>Trade Terms
Trade Terms 2017-11-27T21:04:22+00:00

The following are basic terms of trade to help guide you through any international trade deal.

A  |  B  |  C  |  D  |  E  |  F  |  G  |  H  |  I  |  J  |  K  |  L  |  M  |  N  |  O  |  P  |  Q  |  R  |  S  |  T  |  U  |  V  |  W  |  X  |  Y  |  Z

A

Ad Valorem Tariff

A tariff calculated “according to value,” or as a percentage of the value of goods cleared through Customs; for example, 15 percent ad valorem means 15 percent of the value of the entered merchandise.

ATA Carnet

An ATA Carnet (a. k. a. “Merchandise Passport”) is a document that facilitates the temporary importation of products into foreign countries by eliminating tariffs and value-added taxes (VAT) or the posting of a security deposit normally required at the time of importation.

B

Bill of Lading

Contract between the owner of the goods and the carrier. For vessels, there are two types: a straight bill of lading, which is not negotiable, and a negotiable, or shipper’s orders, bill of lading. The latter can be bought, sold, or traded while the goods are in transit.

Bonded Goods

These are goods stored in a secure warehouse. While they remain there, they are not liable for any payment of import duty until the duty is paid, or the goods are exported or legally dealt with.

Brokerage

Often refers to Customs brokerage, where a third party is used for the clearance of inbound or outbound shipments.

C

Carnet

Standardized international customs document known as an ATA (admission temporaire or temporary admission) carnet that is used to obtain duty-free temporary admission of certain goods into the countries that are signatories to the ATA Convention. Under the ATA Convention, commercial and professional travelers may take commercial samples; tools of the trade; advertising material; or cinematographic, audiovisual, medical, scientific, or other professional equipment into member countries temporarily without paying customs duties and taxes or posting a bond at the border of each country to be visited.

Certificate of Origin

This is a specific document that expressly certifies that the goods to which the certificate relates originate in a specific country. This certificate may also include a declaration by the manufacturer, producer, supplier, exporter or other qualified person.

CIF

An abbreviation used in some international sales contracts, when the selling price includes all “Costs, Insurance and Freight” for the goods sold. This means that the seller arranges and pays for all relevant expenses involved in shipping goods – from their point of export to a given point of import. In trade statistics, “CIF value” means that all figures for imports or exports are calculated on this basis, regardless of the nature of individual transactions.

Commercial Invoice

A commercial invoice is a bill for the goods from the seller to the buyer. These invoices are often used by governments to determine the true value of goods when assessing customs duties.

Commodity

Any article exchanged in trade, but most commonly used to refer to raw materials, including minerals such as tin, copper, and manganese; and bulk-produced agricultural products such as coffee, tea, and rubber.

Consumer Goods

Goods that directly satisfy human desires (as opposed to capital goods). An automobile used for pleasure is considered a consumer good. An automobile used by a business person to deliver wares is considered a capital good.

Consumption

The purchase and utilization of goods or services for the gratification of human desires or in the production of other goods or services. The consumer may be an individual, a business firm, a public body, or other entity.

Cost and Freight (CFR)

Cost and freight to a named overseas port.

Cost, Insurance, and Freight (CIF)

Cost, insurance, and freight to a named overseas post. The seller quotes a price for the goods shipped by ocean (including insurance), all transportation costs, and miscellaneous charges to the point of debarkation from the vessel.

Countervailable Subsidy

Foreign governments subsidize industries when they provide financial assistance to benefit the production, manufacture or exportation of goods. Subsidies can take many forms, such as direct cash payments, credits against taxes, and loans at terms that do not reflect market conditions. The statute and regulations establish standards for determining when an unfair subsidy has been conferred. The amount of subsidies the foreign producer receives from the government is the basis for the subsidy rate by which the subsidy is offset, or “countervailed,” through higher import duties.

Countervailing Duties (CVD)

Specific duties imposed on imports to offset the benefits of subsidies to producers or exporters in the exporting country.

Customs Declaration

Any statement or action, in any form prescribed or accepted by Customs, giving information or particulars required by Customs.

D

Demand

The quantity of an economic good that will be bought at a given price at a particular time in a specific market. Demand in a market economy is strongly influenced by consumer preference or the individual choices of many independent buyers, based upon their perceptions of value for price.

De Minimis

This is a Latin term and is a shortened version of the expression “de minimis non curat lex,” meaning “the law does not care about very small matters.” It is often considered more efficient to waive very small amounts of duties and taxes rather than collect them.

Dumping

Dumping occurs when a foreign producer sells a product in the United States at a price that is below that producer’s sales price in the country of origin (home market), or at a price that is lower than the cost of production. The difference between the price (or cost) in the foreign market and the price in the U.S. market is called the dumping margin. Unless the conduct falls within the legal definition of dumping as specified in U.S. law, a foreign producer selling imports at prices below those of American products is not necessarily dumping.

E

E-Commerce

Buying and selling over the Internet.

Export Control Classification Number (ECCN)

Dual-use items on the Commerce Control List have five characters assigned to them because the items are classified as controlled exports and may require an export license for shipping.

Electronic Export Information (EEI), formerly known as Shipper’s Export Declaration

Document used to control exports and act as a source document for official U.S. export statistics. EEI is required for shipments when the value of the commodities, classified under any single Schedule B number, is more than $2,500. EEI must be prepared and submitted, regardless of value, for all shipments requiring an export license or destined for countries restricted by the Export Administration Regulations.

Embargo

Partial or complete prohibition of commerce and trade with a particular country.

Exports

Goods and services produced in one country and sold in other countries in exchange for goods and services, gold, foreign exchange, or settlement of debt. Countries devote their domestic resources to exports because they can obtain more goods and services with the international exchange they earn from the exports than they would from devoting the same resources to the domestic production of goods and services.

F

Free Trade Agreements

An agreement that creates stable and transparent trading by reducing country barriers to U.S. exports. Enabling access to these foreign markets make it easier and cheaper for U.S. companies to export products.

G

Goods

Inherently useful and relatively scarce articles or commodities produced by the manufacturing, mining, construction, and agricultural sectors of the economy. Goods are important economically because they may be exchanged for money or other goods and services.

Goods and Services Tax (GST)

Tax levied on supplies of goods or services purchased and impacts both the exporter and importer.

H

Harmonization

The process of making procedures or measures applied by different countries — especially those affecting international trade—more compatible, as by effecting simultaneous tariff cuts applied by different countries so as to make their tariff structures more uniform.

Harmonized System

The international system published by the World Customs Organization that sets out in a systemized form the goods handled in international trade. Goods are grouped in Sections, Chapters and Sub-Chapters that are governed by rules.

I

Imports

The inflow of goods and services into a country’s market for consumption. A country enhances its welfare by importing a broader range of higher-quality goods and services at lower cost than it could produce domestically. The expansion of world trade since the end of World War II has therefore been a principal factor underlying a general rise in living standards in most countries.

Importer Of Record (IOR)

This is the person responsible for the shipment documents provided to Customs and all duties and taxes.

Incoterms®

Incoterms are a set of rules that define the responsibilities of sellers and buyers for the delivery of goods under sales contracts for domestic and international trade. They are published by the International Chamber of Commerce (ICC) and are widely used in international commercial transactions. The most recent version, Incoterms 2010, was launched in September 2010 and became effective January 1, 2011.

The two main categories of Incoterms2010 are now organized by modes of transport. Used in international as well as in domestic contracts for the first time, the new groups aim to simplify the drafting of contracts and help avoid misunderstandings by clearly stipulating the obligations of buyers and sellers.

Here are some frequently used Incoterms:

  • EXW Ex Works
  • FCA Free Carrier
  • CPT Carriage Paid To
  • CIP Carriage and Insurance Paid To
  • DAT Delivered at Terminal
  • DAP Delivered at Place
  • DDP Delivered Duty Paid

L

Landed Cost

The cost of the imported goods at the port or point of entry into a country, including the cost of freight, insurance, and port and dock charges. All charges occurring after the goods leave the import point are not included.

Letter of Credit

A written agreement made by a bank stating terms and conditions the exporter must meet to be paid by the buyer of the goods.

Market Forces

Shifts in demand and supply that are reflected in changing relative prices, thus serving as indicators and guides for enterprises that make investment, purchase and sales decisions.

M

Market Access

The ability of domestic providers of goods and services to penetrate a related market in a foreign country. The extent to which the foreign market is accessible generally depends on the existence and extent of trade barriers.

Market Economy

The national economy of a country that relies on market forces to determine levels of production, consumption, investment and savings without government intervention.

Market Forces

Shifts in demand and supply that are reflected in changing relative prices, thus serving as indicators and guides for enterprises that make investment, purchase and sales decisions.

N

Market Access

The ability of domestic providers of goods and services to penetrate a related market in a foreign country. The extent to which the foreign market is accessible generally depends on the existence and extent of trade barriers.

Market Economy

The national economy of a country that relies on market forces to determine levels of production, consumption, investment and savings without government intervention.

Market Forces

Shifts in demand and supply that are reflected in changing relative prices, thus serving as indicators and guides for enterprises that make investment, purchase and sales decisions.

O

Origin

Typically means the location where the shipments transit begins with a pick up scan.

P

Phytosanitary Certificate

A certificate issued by a government agency (usually Agriculture) to satisfy import regulations of foreign countries. The certificate indicates that a shipment has been inspected and found free from harmful pests and plant diseases.

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 specifications (weight, size, etc.).

Prohibited Commodities

The carriage of which the goods are prohibited by any law, regulation or statute of any federal, state or local government of any country to or through which the shipment may be carried.

R

Restricted Commodities

Rules and regulations around particular commodities that require approvals and documentation for shipping.

S

Schedule B

A classification of physical goods for export in the form of a 10-digit number that is used in the United States by the Bureau of Census to collect trade statistics.

Shipper

Also referred to as the Consignor.

Subsidy

An economic benefit granted by a government to domestic producers of goods or services, often to strengthen their competitive position.

Supply

The quantity of an economic good that sellers will make available at a given price at a certain time in a specific market. A supply schedule indicates the quantity of an economic good that might enter the market at all possible prices at a particular time. Supply in a market economy is principally determined by the response of many individual entrepreneurs and firms to their perceptions of opportunities for earning profits.

Surplus

The amount of a commodity that cannot be absorbed in a given market at the existing price.

T

Tariff

A duty (or tax) levied upon goods transported from one Customs area to another, for either protective or revenue purposes. Tariffs raise the prices of imported goods, thus making them generally less competitive within the market of the importing country, unless that country does not produce the items so tariffed.

Trade Agreement

Also known as trade pact, this is a wide-ranging tax, tariff and trade treaty that often includes investment guarantees.

Trade Barriers

Government laws, regulations, policies or practices that either protect domestic products from foreign competition or artificially stimulate exports of particular domestic products.

Type of Export

There are three different type of exports: Permanent, Temporary, Repair / Return.



 

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