SOME COMMON TERMS USED IN INTERNATIONAL TRADE

ACCEPTANCE

A time draft (or bill of exchange) which the drawee (the payer) has accepted for payment at maturity.  The draft must be presented first for acceptance and then for payment.  The drawee becomes the acceptor.  On the face of the draft must be written the word accepted and the date of place of payment.

ACCEPTING BANK

A bank which is the drawee of a time and which becomes the acceptor of the draft.

AD VALOREM

"According to value" A tariff charged on imports in the form of a set percentage of the value of the imports.

ADVISING BANK

A bank which notifies the exporter of the validity of the letter of credit and of the conditions and terms.  The advising bank has no responsibilities under the letter of credit.

AFTER DATE

When a draft bears this phase, the time begins to run from the date drawn.  The date of maturity is, therefore, fixed and does not depend upon acceptance.

AFTER SIGHT

Indicates that payment on a draft is due a specified number of days after presentation of the draft to the drawee or payee.

AIR WAYBILL

A non-negotiable instrument of air transport which serves as a receipt for the shipper, to indicate that the carrier has accepted the goods listed therein and obligates itself to carry the consignment to the airport of destination, according to the conditions listed on the back of the original documents.

ALONGSIDE

The side of the ship.  Goods to be delivered alongside are to be placed on the dock or lighter within reach of the ship's tackle, from which they can be loaded aboard the ship.

A/P

Authority to pay; used mainly in the Far Eastern trade, addressed by a bank to a seller of merchandise, notifying him that it is authorised to purchase, with or without recourse, drafts upto a stipulated amount drawn on a certain foreign buyer in cover of specified shipments of merchandise.

AT SIGHT

Indicates that payment of a negotiable instrument is due upon presentation or demand.

BALANCE OF TRADE

The difference in the value of a country's total exports and import; if export exceed imports, a favourable balance of trade exists, whereas if imports exceed exports, the balance is unfavourable.

BERTH

The place beside a pier, qauay or wharf where a vessel can be loaded or discharged.

BILATERAL TRADE AGREEMENT

A reciprocal trade agreement between two countries which seeks to balance the trade accounts between the countries by stipulating (or value) of goods to be traded and the time of agreement.

BILL OF EXCHANGE

Also called a draft.  An unconditional order from the drawer to the drawee, directing him to pay a specified amount to a named payee at a fixed or determinable future time.

BILL OF LADING

Service as a document of title, a contract of carriage, and a receipt of goods.  Usually prepared by the shipper on forms issued by the carrier, indicating that goods are to be transported from one point to another.

BONDED WAREHOUSE

A building authorised by custom authority for the storage of goods without payment of duties until the goods are removed.

BOOKING

Arranging with steamship companies for the acceptance and carriage of freight.

CHARGES FORWARD

A banking term used when foreign and domestic bank charges commission,  interest (if any), and government taxes in connection with the collection of a draft an account of the drawee.

CHARGES HERE

A banking term used when foreign and domestic bank commission charges, interest (if any), and government taxes in connection with the collection of a draft an account of the drawee.

CHARTER PARTY

Contract between the owner of a vessel and the shipper for using  the vessel or a part thereof.

CLEAN BILL OF LADING

One which indicates that goods were received in "apparent good order and condition", without damages or other irregularities.

CLEAN DRAFT

One to which no documents have been attached.

COASTING TRADE

Trade between ports of the same country in contrast with trade carried out between foreign port.  The small vessels operating along these routes are called 'coasters"

COMMON CARRIER

An individual, partnership, or corporation which transports for compensation persons or goods.

CONFIRMED LETTER OF CREDIT

A letter of credit which has been confirmed by a second bank Such confirmation is desirable, since the seller may not be familiar with the foreign bank which issued the L/C.

CONSIGNMENT

A physical transfer of goods from an exporter (consignor) to an importer (consignee) for the importer to sell.  The consignor retains title of  the goods until the consignee has sold the goods.  The consignee sells the goods for commission and remits the net proceeds to the consignor.

CONSULAR INVOICE

Covers a shipment of export-goods certified by a consular official of the country of destination.  The invoice shows the value of the shipment in the currency of the country of exports.  It is used by customs officials of the country to verify value, quantity and nature of shipment.

CONVERTIBILITY

The ability to exchange a currency for foreign currency in the open market

D/A

Documents against acceptance; instructions given by a shipper to his bank that the documents attached to a draft for collection are deliverable to the drawee only against his acceptance of the draft.

DATE DRAFT

One which matures number of days from the date of issue.

DEMAND DRAFT

One which is payable upon demand.

DEVALUATION

The lowering of the value of a currency in terms of a foreign currency (or currencies).

DOCK RECEIPT

Receipt issued by an ocean carrier or its agent for merchandise delivered at its dock or warehouse awaiting shipment.

DOCUMENTARY CREDIT

A commercial letter of credit providing for payment by a bank to the name beneficiary, who is usually the seller of merchandise, against delivery of such documents as may be specified in the credit.

D/P

Documents against payment; instructions given by a shipper to his bank that the documents attached to a draft for collection are deliverable to the drawee only against his payment of the draft.

E. & 0. E.

Errors and Omissions Excepted; a phrase accompanying the shipper's signature on an invoice, by which he disclaims final responsibility for typographical errors or unintentional omissions.

E. M. C.

Export Management Company, handles foreign business for one or more firms, usually on a retainer and commission basis. Maintains very close relationship with the firm(s) he represents and conducts business in the name(s) of the firms(s) he represents or in his own name.  Offers many of the advantages of a private export department.

Ex

"From" points of origin such as ex-factory, ex-mill, ex-barge.  Price quoted applies only at the point of origin, and the seller agrees to place the goods at the disposal of the buyer at the agreed place within a

fixed period of time.

EXCHANGE RATE

This price of one currency in terms of another, i.e. the number of units of one currency that may be exchanged for one unit of another currency.

EXPORT LICENCE

A government document permitting designated goods to be shipped out of a country as specified.

F.B.T.

Full berth Terms; indicates that the cost of loading and discharge in included in the steamship rate quoted.  Ship owner pays loading and discharge cost.

F. 1. 0.

Free In and Out.  Refers to loading and unloading costs as they apply to the vessel.  The owner of the goods is responsible for the costs of loading and discharge.

F.O.

Free Out.  Under this term the owner of goods is responsible for discharging costs.

FORCE MAJEURE

The title of a standard clause found in marine contracts exempting the parties for non-fulfilment of their obligations by reason of occurrence beyond their control, such as earthquakes, floods, or war.

FOREIGN EXCHANGE

The currency of credit instruments of a foreign country.

FOREIGN FREIGHT FORWARDER.

An independent business which handles shipment for exporter for compensation.

F. P. A.

Free of Particular Average.  A marine insurance term meaning that assures will not allow payment for partial loss or damage to a foreign shipment.

G.A.T.T.

General Agreement on Tariffs and Trade.  Its purpose is to help reduce trade barriers and promote trade through tariff concessions.

HEAVY LIFTS

Freight too heavy to be handled by regular ship's tackle.

HADGINE

The forward purchase or sale of foreign exchange to avoid or minimise losses, should foreign exchange rates change unfavourable.

IN BOND

A term applied to the status of merchandise admitted provisionally to a country without payment of duties - either for storage in a bonded warehouse or for transhipment to another point, where duties will eventually be imposed.

IN CASE OF FEED

A term used for the agent or representative of a shipper abroad, to whom a bank may apply for instructions, when so directed by the shipper.

INHERENT VICE

A condition causing damage to merchandise as a result of its own inherent defects.

L/C

Letter of Credit.  A document issued by a bank at the buyer's request in favour of the seller, promising to pay the agreed amount of money upon receipt by the bank of stipulated documents within a specified time.

LIGHTER

A barge towed by a tugboat.  Used mostly in harbours and inland waterways.

LINER

An ocean vessel used on a particular route with regular sailing’s.

OPEN INSURANCE POLICY

A marine insurance policy that applies on all shipments over a period of time rather than on a single shipment.

PER PRO

An expression signifying the basis upon which the money of one country will exchanged for that of another.

REBATE RATE

The rate per cent deductible if a bill of exchange or draft is paid before its maturity date.

REMITTANCE

The transmittal of money, in the form of cash or negotiable instruments, from one party to another.

REVALUATION

Official increase in the value of one nation's currency expressed in the terms of another.

SHIP'S TACRLE

All riggings, etc.,  utilised on a ship to load or discharge cargo.

SIGHT DRAFT

S/D.  One which is payable upon presentation,

TARE

Weight of the container or package in which merchandise in contained.

TENOR

(Or Usance).  The term fixed for payment of a draft.

TIME DRAFT

One which matures either a certain number of days after sight or a certain number of days after the date of the draft.

TRAMP STEAMER

A ship not operating on regular routes or schedules.

TRUST RECEIPT

An undertaking singed by a buyer, against which a bank releases merchandise to him for the purpose of manufacture or sale, but retains title thereto.  The buyer obligates himself to maintain he identity of the goods or the proceeds thereof distinct from he rest of the assets and to hold them subject to repossession by the bank.

W.A.

With Average.  A marine insurance term meaning that shipment is protected from partial damage whenever the damage exceeds 3% (or some other percentage).

WAREHOUSE RECEIPT

A receipt issued by a warehouse, which lists the goods deposited there.

WHAREFAGE

A charge assessed by a pier or dock owner against the cargo or steamship company for use of the pier or dock.

THE FOURTEEN INCOTERMS

EX-WORKS

"Ex-works" means that the seller's only responsibility is to make the goods available at his premises (i.e. works or factory).  In particular he is not responsible for loading the goods in the vehicle provided by the buyer, unless otherwise agreed.  The buyer bears the full cost and risk involved in bringing the goods from there to the desired destination.  This term thus represents the minimum obligation for the seller.

FREE CARRIER... (NAMED POINT)

This term has been designed to meet the requirements of modern transport, particularly such "multimodal" transport as container or "roll on - roll off" traffic by trailers and ferries.  It is based on the same main principle as FOB except that the seller fulfills his obligations when he delivers the goods into the custody of the carrier at the named point.  If no precise point can be mentioned at the time of the contract of sale, the parties should refer to the place or range where the carrier should take the goods into his charge.  The risk of loss of or damage to the goods is transferred from seller to buyers at that time and not at the ship's rail.  "Carrier" means any person by whom or in whose name a contract of carriage by road, rail, air sea or a combination of modes has been made.  When the seller has to furnish a bill of lading, waybill or carrier’s receipt, he duly fulfills this obligation by presenting such a document issued by a person so defined.

FOR/FOT

FOR and FOT means "Free on Rail" and "Free on Truck".  These terms are synonymous since the word "Truck" relates to the railway wagons, they should only be used when the goods are to be carried by rail.

FOB AIRPORT

FOB Airport is based on the same main principle as the ordinary FOB term.  The seller fulfills his obligations by delivering the goods to the air carrier at the airport of departure.  The risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods have been so delivered.

FREE ALONGSIDE SHIP (FAS)

FAS means "Free Alongside Ship".  Under this term the seller's obligations are fulfilled when the goods have been placed alongside the ship on the quay or in lighters.  This means that the buyer has to bear all costs and risk of loss of or damage to the goods from that moment.  It should be noted that, unlike FOB, the present term requires the buyer to clear the goods for export.

FREE ON BOARD (FOB)

FOB means "Free on Board".  The goods are placed on board a ship by the seller at a port of shipment named in the sales contract.  The risk of loss of or damage to the goods is transferred from the seller to the buyer when the goods pass the ship's rail.

COST AND FREIGHT (C&F)

C&F means "Cost and Freight".  The seller must pay the costs and freight necessary to bring the goods to the named destination, but the risk of loss of or damage to the goods, as well as of any cost increases, is transferred from the seller to the buyer when the goods pass the ship's rail in the port of shipment.

COST, INSURANCE AND FREIGHT (CIF)

CIF means "Cost, Insurance and Freight".  This term is basically the same as C&F but with the addition that the seller has to procure insurance against the risk of loss of or damage to the goods during the carriage.  The seller contract with the insurer and pays the insurance premiums.

FREIGHT CARRIAGE PAID TO

Like C&F "Freight or Carriage Paid to..." means that the seller pays the freight for the carriage of the goods to the named destination.  However, the risk of loss of or damage to the goods, as well as of any cost increases, is transferred from the seller to the buyer when the goods have been delivered into the custody of the first carrier and not at the ship's rail.  It can be used for all modes of transport including multimodal operations and container or roll on-roll of traffic by trailers and ferries.  When the seller has to furnish a bill of lading, waybill or carrier's receipt, he duly fulfills this obligation by presenting such a document issued by the person with whom he has contracted for carriage to the named destination.

FREIGHT CARRIAGE AND INSURANCE PAID TO

This term is the same as "Freight or Carriage Paid to..." but with the addition that the seller has to procure transport insurance against the risk of loss of a damage to the goods during the carriage.  The seller contracts with the insurer and pays the insurance premium.

EX SHIP

"Ex Ship" means that the seller shall make the goods available to the buyer on board the shop at the destination named in the sales contract.  The seller has to bear the full cost and risk involved in bringing the goods there.

EX     QUAY

"Ex Quay" means that the seller makes the goods available to the buyer on the quay (Wharf) at the destination named in the sales contract.  The seller has to bear the full cost and ris involved in bringing the goods there.

There are two "Ex Quay" contracts in use, namely "Ex Quay (duty paid)" and Ex Quay (duties on buyer's account)" in which the liability to clear the goods for import are to be met by The buyer instead of by the seller.

Parties are recommended always to use the full description of these terms, namely "Ex Quay (Duty paid)", or Ex Quay (duties on buyer's account)", or else there may be uncertainty as to who is to be responsible for the liability to clear the goods for import.

DELIVERED AT FRONTIER (DAF)

"Delivered at Frontier" means that the seller's obligations are fulfilled when the goods have arrived at the frontier - but before "the customs border" - of the country named in the sales contract.

The term is primarily intended to be used when goods are to be carried by rail or road.  But it may be used regardless of the planned means of transport. (in practice it is seldom used when the goods travel by air or by sea).

DELIVERED DUTY PAID (DDP)

While the term "Ex Works" signifies the seller's minimum obligation, the term "Delivered Duty Paid" when followed by words naming the buyer's premises denotes the other extreme - the seller's maximum obligation.  The term "Delivered Duty Paid" may be used irrespective of the type of transport involved.

In the parties wish that the seller should clear the goods for import but that some of the costs payable upon the import of the goods should be excluded--such as value added tax (VAT) and/or other similar taxes--this should be made clear by adding words the effect (e.g. "Exclusive of VAT and/or taxes)".