Glossary of International Trade

Common International Trade Terms

Most common international trade terms and their explanations are listed on this page.

What is Acceptance letter of credit

(banking) A letter of credit which, in addition to other required documents, requires presentation of a term draft drawn on the bank nominated as the accepting bank under the letter of credit.

What is Act of God?

In insurance terms, an act of nature beyond person’s control such as lightening, flood or hurricane.

What is AD VALOREM?

Ad Valorem is derived directly from Latin and it means according the value. It is used  to determine proportion to the estimated value of the goods or transaction concerned.

What is an AIR WAYBILL?

A BILL OF LADING  that covers both domestic and international flights transporting goods to a specified destination.

What is AIR FREIGHT?

Air Freight is a shipping service for the air transportation of the goods. It is usually more expensive compared to the sea freight however comes with better delivery times, greater inventory control as well as superior condition of goods upon arrival.

What is ALL RISK?

Extensive insurance coverage of cargo, including coverage due to fire, collision and such. Excluding wars, perishing of goods, strikes, decay or loss of market.

What is ANSI?

American National Standards. A Set of product standards established by the American national standards institute (ANSI).

What is AMS?

Automated Manifest System, AMS is a part of Custom's Automated Commercial System

What is BILL OF LADING?

A document that establishes the terms of a contract between a shipper and a transportation company under which freight is to be moved between specified points for a specified charge.

What does it mean to be BONDED?

Goods stored under supervision of customs until the import duties are paid or the goods are exported.

What is a BOX CAR?

In shipping terms a Box car is a  closed freight car.

What is BULK FREIGHT?

In international shipping freight not in packages or or containers. Example is grain, timber or ore.

What is BUNKER ADJUSTMENT FACTOR(BAF)?

In shipping, an adjustment to the charges to offset price fluctuations in the cost of bunker fuel.

What is CASH AGAINST DOCUMENTS (C.A.D.)?

Payments for goods in which a commission house or other intermediary transfers title documents to the buyer upon payment in cash.

What is CASH IN ADVANCED (C.I.A.)?

Payment for goods in which the price is paid in full before shipment is made.

What is CERTIFICATE OF MANUFACTURE?

A statement in which a producer of goods certifies that manufacture has been completed and that the goods are now at the disposal of the buyer.

What is CHASSIS?

A special trailer or undercarriage on which containers are moved over the road.

What is COST AND FREIGHT (C & F) ?

A pricing term indicating that the cost of the goods and freight charges are included in the quoted price.

What is COST, INSURANCE, FREIGHT?

A pricing term indicating that the cost of the goods, insurance, and freight are included in the quoted price.

What is COMMERCIAL RISK?

In economics, a risk resulting from the normal course of operating a business. Commercial risk includes financial risk, production risk, market risk, ane even the risk of adapting to change.

What is COMMON CARRIER?

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

What is CONSIGNEE?

The person or firm named on the freight contract to whom goods have been shipped or turned over for care.

What is CONSOLIDATION?

The combining of less than truckload shipments of cargo from a number of shippers at a centrally located point of origin by a freight consolidator and transporting them as a single shipment to a destination.

What is CONTAINER LOAD?

A shipment of cargo that fills a given container either by bulk or maximum weight.

What is CONTRACT MANUFACTURING?

An agreement where a company agrees to manufacture a product to the spefications of another company or individual.

What is COST AND FREIGHT?

An international trade term of sale in which, for the quoted price, the seller/exporter/manufacturer clears the goods for export and is responsible for delivering the goods past the ship's rail at the port of shipment.

The seller is responsible from paying cost of transport. However, once the goods past the ship's rail at the port of shipment the buyer assumes responsibility for risk of loss or damage as well as any additional transportation cost.

What is COST INSURANCE AND FREIGHT (CIF)?

An international trade term of sale in which, for the quoted price. the seller/exporter/manufacturer clears the goods for export and is responsible for delivering the goods past ship's rail at the port of shipment. The seller is responsible for paying the costs associated with transport of the goods to the named port of destination. However, once the goods past the ship's rail at the port of shipment the buyer assumes responsibility for risk of loss or damage as well as any additional transportation cost. The seller is also responsible for procuring and paying for marine insurance in the buyer's name for shipment.

What is CUSTOMS BOND?

A bond required by the federal government in connection with the payment of duties or to produce documentation. U.S Customs entries must be accompanies by evidence that surety bond is posted with customs to cover any potential duties, taxes and penalties that may accrue.

What is Customs Broker?

Customs brokers are individuals, corporations , associations or partnerships licensed, regulated and empowered by U.S. Customs and Border Protection (CBP) to assist importers and exporters in meeting Federal requirements governing imports and exports.

What is Customs Tariff?

A schedule of charges assessed by government on imported or exported goods. See Harmonized Tariff System.

What is Dangerous Goods?

Articles or substances which adaptable of posing a significant risk to health, safety or property when transported by air and which are classified according to most current editions of the international civil aviation organization (ICAO) Technical instructions for the safe Transport of Dangerous Goods by Air and the IATA Dangerous Goods Regulations. Dangerous goods may be transported domestically and internationally by air.

What is DEVALUATION?

The official lowering of the value of one country's currency in terms of one or more foreign currencies.

What is EXPORT MANAGEMENT COMPANY?

A private firm that serves as the export department for several manufacturers, soliciting and transacting export business on behalf of its clients in return for a commission, salary, or retainer plus commission.

What is FORCE MAJEURE?

The title of a standard clause in marine contracts exempting the parties for non fulfillment of their obligations as a result of conditions beyond their control, such as earthquakes, floods, or war.

What is FREE PORT ?

An area such as a port city into which merchandise may be legally moved without payment of duties.

What is GROSS WEIGHT?

The full weight of a shipment, including goods and packaging.

What is LETTER OF CREDIT(L/C)?

A document, issued by a bank per instructions by a buyer of goods, authorizing the seller to draw a specified sum of money under specified terms, usually the receipt by the bank of certain documents within a given time.

What is OPEN ACCOUNT?

A trade arrangement in which goods are shipped to a foreign buyer without guarantee of payment

What is PERILS OF THE SEA?

A marine insurance term used to designate heavy weather, stranding, lightning, collision, and seawater damage.

What is PRO FORMA INVOICE?

An invoice provided by a supplier prior to the shipment of merchandise, informing the buyer of the kinds and quantities of goods to be sent, their value, and important specifications.

What is DELIVERED DUTY PAID(...named place of destination) (DDP)?

(incoterm 2000) An international trade term of sale in which, for the quoted price, the seller/exporter/manufacturer clears the goods for export and is responsible for export and is responsible for making them available to the buyer at the named place of destination, cleared for import, but not unloaded from the transport vehicle. The seller, therefore, assumes all responsibilities for delivering the goods to the named place of destination, including all responsibility for import clearance, duties, and other costs payable upon import. The DDP term can be used for any mode of transport. The DDP term is used when the named place of destination is other than the seaport or airport.

What is DELIVERED DUTY PAID(...named place of destination) (DDU)?

(incoterm 2000) An international trade term of sale in which, for the quoted price, the seller/exporter/manufacturer clears the goods for export and is responsible for making them available to the buyer at the named place of destination, not cleared for import. The seller, therefore, assumes all responsibilities for delivering the goods to the named place of destination, but the buyer assumes all responsibility for import clearence, duties, administrative cots, and any other costs upon import as well as transport to the final destination. The DDU term can be used for any mode of transport. However, if the seller and buyer desire that delivery should take place on board a sea vessel or on a quay (wharf), the DES or DEQ terms are recommended. The DDU term is used when the names place of destination (point of delivery) is other than the seaport or airport.

What is DEMURRAGE?

(shipping) The detention of a freight car or ship by the shipper beyond time permitted (grace period) for loading or unloading. The extra charges a shipper pays for detaining a freight car or ship beyond time permitted for loading or unloading. Used interchangeably with detention. Detention applies to equipment. Demurrage applies to cargo.

What is DETENTION?

(shipping) Holding a carrier's driver and/or truck trailer beyond a certain stated period of "free time", often resulting in the assessment of detention charges. The delay in clearing goods through customs resulting in storage and other charges. The prevention, by government authority, of a vessel and/or cargo leaving port.

What is DETENTION INSURANCE?

(insurance) Insurance coverage to pay for the costs resulting in the storage or maintenance of goods delayed in the clearance of customs at a foreign port.

What is DUMPING?

(customs) The sale of a commodity in a foreign market at less than fair value, usually considered to be a price lower than that a which it is sold within the exporting country or a third countries.

What is DUTY?

(customs) A tax levied by a government on the import, export or consumption of goods. Usually a tax imposed on imports by the customs authority of a country. Duties are generally based on the value of the goods (ad valorem duties), some other factors such as weight or quantity (specific duties), or a combination of value and other factors (compound duties).

What is ECONOMIC ORDER QUANTITY (EOQ)?

(logistics) The optimum order size that archives the best possible balance between meeting customer needs and minimizing ordering and inventory holding costs.

What is ELECTRONIC DATA INTERCHANGE (EDI) RELEASE?

(Canada Customs) EDI Release is a Canada Border Services Agency (CBSA) import shipment release program that allows importers to electroniclly transmit release data, including invoice information, to the Accelerated Commercial Release Operations Support System (ACROSS). A customs officers reviews the information and transmits the release decision back to the importer via the RNS/CADEX Release Notification Report.

What is ECONOMIC ORDER QUANTITY (EOQ)?

(logistics) The optimum order size that archives the best possible balance between meeting customer needs and minimizing ordering and inventory holding costs.

What is ENTRY DOCUMENTS?

(customs) the documents required to secure the release of imported merchandise. 

(US Customs) within five working days of the data of arrival of a shipment at a US port of entry, entry documents must be filled at a location specified by the district/area director, unless an extension is granted. these documents consist of:

(1) Entry Manifest, Custom Form 7533: or Application and Special Permit for Immediate Delivery, Custom form 3461, or other form of merchandise release required by the district director.

(2) Evidence of right to make entry.

(3) Commercial invoice or pro-forma invoice when the commercial invoice can not be produced.

(4) Packing list if appropriate.

(5) Other documents necessary to determine merchandise admissibility. 

If the goods are to be released from Customs custody on entry documents, an entry summary for consumption must be filled and estimated duties deposited at the port of entry within 10 working days of the time the goods are entered and released. 

What is Estimated time of Arrivals(ETA)?

(shipping) The expected date and time of arrival of a shipment, passenger or vessel at a port, airport or terminal.

What is Estimated Time of Departure (ETD)?

(shipping) The estimated date and time of departure of a shipment, passenger or vessel at a port, airport or terminal.

What is Ex Dock?

(trade term) A term of sale where the buyer takes title to the goods only when they are unloaded on his/her dock.

What is ex Factory?

(trade term) A term of sale where the buyer takes title to the goods when they leave the vendor's dock.

What is Express Bill of Lading?

(shipping/logistic) Anon-negotiable bill of lading used when cargo is to be delivered immediately upon arrival at destination. Express bills of lading are only used when there is no bank negotiation for payment involved. 

What is fiat money / fiat currency?

Coinage or currency that is accepted as a medium of exchange by virtue of government decree (fiat). Fiat money is not backed by a commodity such as gold or silver and only retains value so long as holders of the currency feel that they can find an exchange partner for it at some later time.

What is fill rate?

(logistic) The percentage of order items that are picked and readied for shipment in a specified amount of time. 

What is FOB?

(trade term) See Free On Board, Guide to Incoterms 2000 Appendix. 

What is Free On Board (...named port of shipment)(FOB)?

(Incoterms 2000) An international trade term of sale in which, for the quoted price, the seller/exporter/manufacturer clears the goods for export and is responsible for the costs and risks of delivering the goods past the ship's rail at the named port of shipment.

The Free On Board term is used only for ocean or inland waterway transport.

The "named place" in Free On Board and all "F" Incoterms 2000 is domestic to the seller.

The Free On Board term is commonly used in the sale of bulk commodity cargo such as oil, grains, and ore where passing the ship's rail is important. However, it is also passing the ship's rail is important. However, it is also commonly used in shipping container loads of other goods.

The key document in FOB transactions is the "On Board Bill of Lading."

Sellers and buyers often confuse the Free On Board term with Free Carrier. Free On Board (FOB) does not mean loading the goods onto a truck at the seller's place of business. Free On Board is used only in reference to delivering the goods past a ship's rail in ocean or inland waterway transport. Free Carrier, on the other hand, is applicable to all modes of transport.

What is free trade area?

A group of two or more countries that have eliminated tariff and most nontariff barriers affecting trade among themselves, while each participating country applies its own independent schedule of tariffs to imports from countries that are not members. A free trade area allows member countries to maintain individually separate tariff schedules for external countries; members of a customs union employ a common external tariff. The best known example is the European Free Trade Association (EFTA) and the free trade area for manufactured goods that have been created through the trade agreements that have been concluded between the European Community and the individual EFTA countries. The World Trade Organization (WTO) spells out the meaning of a free trade area and specifies the applicability of other WTO provisions to free trade areas.  

What is freight forwarder?

(shipping) A person engaged in the business of assembling, collection, consolidating, shipping and distributing less-than-carload or less-than-truckload freight. Also, a person acting as agent in the transshipping of freight to or from foreign countries and the clearing of freight through customs, including full preparation of documents, arranging for shipping, warehousing, delivery and export clearance. . 

What is TEU?

TEU (Twenty Foot Equivalent Unit) is the unit of the capacity of a container ship. Twenty foot containers are the most commonly used containers and the term TEU is coined to standardize official capacity of a container ship.