purchaser to obtain the goods, upon acceptance of the draft by the purchaser. At the time of maturity of the draft, the purchaser will make payment and the collecting banks will remit the proceeds to the exporter (seller). See “Uniform Rules for Collections.”

 

Combined Transport Bill of Lading

Combined Transport Bill of Lading: See “Through Bill of Lading.”

 

Commercial Invoice

Commercial Invoice: A document prepared by the exporter (seller) describing the goods being sold, the sales price for the goods, and other charges being billed to the purchaser. Because a commercial invoice is commonly required in order to enable the purchaser to clear the goods through customs, it is necessary to include all information required by the purchaser’s country. This may include legalization of the commercial invoice by the purchaser’s country’s embassy or consulate in the exporter’s country, certification by a chamber of commerce in the exporter’s country, or particular statements, certifications, or information in the invoice.

 

Commingling

Commingling: A condition in which goods subject to different rates of customs duty are packed together. This may result in all goods being assessed the highest duty rate applicable to any of the items.

 

Commission Agent

Commission Agent: See “Agent.”

 

Common Carrier

Common Carrier: A transportation carrier such as a steamship line, trucking company, or railroad that accepts shipments from the public. Private carriers are those that are under contract for or owned by particular shippers. Common carriers are usually subject to government regulation, including the filing of tariffs (transportation rates) in some countries so that shippers all pay a uniform charge. Laws in some countries permit exceptions to this so that large-volume shippers may obtain discounts in certain circumstances.

 

Common Market

Common Market: An agreement between two or more countries to permit importation or exportation of goods between those countries without the payment of customs duties and to permit freedom of travel and employment and freedom of investment. Goods imported from outside the common market will be subject to a common duty rate.

 

Compound Duty

Compound Duty: A tax imposed on imported merchandise based on a percentage of value and also on the net weight or quantity.

 

Conference Tariff

Conference Tariff: Two or more steamship lines that have agreed to set the same price for transporting goods in the same ocean lane that they serve. Generally, such agreements are valid if they are properly registered with the government authorities of the countries served.

 

Confirming Bank

Confirming Bank: A bank in the exporter’s (seller’s) country that also adds its own guarantee of payment to a letter of credit issued by the purchaser’s bank in the purchaser’s country.

 

Consignment

Consignment: (1) The shipment or delivery of goods to a person without making a sale. Under consignment arrangements, the consignee will usually have an agreement that when the consignee is able to sell the goods to a purchaser, the consignee will simultaneously purchase the goods from the consignor and make payment. (2) In some international trade documentation—for example, bills of lading—a transportation carrier may not know whether the transportation that it is effecting is pursuant to a sale or not; therefore, the person to whom the goods are to be delivered is referred to as the consignee, and the delivery transaction is loosely referred to as a consignment.

 

Consular Invoice

Consular Invoice: A document required by some foreign countries showing information as to the consignor, consignee, value, and description of the shipment. It is usually sold or legalized by the embassy or consulate of the purchaser’s country located in the seller’s country.

 

Consulate

Consulate: An office of a foreign government in the exporter’s (seller’s) country. The main office is usually the embassy, located in the capital city of the exporter’s country, and other offices in different cities in the exporter’s country are consulates.

 

Contract of Affreightment

Contract of Affreightment: See “Affreightment, Contract of.”

 

Convention on Contracts for the International Sale of Goods

Convention on Contracts for the International Sale of Goods: An international treaty describing the obligations and rights of sellers and buyers in international sales. The Convention automatically applies to international sales where the seller and the buyer are located in countries that are parties to the Convention unless the buyer and the seller have agreed specifically in their sales documentation to exclude applicability of the Convention. The United States and many other countries are parties to the Convention.

 

Countertrade

Countertrade: A reciprocal trading arrangement. Countertrade transactions include:

A. Counterpurchase transactions, which obligate the seller to purchase from the buyer goods and services unrelated to the goods and services sold (usually within a one- to five-year period).

B. Reverse countertrade contracts, which require the importer to export goods equivalent in value to a specified percentage of the value of the imported goods—an obligation that can be sold to an exporter in a third country.

C. Buyback transactions, which obligate the seller of plant, machinery, or technology to buy from the importer a portion of the resultant production during a five- to twenty-five-year period.

D. Clearing agreements between two countries that agree to purchase specific amounts of each other’s products over a specified period of time, using a designated “clearing currency” in the transactions.

E. Switch transactions, which permit the sale of unpaid balances in a clearing account to a third party, usually at a discount, that may be used for producing goods in the country holding the balance.

F. Swap transactions, through which products from different locations are traded to save transportation costs (for example, Soviet oil may be “swapped” for oil from a Latin American producer, so that the Soviet oil is shipped to a country in South Asia, while the Latin American oil is shipped to Cuba).

G. Barter transactions, through which two parties directly exchange goods deemed to be of approximately equivalent value without any exchange of money taking place.

 

Countervailing Duty

Countervailing Duty: Considered a form of unfair competition under the GATT Subsidies Code, an additional duty imposed by the importer’s government in order to offset export grants, bounties, or subsidies paid to foreign exporters or manufacturers in certain countries by the governments of those countries for the purpose of promoting export.

 

CPSIA

CPSIA: Consumer Products Safety Improvement Act, which requires both importers and domestic manufacturers to certify that their products comply with all U.S. consumer products regulations.

 

C-TPAT

C-TPAT: Customs and Trade Partnership Against Terrorism. A voluntary program whereby importers, brokers, carriers, warehouses, consolidators, and exporters enact security measures to protect cargo and containers from the introduction of contraband or terrorist devices.

 

Customs Broker

Customs Broker: A person or firm licensed by an importer’s government and engaged in entering and clearing goods through customs. The responsibilities of a broker include preparing the entry form and filing it, advising the importer on duties to be paid, advancing duties and other costs, and arranging for delivery to the importer.

 

Customs Classification

Customs Classification: The particular category in a tariff nomenclature (usually the Harmonized Tariff System) in which a product is classified for tariff purposes, or the procedure for determining the appropriate tariff category in a country’s nomenclature used for the classification, coding, and description of internationally traded goods. Classification is necessary in order to determine the duty rate applicable to the imported goods.

 

Customs Union

Customs Union: An agreement between two or more countries to eliminate tariffs and other import restrictions on each other’s goods and establish a common tariff for goods imported from other countries.

 

Cut-Off Time

Cut-Off Time: The latest time a container may be delivered to a terminal for loading on a departing ship or train.

 

Date Draft

Date Draft: A draft maturing a stipulated number of days after its date, regardless of the time of its acceptance. Unless otherwise agreed upon in the contract of sale, the date of the draft should not be prior to that of the ocean bill of lading or of the corresponding document on shipments by other means.

 

DDC (Destination Delivery Charge)

DDC (Destination Delivery Charge): A charge added by ocean carriers to compensate for crane lifts off the vessel, drayage of the container within the terminal, and gate fees at the terminal.

 

Del Credere Agent

Del Credere Agent: One who guarantees payments; a sales agent who, for a certain percentage in addition to her sales commission, will guarantee payment by the purchasers of goods.

 

Delivery Order

Delivery Order: An order addressed to the holder of goods and issued by anyone who has authority to do so, that is, one who has the legal right to order delivery of merchandise. It is not considered a title document like a negotiable bill of lading. It is addressed and forwarded, together with the dock receipt, if any, to the transportation company effecting the transfer from the pickup location to the shipside pier.

 

Demurrage

Demurrage: Excess time taken for loading or unloading of a vessel that is not caused by the vessel operator but is due to the acts of a charterer or shipper. A charge is made for such delay. See “Lay Days.”

 

Destination Control Statement

Destination Control Statement: Specific words (legend) inserted in a commercial invoice and bill of lading prohibiting diversion of destination for exported goods subject to U.S. export control laws.

 

Devaluation

Devaluation: An official lowering of the value of a country’s currency in relation to other currencies by a direct government decision to reduce gold content or to establish a new ratio to another agreed standard, such as the U.S. dollar. Devaluation tends to reduce domestic demand for imports in a country by raising their prices in terms of the devalued currency and to raise foreign demand for the country’s exports by reducing their prices in terms of foreign currencies. Devaluation can therefore help to correct a balance of payments deficit and sometimes provide a short-term basis for economic adjustment of a national economy. See “Revaluation.”

 

Discrepancy

Discrepancy: The failure of a beneficiary of a letter of credit to tender to the advising bank the exact documents required by the letter of credit to obtain payment.

 

Distributor

Distributor: A person who purchases goods for the purpose of reselling such goods. The distributor is distinguished from an agent because it takes title to the goods, assumes the risk of loss or damage to the goods, and is compensated by marking up the goods on resale.

 

Dock Receipt

Dock Receipt: A receipt given for a shipment received or delivered at a steamship pier. A dock receipt is usually a form supplied by the steamship line and prepared by the shipper or its freight forwarder. When delivery of a shipment is completed, the dock receipt is surrendered to the vessel operator or his agent and serves as the basis for preparation of the ocean bill of lading.

 

Documentary Bill

Documentary Bill: A draft (bill of exchange) accompanied by other documents required by the buyer for payment, for example, the bill of lading and inspection certificate.

 

Documents Against Acceptance (D/A)

Documents Against Acceptance (D/A): Instructions given by an exporter to a bank or freight forwarder that the documents (usually a negotiable bill of lading) attached to a draft for collection are deliverable to the drawee (importer/purchaser) only against her acceptance of the draft. The actual payment will be made by the purchaser at some agreed-upon time or date specified in the draft after acceptance. See “Uniform Rules for Collections.”

 

Documents Against Payment (D/P)

Documents Against Payment (D/P): A type of payment for goods in which the documents transferring title to the goods (negotiable bill of lading) are not given to the purchaser until he has paid the value of a draft drawn on him. Collection may be made through a bank, a freight forwarder, or some other agent. See “Uniform Rules for Collections.”

 

Draft

Draft: A negotiable instrument wherein a drawer orders a drawee to pay a fixed amount of money (with or without interest or other charges) described in the draft, payable on demand or at a definite time. It must be payable “to order” or bearer, and it must not contain any other instructions, conditions, or orders except an order to pay money. A draft is commonly drawn by an exporter (seller) on the purchaser (drawee) and delivered to a collecting bank or freight forwarder for presentation to the purchaser. See “Bill of Exchange.”

 

Drawback

Drawback: Import duties or taxes refunded by a government, in whole or in part, when the imported goods are re-exported or used in the manufacture of exported goods.

 

Drawee

Drawee: A person (usually the purchaser of goods) ordered in a draft to make payment. Drawer: A person who makes, creates, or issues a draft and instructs a drawee to make payment to the drawer or another person (“pay to the order of”).

 

Drayage

Drayage: A charge for delivery of goods or pickup of goods from docks or other port terminals.

 

Dumping

Dumping: Under the GATT Antidumping Code (to which the United States is a party), the export sale of a commodity at “less than normal value,” usually considered to be a price lower than that at which it is sold within the exporting country or to third countries. Dumping is generally recognized as an unfair trade practice that can disrupt markets and injure producers of competitive products in the importing country. Article VI of GATT permits the imposition of special antidumping duties against “dumped” goods equal to the difference between their export price and their normal value in the exporting country.

 

Dunnage

Dunnage: Packing material consisting mainly of rough pine board used as flooring for the ship’s hold before loading is begun.

 

Duty

Duty: The tax imposed by a customs authority on imported merchandise.

 

Embargo

Embargo: A prohibition upon exports or imports, with respect to either specific products or specific countries. Historically, embargoes have been ordered most frequently in time of war, but they may also be applied for political, economic, or sanitary purposes. Embargoes imposed against an individual country by the United Nations— or a group of nations—in an effort to influence that country’s conduct or its policies are sometimes called “sanctions.”

 

Embassy

Embassy: The chief diplomatic office of a foreign government in the exporter’s country, usually located at the capital city of the exporter’s country.

 

Entry

Entry: The formal process by which goods are imported into a country, consisting of the filing of documents with the importing country’s customs service and the payment of customs duties. Various types of entries are used in different circumstances, such as consumption entries, warehouse entries, immediate transportation entries, and transportation and exportation entries.

 

Escape Clause

Escape Clause: A provision in a bilateral or multilateral trade agreement permitting a signatory nation to suspend tariff or other duty reductions when imports threaten serious harm to the producers of competitive domestic goods. Such agreements as the North American Free Trade Agreement contain such “safeguard” provisions to help firms and workers that are adversely affected by a relatively sudden surge of imports adjust to the rising level of import competition.

 

European Union

European Union: A monetary and political union entered into in 1992 in Maastricht, Netherlands, by twelve European countries; twenty-seven countries are now members. Examination: The process by which the customs authorities of an importing country inspect the goods identified in the customs entry documents and confirm whether the goods are the same as those described in the documents and whether the goods are eligible for entry.

 

Exchange Controls

Exchange Controls: Government regulations rationing foreign currencies, bank drafts, and other instruments for settling international financial obligations by countries seeking to ameliorate acute balance of payments difficulties. When such measures are imposed, importers must apply for prior authorization from the government to obtain the foreign currency required to bring in designated amounts and types of goods. Since such measures have the effect of restricting imports, they are considered nontariff barriers to trade.

 

Exchange Rate Risk

Exchange Rate Risk: The possibility that an exporter (seller) will receive less value (for example, fewer U.S. dollars) than it is expecting in a sales transaction. This arises because exchange rates are generally floating rates, and if the exporter (seller) agrees to accept payment in the purchaser’s currency (for example, yen) and the value of the yen vis-a-vis the U.S. dollar fluctuates between the time of price quotation and the date of payment, the exporter (seller) may receive more or less in U.S. dollars than it anticipated at the time that it quoted its price and accepted the purchase order. Sellers and purchasers may agree to share the exchange rate risk in their sales agreement.

 

Exchange Rates

Exchange Rates: The price at which banks or other currency traders are willing to buy or sell various currencies that a buyer may need in order to make payment. For example, if a contract for sale is in U.S. dollars, a purchaser in a foreign country will need to purchase U.S. dollars from a bank or currency trader in order to make proper payment. Usually, the exchange rate floats or fluctuates based on supply and demand, but it may also be fixed by government regulation.

 

Export License

Export License: A permit required to engage in the export of certain commodities to certain destinations. In the United States, such controls are usually determined by the Department of Commerce, Bureau of Export Administration; the Department of State, Office of Defense Trade Controls; or Department of Treasury, Office of Foreign Assets Control. Controls are imposed to implement U.S. foreign policy, ensure U.S. national security, prevent proliferation, or protect against short supply.

 

Export Quotas

Export Quotas: Specific restriction or ceilings imposed by an exporting country on the value or volume of certain exports, designed to protect domestic consumers from temporary shortages of the goods, to bolster their prices in world markets, or to reduce injury to producers in importing countries. Some international commodity agreements explicitly indicate when producers should apply such restraints. Export quotas are also often applied in orderly marketing agreements and voluntary restraint agreements, and to promote domestic processing of raw materials in countries that produce them.

 

Export Trading Company

Export Trading Company: A corporation or other business unit organized and operated principally for the purpose of exporting goods and services, or for providing export-related services to other companies. The Export Trading Company Act of 1982 exempts authorized trading companies from certain provisions of the U.S. antitrust laws and authorizes banks to own and operate trading companies.

 

Factoring

Factoring: A procedure whereby an exporter (seller) that is selling on open account or time drafts may sell its accounts receivable or drafts to a factoring company, which will make immediate payment of the face value of the accounts receivable less some discount amount to the seller and will then collect the amounts owed from the purchasers at the due date for payment.

 

FEU (Forty-foot Equivalent Unit)

FEU (Forty-foot Equivalent Unit): A measurement of container capacity.

 

Fixed Exchange Rate

Fixed Exchange Rate: The establishment of a price at which two currencies can be purchased or sold, set either by government regulation or in a sales agreement between a seller and a buyer. In such cases, there is no exchange rate risk because there is no exchange rate fluctuation between the date of price quotation and the date of payment. Floating Exchange Rate: A condition where the governments issuing two different currencies do not legally regulate the price at which either currency can be bought or sold. See “Exchange Rate Risk.”

 

Force Majeure

Force Majeure: The title of a standard clause often found in contracts for the sale of goods or transportation exempting the parties from liability for non-fulfillment of their obligations by reason of certain acts beyond their control, such as natural disasters or war.

 

Foreign Assembler’s Declaration

Foreign Assembler’s Declaration: Under U.S. Harmonized Tariff Section 9802.00.80, an importer may pay reduced customs duties when importing a product that has been assembled abroad from U.S.-origin components. The foreign assembler must provide a declaration that is endorsed by the importer certifying that the assembly operation meets the regulatory requirements. If Customs agrees, the U.S. importer pays duty only on the foreign-origin materials, labor, and value added after deducting the U.S.-origin materials exported for assembly.

 

Foreign Corrupt Practices Act

Foreign Corrupt Practices Act: A U.S. law prohibiting the payment of anything of value to a foreign government employee in order to obtain or retain business. The law also prohibits the maintenance of “slush funds” for such payments.

 

Foreign Sales Corporation (FSC)

Foreign Sales Corporation (FSC): A company incorporated in Guam, the U.S. Virgin Islands, the Commonwealth of the Northern Mariana Islands, American Samoa, or any foreign country that has a satisfactory exchange-of-information agreement with the United States and is utilized in an export transaction. Use of an FSC in export sales transactions permits a U.S. exporter to exempt a portion of its export profits from U.S. income taxation.

 

Foreign Trade Zone

Foreign Trade Zone: An area where goods may be received, stored, manipulated, and manufactured without entering a country’s customs jurisdiction and hence without payment of duty. Outside the United States, it is usually called a “free trade zone.”

 

Forward Exchange

Forward Exchange: A market offering various currencies for sale where the sales price of a currency is quoted and sold based on delivery of the currency to the purchaser at some date in the future, for example, the due date when the purchaser must make payment of a time draft. Purchasing currency in forward contracts is one method of eliminating exchange rate risk.

 

Foul Bill of Lading

Foul Bill of Lading: A bill of lading issued by a carrier bearing a notation that the outward containers or the goods have been damaged. A foul bill of lading may not be acceptable for payment under a letter of credit.

 

Free In and Out (F.I.O.)

Free In and Out (F.I.O.): The cost of loading and unloading of a vessel that is borne by the charterer.

 

Free of Capture and Seizure (F.C.&S.)

Free of Capture and Seizure (F.C.&S.): An insurance clause providing that a loss is not insured if it is due to capture, seizure, confiscation, and like actions, whether legal or not, or from such acts as piracy, civil war, rebellion, and civil strife.

 

Free of Particular Average (F.P.A.)

Free of Particular Average (F.P.A.): The phrase means that the insurance company will not cover partial losses resulting from perils of the sea except when caused by stranding, sinking, burning, or collision. American conditions (F.P.A.A.C.): Partial loss is not insured unless it is caused by the vessel’s being sunk, stranded, burned, on fire, or in collision. English conditions (F.P.A.E.C.): Partial loss is not insured unless it is a result of the vessel’s being sunk, stranded, burned, on fire, or in collision.

 

Free Out (F.O.)

Free Out (F.O.): The cost of unloading a vessel that is borne by the charterer.

 

Free Port

Free Port: An ocean port and its adjacent area where imported goods may be temporarily stored and sometimes repackaged; manipulated; or, under the laws of some countries, further processed or manufactured without payment of customs duties until the merchandise is sold in the country or the time period for exportation expires. Free Trade: A theoretical concept that assumes that international trade is unhampered by government measures such as tariffs or non-tariff barriers. The objective of trade liberalization is to achieve “freer trade” rather than “free trade,” it being generally recognized among trade policy officials that some restrictions on trade are likely to remain.

 

Free Trade Area

Free Trade Area: An arrangement between two or more countries for free trade among themselves while each nation maintains its own independent tariffs toward nonmember nations.

 

Free Trade Zone

Free Trade Zone: See “Foreign Trade Zone.”

 

Freight All Kinds (FAK)

Freight All Kinds (FAK): The general transportation rate for a shipment of multiple types of merchandise.

 

Freight Collect

Freight Collect: The shipment of goods by an exporter (seller) where the purchaser has agreed to pay the transportation costs and the transportation carrier has agreed to transport the goods on the condition that the goods will not be released unless the purchaser makes payment for the transportation charges.

 

Freight Forwarder

Freight Forwarder: A person who dispatches shipments via common carriers, books or otherwise arranges space for those shipments on behalf of shippers, and processes the documentation or performs related activities incident to those shipments. Freight Prepaid: An agreement between the seller and a buyer that the seller will pay for the transportation charges before delivery to the transportation carrier.

 

 

Full Set

Full Set: Generally used in reference to bills of lading. Where a steamship line undertakes to transport goods, it issues a sole original or full set (generally three copies, which are all originals) of the bill of lading. Where the bill of lading is negotiable, the steamship line is authorized to make delivery as soon as any person presents one original bill of lading at the destination.

 

GATT

GATT: The General Agreement on Tariffs and Trade. This is an international treaty that has now been superseded by the World Trade Organization. A number of agreements negotiated under GATT continue in force, such as the Valuation Code, the Antidumping Code, and the Subsidies Code. See “World Trade Organization.”

 

General Average

General Average: A deliberate loss of or damage to goods in the face of a peril, such as dumping overboard, which sacrifice is made for the preservation of the vessel and other goods. The cost of the loss is shared by the owners of the saved goods.

 

Generalized System of Preferences (GSP)

Generalized System of Preferences (GSP): The United Nations program adopted by the United States and many other countries and designed to benefit less developed countries by extending duty-free treatment to imports from such countries. Sometimes certain countries or products are “graduated” and are no longer eligible to receive GSP benefits.

 

General Order

General Order: Merchandise for which proper customs entry has not been made within five working days after arrival is sent to a general order warehouse. All costs of storage are at the expense of the importer.

 

Gray Market Goods

Gray Market Goods: Products that have been manufactured and sold by the inventor or duly authorized licensee that are being resold by purchasers into geographical areas not intended or authorized by the original seller. Depending upon the laws of the countries involved, gray marketing may be illegal, encouraged, or regulated. Sometimes economic incentives for gray marketing occur as a result of a manufacturer selling the products to different trade channels at different prices or due to fluctuating exchange rates.

 

Harmonized Tariff System (Codes)

Harmonized Tariff System (Codes): The system adopted by most of the commercial countries of the world in 1989, classifying products manufactured and sold in world commerce according to an agreed-upon numerical system. Common international classifications facilitate balance of trade statistics collection, customs classification, and country of origin determination.

 

In Bond

In Bond: The transportation or storage of goods in a condition or location that is exempt under the customs laws from the payment of customs duties for the time period that is allowed by law for transportation or storage. Transportation or storage in bond may be effected by transportation carriers or warehouses that have posted a bond with the customs authorities guaranteeing payment of all customs duties in the event that the goods are improperly released without the payment of customs duties by the owner of the goods.

 

Inchmaree Clause

Inchmaree Clause: A provision in an ocean casualty insurance policy covering the assured against damage to the owner’s goods as a result of negligence or mismanagement by the captain or the crew in navigation of the ship or damage due to latent defects in the ship.

 

Incoterms

Incoterms: A set of sales and delivery terms issued by the International Chamber of Commerce and widely used in international trade. These terms, such as “ex-works,” “CIF,” and “delivered duty paid,” set out in detail the responsibilities and rights of the seller and purchaser in an international sale transaction. See also “Convention on Contracts for the International Sale of Goods” and “Uniform Commercial Code.”

 

Indent Merchant

Indent Merchant: One who assembles a number of orders from merchants in his locality, such orders being placed with foreign manufacturers by the indent merchant for his own account. He assumes the full credit risk and obtains his commission from those for whom he orders.

 

Insurable Interest

Insurable Interest: The legal interest that a person must have in goods in order to be covered by insurance. For example, in an international sale under the Incoterm “ex-works,” delivery and risk of loss for damage to the goods passes to the purchaser when the goods are loaded on and leave the seller’s factory or warehouse. If the seller has already been paid for the goods at that time, the seller no longer has any legal interest in ownership or payment and cannot receive payment under any insurance coverage that the seller may have, such as a blanket insurance policy covering all sales.

 

Intellectual Property

Intellectual Property: Ownership conferring the right to possess, use, or dispose of products created by human ingenuity, including patents, trademarks, and copyrights. These rights are protected when properly registered, but registration in one country does not create rights in another country.

 

Invisible Trade

Invisible Trade: Items such as freight, insurance, and financial services that are included in a country’s balance of payments accounts (in the “current” account), even though they are not recorded as physically visible exports and imports.

 

Invoice

Invoice: See “Commercial Invoice” and “Consular Invoice.”

 

Irrevocable Credit

Irrevocable Credit: A letter of credit issued by the purchaser’s bank in favor of the seller that cannot be revoked without the consent of the seller (who is the beneficiary of the letter of credit). Under the Uniform Customs and Practice for Documentary Credits (No. 500), all letters of credit are irrevocable unless specifically stated otherwise on their face. This protects the seller against the risk of non-payment due to revocation after release of the goods to the buyer or the buyer’s agent.

 

ISO 9000

ISO 9000: A series of quality control standards promulgated by the International Standards Organization.

 

ITAR

ITAR: See “Arms Export Control Act.”

 

Jettison

Jettison: The act of throwing the goods off a steamship into the ocean to lighten the ship in time of peril. It may occur as a way to save a sinking ship or through illegal or improper action by steamship employees. Certain jettisons are covered by insurance or general average, but others are not.

 

Lacey Act

Lacey Act: The Lacey Act was originally enacted in 1900 to protect wildlife, fish, and plants. Recent amendments to the act were enacted to prohibit illegal logging and require importers to file a certification on the source of any plant products or products with plant components.

 

Lay Days

Lay Days: The dates between which a chartered vessel is to be available in a port for loading of cargo.

 

LCL

LCL: Less than a full container load.

 

Legalization

Legalization: A procedure whereby an embassy or consular employee of the purchaser’s country located in the exporter’s (seller’s) country signs or stamps an export document, for example, a commercial invoice, in order to enable the goods to be admitted upon arrival at the purchaser’s country.

 

Letter of Credit (L/C)

Letter of Credit (L/C): A formal letter issued by a bank that authorizes the drawing of drafts on the bank up to a fixed limit and under terms specified in the letter. Through the issuance of such letters, a bank guarantees payment on behalf of its customers (purchasers of goods) and thereby facilitates the transaction of business between parties who may not be otherwise acquainted with each other. The letter of credit may be sent directly by the issuing bank or its customer to the beneficiary (sellers of goods), or the terms of the credit may be transmitted through a correspondent bank. In the latter event, the correspondent may add its guarantee (confirmation) to that of the issuing bank, depending on the arrangements made between the seller and the purchaser. Letters of credit may be revocable or irrevocable depending on whether the issuing bank reserves the right to cancel the credit prior to its expiration date.

 

Letter of Indemnity/Guaranty

Letter of Indemnity/Guaranty: (1) A document issued by a shipper to a steamship line instructing the steamship line to issue a clean bill of lading even though the goods are damaged, and agreeing to hold the steamship line harmless from any claims. (2) An agreement by a beneficiary of a letter of credit to hold a bank harmless for making payment to the beneficiary, even though there are some discrepancies between the documents required by the letter of credit and those presented by the beneficiary. (3) An agreement by an exporter and/or importer to hold a steamship line harmless from any claims that may arise as a result of the steamship line’s releasing goods where a negotiable bill of lading covering the goods has been lost or destroyed.

 

Lighterage

Lighterage: The cost for conveying the goods by lighters or barges between ships and shore and vice versa, including the loading into and discharging out of lighters.

 

 

Liner Service

Liner Service: Regularly scheduled departures of steamships to specific destinations (trade lanes).

 

Liquidation

Liquidation: A U.S. Customs term of art describing the official final determination by the customs authorities of the classification and value of the imported merchandise. For example, any importer, by posting a customs bond, may obtain immediate delivery of merchandise by classifying the imported product and paying customs duties at that time. The importer’s classification and value, however, are not binding on U.S. Customs and Border Protection, and within an additional period of time, for example, three to six months, Customs will make its own analysis of the goods and determine whether or not it agrees with the classification, value, and duties paid.

 

Long Ton

Long Ton: 2,240 pounds.

 

LTL

LTL: A shipment of less than a full truckload.

 

Manifest

Manifest: A listing of the cargo being transported by the transportation carrier.

 

Marine Extension Clause

Marine Extension Clause: A provision in an ocean casualty insurance policy extending the ordinary coverage to include time periods where goods have been received for shipment but not yet loaded on a steamship and have been loaded off the steamship but not yet delivered to the buyer, and periods where the ship deviates from its intended course or the goods are transshipped.

 

Marine Insurance

Marine Insurance: Insurance that will compensate the owner of goods transported overseas in the event of loss or damage. Some “marine” insurance policies also cover air shipments.

 

Marine Surveyor

Marine Surveyor: A company or individual that assesses the extent of damage to cargo incurred during ocean transportation. Such survey reports are necessary in order for insurance companies to make payment to the beneficiary of the insurance policy.

 

Marking Laws

Marking Laws: Laws requiring articles of foreign origin and/or their containers imported into a country to be marked in a specified manner that would indicate to the purchaser the country of origin of the article.

 

Mate’s Receipt

Mate’s Receipt: Commonly used in Europe, a document similar to a dock receipt. A mate’s receipt is issued by an employee of a steamship line, usually at the wharf or pier where the goods are received from the transportation carrier delivering the goods to the port. It evidences that delivery was made by the ground carrier. The steamship line will prepare the bill of lading based on the information in the mate’s receipt.

 

Maturity

Maturity: The date on which a time draft must be paid.

 

Measurement Ton

Measurement Ton: An alternative way of calculating the transportation charge for articles that may be unusually bulky or light. The steamship line ordinarily will charge the higher of the actual weight or a calculated or constructed weight based upon the dimensions of the goods being transported.

 

MERCOSUR

MERCOSUR: A common market established by Argentina, Brazil, Paraguay, and Uruguay.

 

Metric Ton

Metric Ton: 2,200 pounds.

 

Minimum Freight

Minimum Freight: The minimum amount that a transportation carrier will charge for transportation. Because such minimum charges exist, freight consolidators provide the service of aggregating small shipments so that lower freight rates can be obtained, which are then partially passed back to the shippers.

 

Most Favored Nation

Most Favored Nation: An agreement in a treaty or in a sales contract whereby one party promises to give to the other party benefits at least equal to the benefits that party has extended to any other country or customer.

 

NAFTA

NAFTA: North American Free Trade Agreement, a trade agreement between the United States, Canada, and Mexico allowing for preferential duty rates on imports that meet the criteria.

 

Negotiable Instrument

Negotiable Instrument: A document containing an unconditional promise or order to pay a fixed amount of money with or without interest or other charges described in the promise or order if it is payable to bearer or order at the time it is issued, is payable on demand or at a definite time, and does not state any other undertaking or instructions in addition to the payment of money. Examples of negotiable instruments include checks and drafts.

 

Negotiation

Negotiation: A transfer of possession of a negotiable instrument, whether voluntary or involuntary, for value received by a person to another person, who thereby becomes its holder.

 

Non-Negotiable

Non-Negotiable: A document that is incapable of transferring legal ownership or rights to possession of the goods by transfer or endorsement of the document, for example, a railroad, sea, or air waybill.

 

Non-Tariff Barriers

Non-Tariff Barriers: Obstacles to selling or importing activities other than the customs duties assessed on imported goods, for example, inspections that delay importation, foreign exchange controls that make payment difficult, foreign language labeling regulations, buy national policies, product standards, and quotas.

 

Non-Vessel-Operating Common Carrier (NVOCC)

Non-Vessel-Operating Common Carrier (NVOCC): A cargo consolidator of small shipments in ocean trade, generally soliciting business and arranging for or performing containerization functions at the port. The NVOCC is recognized by the Federal Maritime Commission as a common carrier that does not own or operate steamships, but that publishes tariffs after having filed them with the Commission and becomes the shipper of the goods.

 

Notify Party

Notify Party: The person listed on a bill of lading or other document that the transportation carrier is supposed to notify upon arrival. A notify party may be the purchaser of the goods, a foreign freight forwarder or customs broker, or a bank or other party, depending upon the terms of the sales agreement and the agreement relating to payment for the goods.

 

On Board Notation, On Board Endorsement

On Board Notation, On Board Endorsement: A legend, stamp, or handwritten statement on the face of a bill of lading issued by a steamship line certifying that the goods have actually been loaded on the ship. Often letters of credit will specify that the goods must be on board before the expiration date of the letter of credit in order for the exporter (seller) to receive payment under the letter of credit. See “Received Bill of Lading.”

 

Open Account (O/A)

Open Account (O/A): A sale payable when specified, that is, R/M: return mail; E.O.M: end of month; 30 days: thirty days from date of invoice; 2/10/60: 2 percent discount for payment in ten days, net if paid sixty days from date of invoice. Unlike a letter of credit, there is no security or bank guaranty of payment.

 

Order Bill of Lading

Order Bill of Lading: Usually, “To Order” bills of lading are made to the order of the shipper and endorsed in blank, thereby giving the holder of the bill of lading title to the goods being shipped. They may also be to the order of the consignee or the bank financing the transaction. Order bills of lading are negotiable (whereas straight bills of lading are not).

 

 

Orderly Marketing Agreements (OMAs)

Orderly Marketing Agreements (OMAs): International agreements negotiated between two or more governments in which the trading partners agree to restrain the growth of trade in specified “sensitive” products, usually through the imposition of export or import quotas. Orderly marketing agreements are intended to ensure that future trade increases will not disrupt, threaten, or impair competitive industries or their workers in importing countries.

 

OSD

OSD: A notation on a carrier receipt or bill of lading signifying “Over, Short, or Damaged.”

 

Packing List

Packing List: A document describing the contents of a shipment. It includes more detail than is contained in a commercial invoice but does not contain prices or values. It is used for insurance claims as well as by the foreign customs authorities when examining goods to verify proper customs entry.

 

Particular Average (P.A.)

Particular Average (P.A.): A partial loss or damage to cargo that solely affects “particular” interests. These damages or partial losses are not shared by other interests but are excepted in the ocean carrier’s bill of lading. Therefore, unless negligence is involved, claims under particular average cannot be directed against the steamship line.

 

Passport

Passport: An official document issued by a country authorizing one of its citizens or legal residents to leave the country and to be readmitted to the country upon return. See “Visa.”

 

Performance Bond

Performance Bond: A guarantee issued by an insurance company, surety company, or other person acceptable to the beneficiary guaranteeing that the applicant (for example, a seller of goods) will manufacture and deliver the goods to the purchaser in accordance with the specifications and delivery schedule.

 

Perils of the Seas

Perils of the Seas: Conditions covered by marine insurance, including heavy weather, stranding, collision, lightning, and seawater damage.

 

Permanent Establishment

Permanent Establishment: An office, warehouse, or place of business in a foreign country that may cause its owner or lessor to be subject to income taxes in that country. Under the common international tax treaties negotiated between countries of the world, profits made by a seller are not taxable in the buyer’s country unless the seller also has a permanent establishment in the buyer’s country that has played some part in arranging the sale transaction.

 

Pickup Order

Pickup Order: A document used when city or suburban export cargo has to be delivered to a dock, or for pickup of goods from storage places.

 

Power of Attorney

Power of Attorney: A legal document wherein a person authorizes another person to act on the first person’s behalf. It may be issued to an attorney-at-law or to any person and authorizes that person to act as an agent for the issuer of the power of attorney for general or limited purposes.

 

Preshipment Inspections

Preshipment Inspections: A procedure whereby a buyer, through an independent agent such as an inspection company, will examine the goods being purchased prior to exportation by the foreign seller. These examinations may be for quality alone or, in some cases where the buyer’s government requires it, the inspection company may require information on the value of the goods.

 

Product Liability

Product Liability: The responsibility of a manufacturer and, in some cases, a seller for defects in goods that cause injury to a purchaser, user, or consumer of the goods or cause damage to the purchaser’s business.

 

Pro Forma Invoice

Pro Forma Invoice: An abbreviated invoice sent at the beginning of a sale transaction, usually to enable the buyer to obtain an import permit or a foreign exchange permit or both. The pro forma invoice gives a close approximation of the weights and values of a shipment that is to be made.

 

Provisional Insurance

Provisional Insurance: Temporary insurance issued by an agent of an insurance company covering a temporary time period until the actual insurance application can be reviewed by the insurance company and the insurance policy issued.

 

Quota

Quota: A limitation or restriction on the quantity or duty rate payable on imported goods. See “Absolute Quota” and “Tariff Rate Quota.”

 

Received Bill of Lading

Received Bill of Lading: A document issued by a steamship company acknowledging that it has received delivery of goods to be transported at some later time, usually on the first available steamship going to the destination specified by the shipper. Since the goods are not yet loaded on board, there is no guarantee that the goods will be shipped in the near future, and, therefore, such bills of lading are generally not acceptable if presented by a seller for payment under a letter of credit that is about to expire.

 

Recourse

Recourse: The right to claim a refund for amounts paid to a payee. For example, a factoring company may purchase accounts receivable from an exporter (seller), pay the exporter a discounted amount, and collect the accounts receivable as they become due from the purchasers of the goods. If the purchase of the accounts receivable by the factor is with recourse, if any of the purchasers fails to pay, the factor has the option of pursuing the purchaser or claiming a refund for that amount from the exporter (seller) from whom the accounts receivable were purchased.

 

Remittance

Remittance: A payment, usually from one collecting bank to another, for example, under a documentary collection. However, a remittance may also include payments directly by the purchaser to the seller.

 

Revaluation

Revaluation: A government action whereby its currency is valued upward in relationship to another currency. See “Devaluation.”

 

Revocable Credit

Revocable Credit: A letter of credit issued by a bank that is subject to revocation by the applicant (purchaser of the goods) at any time. Under the new Uniform Customs and Practice for Documentary Credits, No. 500, letters of credit are irrevocable unless expressly stated to be revocable.

 

Revolving Credit 

Revolving Credit: An agreement by a bank issuing a letter of credit with the applicant (purchaser of goods) that as soon as the purchaser makes payment for a particular shipment or amount of goods to the seller, the bank will automatically issue a new letter of credit covering the next shipment or the amount agreed upon between the applicant and the bank.

 

Royalty

Royalty: An amount paid by a licensee to acquire certain rights, for example, a lump sum or an ongoing amount to manufacture or sell goods in accordance with the licensed patent, trademark, copyright, or trade secrets. In some situations, royalties paid by the purchaser of goods to the seller of goods must be included in the dutiable value of the goods.

 

Sales Agreement or Contract 

Sales Agreement or Contract: The agreement, oral or written, between the exporter (seller) and the importer (purchaser) describing the terms and conditions upon which the seller and purchaser will execute the sale and describing the rights and responsibilities of each party.

 

Schedule B

Schedule B: A classification system based on the Harmonized Tariff System applicable to U.S. exports.

 

Section 301

Section 301 (of the Trade Act of 1974): A provision of U.S. law that enables the president to withdraw duty reductions or restrict imports from countries that discriminate against U.S. exports, subsidize their own exports to the United States, or engage in other unjustifiable or unreasonable practices that burden or discriminate against U.S. trade.

 

Selling Commission

Selling Commission: Money or compensation paid by the seller of goods to the seller’s agent for services performed by that agent, such as identifying prospective purchasers and assisting with export of the goods. If the amount of the selling commission is charged to the purchaser of the goods, it will usually become subject to customs duties in the country of importation.

 

Service Contract

Service Contract: A contract between an ocean carrier and a shipper or a shippers’ association, in which the shipper commits to a minimum quantity of freight for transport within a fixed period of time and the carrier discounts its usual transportation charges and guarantees levels of service, such as assured space and transit time.

 

Shippers’ Association

Shippers’ Association: A group of exporters who negotiate with transportation carriers for lower freight rates by committing their aggregate volume of cargo.

 

Shipper’s Export Declaration

Shipper’s Export Declaration: A form required by the Treasury Department for shipments over $2,500 ($500 for mail shipments) to all countries except Canada. It is completed by a shipper or its freight forwarder showing the value, weight, consignee, designation, Schedule B number, etc., for the export shipment.

 

Shipper’s Letter of Instructions 

Shipper’s Letter of Instructions: A document issued by an exporter or importer instructing the freight forwarder to effect transportation and exportation in accordance with the terms specified in the letter of instructions.

 

Shipping Conference

Shipping Conference: Steamship lines establishing regularly scheduled service and common transportation rates in the same trade lanes.

 

Shipping Permit

Shipping Permit: Sometimes called delivery permit, a document issued by the traffic department of an ocean carrier after the booking of cargo has been made. It directs the receiving clerk at the pier at which the vessel will load to receive from a named party (exporter or forwarder) on a specified day or time the goods for loading and ocean shipment measurement.

 

Ship’s Manifest 

Ship’s Manifest: A document containing a list of the shipments making up the cargo of a vessel.

 

Short Ton

Short Ton: 2,000 pounds.

 

Sight Draft (S/D)

Sight Draft (S/D): Similar to cash on delivery, a draft so drawn by the seller as to be payable on presentation to the drawee (importer) or within a brief period thereafter known as days of grace. Also referred to as a demand draft, a sight draft is used when the seller wishes to retain control of the shipment until payment.

 

 

Single Administrative Document

Single Administrative Document: The document now used throughout the European Union to effect exports and customs clearance among member nations and external countries.

 

SL&C (Shipper’s Load and Count)

SL&C (Shipper’s Load and Count): Shipments loaded and sealed by the shipper and not checked or verified by the carrier.

 

Special Endorsement

Special Endorsement: A direction by the payee of a draft specifying the name of an alternative payee to whom the drawee is authorized to make payment after delivery of the draft to the alternative payee.

 

Specific Duty

Specific Duty: A tax imposed on imported merchandise without regard to value. It is usually based on the net weight or number of pieces.

Spot Exchange

Spot Exchange: The exchange rate that exists between two currencies for immediate purchase and sale.

 

Stale Bill of Lading

Stale Bill of Lading: A bill of lading that has not been presented under a letter of credit to the issuing or confirming bank within a reasonable time (usually twenty-one days) after its date, thus precluding its arrival at the port of discharge by the time the vessel carrying the shipment has arrived.

 

Standby Credit

Standby Credit: A letter of credit issued by a bank that is payable upon a simple certification by the beneficiary of the letter of credit that a particular condition or duty has not been performed by the applicant for the letter of credit. For example, an exporter (seller) may have to apply for and obtain a standby letter of credit issued in favor of the purchaser when the purchaser is a foreign government to guarantee that the exporter (seller) will perform the sales agreement and deliver the goods in accordance with the delivery schedule. This is to be distinguished from a documentary letter of credit, where the purchaser is the applicant and payment is made by the bank issuing the letter of credit upon presentation to the bank of certain specified documents, such as bills of lading, insurance certificates, inspection certificates, and weight certificates.

 

 

Stevedoring

Stevedoring: A charge, generally so much per ton, agreed upon between the ocean carrier and a stevedoring, or terminal, operator covering the allocation of men (longshoremen), gear, and all other equipment for working the cargo into or out of the vessel, under the supervision and control of the ship’s master.

 

Stowage

Stowage: The placing of cargo into a vessel.

 

Straight Bill of Lading

Straight Bill of Lading: A bill of lading in which the goods are consigned directly to a named consignee and not to the seller’s or buyer’s “order.” Delivery can be made only to the named person; such a bill of lading is non-negotiable.

 

Strikes, Riots and Civil Commotions (S.R.&C.C.)

Strikes, Riots and Civil Commotions (S.R.&C.C.): A term referring to an insurance clause excluding insurance for loss caused by labor disturbances, riots, and civil commotions or any person engaged in such actions.

 

 

Stripping

Stripping: Unloading (devanning) a container.

 

Stuffing

Stuffing: Loading a container.

 

Subrogation

Subrogation: The right that one person, usually an insurance or surety company, has after payment to the beneficiary of the insurance policy, for example, for damage to goods, to pursue any third party against whom the beneficiary would have had a claim, such as the person causing the damage to the goods.

 

Sue & Labor Clause

Sue & Labor Clause: A provision in a marine insurance policy obligating the assured to do those things necessary after a loss to prevent further loss and to cooperate with, and act in the best interests of, the insurer.

 

Surveyor

Surveyor: A company or individual that assesses the extent of damages to cargo incurred during ocean transportation. Such survey reports are necessary in order for insurance companies to make payment to the beneficiary of the insurance policy.

 

Tariff

Tariff: A duty (or tax) levied upon goods transported from one customs area to another. Tariffs raise the prices of imported goods, thus making them less competitive within the market of the importing country.

 

Tariff Rate Quota

Tariff Rate Quota: An increase in the tariff duty rate imposed upon goods imported to a country after the quantity of the goods imported within the quota period reaches a certain pre-established level.

 

Tax Haven

Tax Haven: A country that imposes a low or no income tax on business transactions conducted by its nationals.

 

Tender

Tender: A solicitation or request for quotations or bids issued by a prospective purchaser, usually a government entity, to select the supplier or seller for a procurement or project.

 

Tenor

Tenor: The term fixed for the payment of a draft.

 

TEU (Twenty-Foot Equivalent Unit)

TEU (Twenty-Foot Equivalent Unit): A measurement of container capacity.

 

Theft, Pilferage &/or Non-Delivery

Theft, Pilferage &/or Non-Delivery: A type of risk that may be covered under a transportation insurance policy either within the terms of the main coverage or by special endorsement and payment of the corresponding premium.

 

Through Bill of Lading

Through Bill of Lading: Also called a combined transport bill of lading or intermodal bill of lading, a document issued by the transportation carrier that thereby agrees to effect delivery to the required destination by utilizing various means of transportation, such as truck, railroad, and/or steamship line.

 

Time Draft

Time Draft: A draft maturing at a certain fixed time after presentation or acceptance. This may be a given number of days after sight (acceptance) or a given number of days after the date of the draft.

 

TL

TL: A truckload shipment.

 

Total Loss

Total Loss: A situation in which damaged goods covered by an insurance policy are adjudged to have no commercial value and their full value will be paid under the insurance policy.

 

Trademark

Trademark: A brand name, word, or symbol placed on a product to distinguish that product from other similar types of products. The right to sell products under a trademark is regulated by the laws and regulations applicable in each country of sale. Tramp: A steamship or steamship line that does not adhere to a shipping conference and, therefore, is free to charge whatever transportation rates and to sail in any ocean lane it desires.

 

Transferable Credit

Transferable Credit: A letter of credit in which the applicant (purchaser of goods) has authorized the beneficiary of the letter of credit (exporting seller of the goods) to transfer its right to payment to a third party, for example, the manufacturer of the goods being sold by the exporter to the purchaser.

 

Transfer Pricing

Transfer Pricing: Sales of goods between sellers and buyers that are affiliated, for example, by common stock ownership. In such cases, the price may be artificially increased or decreased to vary from the price charged in an arms-length transaction. As a result, income tax and customs authorities may readjust the price.

 

Trust Receipt

Trust Receipt: A document signed by a buyer, based on which a bank holding title to goods releases possession of the goods to the buyer for the purpose of sale. The buyer obligates himself to maintain the identity of the goods or the proceeds thereof distinct from the rest of his assets and to hold them subject to repossession by the bank. Trust receipts are used extensively in the Far East, where it is customary to sell on terms of sixty or ninety days, documents against acceptance. The collecting bank permits buyers of good standing to obtain the goods, under a trust receipt contract, before the maturity date of the draft. In some countries, warrants serve the same purpose.

 

Unconfirmed Credit

Unconfirmed Credit: A letter of credit issued by the applicant’s (purchaser of goods’) bank, usually in the purchaser’s own country. See also “Confirming Bank.”

 

Uniform Commercial Code

Uniform Commercial Code: A series of laws applicable in the United States governing commercial transactions, such as sales, leasing, negotiable instruments, bank collections, warehousing, bills of lading, investment securities, and security interests. See also “Convention on Contracts for the International Sale of Goods” and “Incoterms.”

 

Uniform Customs and Practice for Documentary Credits (UCP)

Uniform Customs and Practice for Documentary Credits (UCP): A set of international rules and standards agreed upon and applied by many banks in the issuance of letters of credit. The most recent edition (No. 600) went into effect on January 1, 2007.

 

Uniform Rules for Collections (URC)

Uniform Rules for Collections (URC): A set of international rules and standards agreed upon and applied by many banks when acting as a collecting bank in a documentary collection. The most recent edition (No. 522), published by the International Chamber of Commerce, went into effect on January 1, 1996. See “Collecting Bank.” Unitization: The consolidation of a quantity of individual items into one large shipping unit for easier handling.

 

Usance 

Usance: The time period during which credit is being extended and during which the purchaser of goods or borrower of monies must pay interest.

 

Valuation

Valuation: The appraisal of the value of imported goods by customs officials for the purpose of determining the amount of ad valorem duty payable in the importing country. The GATT Customs Valuation Code obligates governments that are party to it to use the “transaction value” of imported goods—usually the price actually paid or payable for the goods—as the principal basis for valuing the goods for customs purposes.

 

Value-Added Tax (VAT)

Value-Added Tax (VAT): An indirect tax on consumption that is levied at each discrete point in the chain of production and distribution, from the raw material stage to final consumption. Each processor or merchant pays a tax proportional to the amount by which she increases the value or marks up the goods she purchases for resale.

 

Visa

Visa: (1) A stamp put into a traveler’s passport by officials of an embassy or consulate authorizing a traveler to enter a foreign country. (2) The document issued by an exporting country allowing the export of products subject to an export quota that is in effect in the exporting country.

 

Voluntary Restraint Agreements (VRAs)

Voluntary Restraint Agreements (VRAs): Informal arrangements through which exporters voluntarily restrain certain exports, usually through export quotas, to avoid economic dislocation in an importing country and to avert the possible imposition of mandatory import restrictions.

 

Warehouse Receipt

Warehouse Receipt: A receipt given by a warehouseman for goods received by him for storage. A warehouse receipt in which it is stated that the commodities referred to therein will be delivered to the depositor or to any other specified person or company is a negotiable warehouse receipt. Endorsement and delivery of a negotiable warehouse receipt serves to transfer ownership of the property covered by the receipt. Warehouse to Warehouse Clause: A provision in a transportation insurance policy extending coverage from the time of transport from the seller’s place of business to the purchaser’s place of business.

 

War Risk Insurance

War Risk Insurance: Separate insurance coverage for loss of goods that results from any act of war. This insurance is necessary during peacetime because of objects, such as floating mines, left over from previous wars.

 

Wharfage

Wharfage: A charge assessed by a pier or dock owner against freight moving over the pier or dock or against carriers using the pier or dock.

 

With Average (W.A.)

With Average (W.A.) : An insurance coverage broader than F.P.A. and representing protection for partial damage caused by the perils of the sea. Additional named perils, such as theft, pilferage, non-delivery, and freshwater damage, can be added to a W.A. clause. Generally, however, damage must be caused by seawater. A minimum percentage of damage may be required before payment is made.

WTO

World Trade Organization (WTO): The World Trade Organization consists of 123 signatory countries. The Uruguay Round of negotiations resulted in the formation of the WTO and in numerous agreements relating to the reduction of tariffs and non-tariff barriers to trade. The WTO supersedes GATT, but a number of agreements reached under GATT, such as the Valuation Code, the Antidumping Code, the Subsidies Code, and the Agreement on Government Procurement, continue in revised form under the WTO.

World Trade Organization (WTO)

World Trade Organization (WTO): The World Trade Organization consists of 123 signatory countries. The Uruguay Round of negotiations resulted in the formation of the WTO and in numerous agreements relating to the reduction of tariffs and non-tariff barriers to trade. The WTO supersedes GATT, but a number of agreements reached under GATT, such as the Valuation Code, the Antidumping Code, the Subsidies Code, and the Agreement on Government Procurement, continue in revised form under the WTO.

 

York Antwerp Rules of General Average

York Antwerp Rules of General Average: An international treaty prescribing the conditions and rules under which damage to a steamship or to goods will be shared by the other owners of goods on the steamship.