Commonly Used Trade TermsAdvance Payment: An arrangement in which the buyer delivers cash to the seller before the seller releases the goods. Some sellers ask for such partial payment to show good faith on the part of the buyer and also to enhance their cash flow related to the sale of a particular custom-made item. It may not mean exactly the same as payment in advanceAdvising Bank: The bank, usually in the country of the exporter, that notifies the availability of the letter of credit to the exporter. The advising bank is responsible for authenticating and forwarding the L/C but makes no commitment to pay unless it agrees to act as confirming bank. Air Waybill: The carrying agreement between shipper and air carrier that is obtained from the airline used to ship the goods. Technically, it is a nonnegotiable instrument of air transportation that serves as a receipt for the shipper, indicating that the carrier has accepted the goods listed therein and obliges itself to carry the consignment to the airport of destination according to specified conditions. Arbitrage: The process of buying foreign exchange, stocks, bonds, and other commodities in one market and immediately selling them in another market at higher prices. At Sight: A phrase indicating that payment on a draft or other negotiable instrument is due upon presentation or demand. Balance of Trade: The balance between a country's exports and imports. Banker's Acceptance (B/A): A draft bearing the acceptance of a drawee bank, thus qualifying for financing in the liquid US dollar banker's acceptance market. It is useful vehicle for fixed-term, fixed-rate financing, especially for banks without access to low-cost US dollar funds. Bank Holding Company (BHC): Any company that directly or indirectly owns or controls, with power to vote, more than 5 percent of the voting shares of another bank. Barter: Trade in which mercandise is exchanged directly for other merchandise without use of money. Barter is an important means of trade with countries using currency that is not readily convertible. Beneficiary: The person, usually an exporter, in whose favor a letter of credit is issued or a draft is drawn. Bill of Exchange: A written, unconditional demand, signed by the drawer and addressed to the drawee, to pay a sumof money upon presentation or at some future date to the order of the payee, or to the bearer. Frequently known as a draft or bill. Bill of Lading (B/L): A document that provides the terms of the contract between the shipper and the transportation company to move freight between stated points at a specified charge. Usually prepared by the shipper on forms issued by the carrier, it serves as a document of title, a contract of carriage, and a receipt of goods. It is the primary evidence of shipment of goods and the exporter's key to prompt to prompt payment. Bonded Warehouse: A building authorized by customs authorities under bond or guarantee of compliance with revenue laws for the storage of goods without payment of duties until removal. Carnet: A customs document allowing special categories of goods to cross international borders without payment of duties. Carrier: A transportation line that hauls cargo. Cash Against Documents (CAD): Payment for goods in which a commission house or other intermediary transfers title documents to the buyer upon payment in cash. Cash In Advance (CIA): Payment for goods in which the price is paid in full before shipment is made. This method is usually used only for small purchases or when the goods are built. Cash with Order (CWO): Payment for goods in which the buyer pays when ordering and in which the transaction is binding on both parties. Certificate of Origin: A certificate stating the origin of goods, usually signed by the importing country's embassy in the country of the exporter. CFR: Cost and Freight. Incoterm indicating that the sale price includes all costs of shipment and freight up to the port of destination. The buyer must insure the cargo from the port of loading, for if the cargo is lost the buyer will bear the consequence. Chamber of Commerce: An association of businesspeople whose purpose is to promote commercial and industrial interests in the community. C&I: Cost and Insurance. A pricing term indicating that these costs are included in the quoted sale price. CIF: Cost, insurance and freight. Incoterm indicating that all costs of shipment and insurance and freight up to the port of destination are included in the quoted sale price. The seller must insure the cargo as far as the port of delivery, for if the cargo is lost the seller will bear the consequence. |